2025 Financial Investment Sector Financial Supervision Briefing
Proactive Risk Response... Strict Measures Against Unhealthy and Illegal Practices
"Frequent and On-the-Spot Inspections... CEO Letters to Encourage Voluntary Improvements"
The Financial Supervisory Service (FSS) plans to strengthen collaborative and on-the-spot inspections this year to eradicate unhealthy business practices and focus on so-called internal control 'Gray-Zone' areas?intermediate zones where boundaries are difficult to distinguish. To reinforce preventive responsibilities, a 'CEO Letter' containing key points will also be sent to the chief executive officers (CEOs) of each company.
On the morning of the 24th, the FSS held the '2025 Financial Investment Sector Financial Supervision Work Briefing' attended by about 270 stakeholders from securities firms, asset management companies, and other financial investment sectors, where it introduced this direction of work.
In his opening remarks, Deputy Director Seo Jae-wan said, "Last year, the domestic capital market showed unpredictable volatility due to internal and external economic uncertainties, and repeated illegal and unhealthy business practices reaffirmed the importance of internal controls. This year, we plan to continuously pursue multifaceted improvement measures for thorough management of capital market risks, strict punishment of unreasonable business practices and illegal activities, and strengthening the competitiveness of the financial investment industry and capital markets."
The FSS has set the basic direction for financial investment sector inspections this year as ▲ strengthening collaborative and on-the-spot inspections against unhealthy business practices ▲ proactive and preventive checks in areas of market concentration ▲ and activation of communication to reinforce internal controls. Deputy Director Seo stated, "To prevent recurrence of illegal and unhealthy business practices, we will promote swift and efficient supervision centered on frequent and on-the-spot inspections," adding, "We will share internal control issues with the industry regularly through CEO Letters and other means to encourage voluntary improvements."
The CEO Letter, benchmarked from the U.S. Securities and Exchange Commission (SEC) staff letters, is expected to have the effect of risk prevention and enhanced accountability by directly delivering internal control issues to each company's CEO. In particular, the FSS requested the industry to establish a practical internal control system as the accountability structure will become clearer with the introduction of the accountability structure from July.
Deputy Director Seo also emphasized, "We will refine liquidity regulations for financial investment companies and reform the capital adequacy regulatory system to enhance responsiveness to market shocks," urging the industry to take proactive measures against major risks such as real estate project financing (PF) defaults and short-term money market instability arising from increased market volatility in the future.
As a preemptive response to capital market risks this year, the FSS will pursue ▲ improvement of the net capital ratio (NCR) calculation method for securities firms ▲ consideration of introducing liquidity management tools (LMT) for open-end funds to prevent fund runs ▲ analysis of risk factors in accountability-type land trusts and preparation of systematic management plans ▲ and strengthening financial soundness and business site management according to risk levels.
The FSS will respond strictly to unreasonable business practices and illegal activities. It plans to conduct linked inspections of lead managers, asset managers, and distributors to check for linked illegal activities, as well as examine the internal control status of sales channels with concentration phenomena and compliance with procedures when selling high-risk products. It will also verify whether unhealthy business practices are being repeated habitually, as in the previously sanctioned 'bond rollover' incident. Gray zones where internal controls are not properly applied will also be intensively inspected.
Additionally, ahead of the launch of the alternative trading system and the resumption of short selling in March, the FSS will accelerate efforts to stabilize related systems as part of strengthening capital market competitiveness. This year, supervisory measures in preparation for the institutionalization of token securities (STO) will also be reviewed. Deputy Director Seo said, "We plan to continuously refine the regulatory system to strengthen the competitiveness of the financial investment industry through activation of venture capital supply and the launch of creative new products," and urged, "The financial investment industry should also make continuous efforts based on creativity and innovation to activate capital supply and enhance investor benefits."
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