Sohn Tae-seung and Financial Supervisory Service Legal Battle Countdown... 'DLF Heavy Sanctions' Soon to Take Effect

Financial Services Commission Approves Sanctions Proposal for Woori and Hana Banks

Son Tae-seung, Chairman of Woori Financial Group

[Asia Economy Reporter Kim Hyo-jin] The legal battle between Sohn Tae-seung, Chairman of Woori Financial Group, and the Financial Supervisory Service (FSS) over the 'DLF heavy sanctions' has entered its final countdown. This follows the completion of the last procedure for the enforcement of the FSS sanctions.

Chairman Sohn is expected to initiate a lawsuit next week to suspend the effectiveness of the sanctions. If the sanctions remain in effect, he will not be able to serve a second term.

According to financial authorities on the 4th, the Financial Services Commission (FSC) held a regular meeting at the Government Complex Seoul in the morning and approved institutional sanctions against Woori Bank and Hana Bank related to the overseas interest rate-linked derivative-linked fund (DLF) loss incident.

The FSS had recommended to the FSC at the end of January fines of 23 billion KRW and 26 billion KRW respectively for the two banks, along with a six-month suspension of some business activities (new sales of private funds). However, after the Securities and Futures Commission meeting on the 12th of last month, the fines were reduced to 19.7 billion KRW and 16.7 billion KRW respectively and were approved as is.

Along with sanctions against the banks, the FSS decided on a 'written warning' sanction, which is a heavy disciplinary action, against Chairman Sohn and Vice Chairman Ham Young-joo of Hana Financial Group.

Unlike the sanctions against institutions (the banks), sanctions against executives such as Chairman Sohn do not require FSC approval and are finalized by the FSS Governor’s sole decision, so they were confirmed early but have not yet taken effect.

The sanctions take effect when the FSS’s inspection report containing the details and grounds of the sanctions is notified to the parties involved. However, the FSS decided to notify the sanctions against Chairman Sohn and others together with the institutional sanctions rather than separately.

Once the FSC formally delivers the approved contents to the FSS, the FSS will complete the preparation of the inspection report and notify the sanctioned parties in person. An FSS official said, "Considering the usual process, the notification procedure is expected to be completed early next week."

The party in urgent need is Chairman Sohn. The Woori Financial Group Executive Candidate Recommendation Committee recommended Chairman Sohn as the next chairman candidate for a three-year term at the end of last year.

Chairman Sohn’s reappointment is scheduled to be finalized at the shareholders' meeting on the 25th, but it could be blocked by the 'DLF heavy sanctions.' Receiving a written warning means he cannot be employed by any financial institution for three years.

To be reappointed, Chairman Sohn must either nullify the sanctions or at least suspend their effect before the shareholders' meeting. Accordingly, Chairman Sohn is expected to file an administrative lawsuit next week arguing that the sanctions are unjust, and before the full dispute begins, he will likely file a provisional injunction to suspend the sanctions’ effect.

A Woori Financial Group official said, "This is purely a personal response by Chairman Sohn," adding, "It is difficult to specifically predict the timing of the lawsuit filing."

Meanwhile, the Blue House’s Office of Civil Affairs has launched an inspection of the FSS, drawing attention to the background and outcome. The Blue House is reportedly reviewing whether the FSS’s sanctions and other actions constituted abuse or misuse of supervisory authority.

This is because the heavy sanctions related to the DLF have put the governance of major financial holding companies in jeopardy. A financial industry official predicted, "The results of the Blue House’s inspection could influence the administrative lawsuit process going forward."

This content was produced with the assistance of AI translation services.