Announcement of Comprehensive Measures to Enhance Capital Market Transaction Stability
Strengthening Ongoing Monitoring and Intensive Management of High-Risk Firms
It has been revealed that nearly 430 electronic financial transaction incidents have occurred at securities firms over the past five years. With as many as 100 incidents reported in just the past year, the financial authorities, recognizing that these recurring incidents are shaking trust in the capital markets, have announced that "there will be no more temporary fixes" and are moving to implement comprehensive measures. They plan to strengthen ongoing monitoring and focus on intensive management for high-risk firms with frequent incidents, including improvement measures such as executive interviews.
On August 25, the Financial Supervisory Service held a workshop titled 'Enhancing Capital Market Transaction Stability' at its Yeouido headquarters, attended by 150 employees from securities firms, and announced a comprehensive plan to enhance transaction stability in the capital markets. This comes amid concerns that a series of recent IT incidents at securities firms have undermined trust in the fundamental trading infrastructure of the capital markets.
According to the Financial Supervisory Service, a total of 429 incidents occurred at 35 securities firms from 2020 to 2024. The annual number of incidents is also increasing, with 66 in 2020, 85 in 2021, 78 in 2022, 100 in 2023, and 100 expected in 2024. In particular, during the first half of this year alone, 58 incidents have already occurred, surpassing the 40 incidents during the same period last year, heightening investor concerns. A representative from the Financial Supervisory Service pointed out, "When incidents occur, they lead directly to investor losses due to delays or interruptions in trade execution." Over the past five years, the total financial loss from electronic financial transaction incidents in the financial sector has reached approximately 29.46 billion won, with the financial investment sector (securities firms) accounting for 89% (26.25 billion won) of this amount.
A closer look at the incident statistics by firm size shows that, over the past five years, the top 10 firms by equity capital accounted for 202 incidents, or 47% of the total, averaging four incidents per firm per year. Small and medium-sized firms accounted for 227 incidents (53%), averaging three incidents per firm per year. By type, program errors were the most common cause, with 156 incidents (36.4%). However, recently, incidents caused by external factors have also been increasing, accounting for 133 cases (31%).
The Financial Supervisory Service determined that a comprehensive response is necessary, as these IT incidents can directly lead to large-scale investor losses, and has prepared this comprehensive plan. Based on the incident data, they identified six risk factors: ▲large-scale IT system failures, ▲insufficient IT internal controls, ▲high-risk groups (online and retail-focused securities firms), ▲inadequate incident prevention and emergency response, ▲protection of credit information, and ▲securities firms not subject to the Electronic Financial Transactions Act. In response, they proposed seven measures: ▲strengthened ongoing monitoring, ▲rapid information collection and sharing, ▲establishing IT audit guidelines, ▲activation of autonomous correction systems, ▲intensive management of high-risk firms, ▲timely inspections and strict sanctions, and ▲enhanced communication and education.
Based on this, the authorities plan to immediately implement tailored response measures (policy mix) by group and situation to prevent and promptly respond to risks such as electronic financial transaction incidents. For example, for large firms, they will operate ongoing IT audit guidelines, activate autonomous correction systems, and enhance communication and education measures. When necessary, firms identified as high-risk will be subject to executive interviews and company-wide IT internal control measures for intensive management. Firms with insufficient risk response or that experience major incidents will undergo timely inspections and face stronger sanctions.
Seo Jaewan, Deputy Governor of the Financial Supervisory Service, stated in his opening remarks, "Ensuring the stability of capital market transactions is an essential condition for revitalizing the capital market and protecting investors." He emphasized, "IT incidents can lead to large-scale losses, resulting in failure to protect investors, increased reputational risk for securities firms, and ultimately, a serious erosion of trust in the capital markets."
Deputy Governor Seo added, "Temporary fixes are no longer acceptable. Please make every effort at the company-wide level to prevent IT incidents that inconvenience investors." He also urged securities firms to "establish a stronger IT internal control system through thorough root cause analysis and the development of preventive measures." He further requested cooperation, stating, "This response plan is based on strengthening the autonomous correction and internal control capabilities of the securities firms themselves."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
