Son Tae-seung Files Injunction Today to Suspend Effect of 'DLF Heavy Disciplinary Action'

Legal Battle Begins Over FSC Sanction Proposal Blocking Reappointment
Dispute Expected Over Obligation to Establish 'Internal Control Standards'

Son Tae-seung, Chairman of Woori Financial Group

[Asia Economy Reporter Kim Hyo-jin] Sohn Tae-seung, Chairman of Woori Financial Group, is set to initiate a legal battle challenging the heavy disciplinary action related to losses from the overseas interest rate-linked derivative-linked fund (DLF) incident.

According to the financial sector on the 9th, Chairman Sohn will file a provisional injunction with the court on the same day, seeking to suspend the effect of the heavy disciplinary action (reprimand warning) imposed by the Financial Supervisory Service (FSS) regarding the DLF case. A provisional injunction is a procedure preceding the main lawsuit, and results usually come out within a few days. The main lawsuit can take years to reach a final verdict if appeals are repeatedly made by both parties.

The court grants a provisional injunction if it recognizes an urgent need to prevent irreparable damage to the parties caused by specific administrative actions. If Chairman Sohn temporarily resolves the DLF disciplinary issue through the provisional injunction, there will be no problem with his reappointment.

Conversely, if the court dismisses the application and the sanction remains effective, it will be difficult for Chairman Sohn to be reappointed. Although he can complete the remaining term, he will be restricted from employment in financial companies for three years.

Woori Financial recommended Chairman Sohn as the next chairman candidate for a three-year term at the end of last year and plans to formally appoint him at the shareholders' meeting on the 25th. The FSS notified the disciplinary measures against Chairman Sohn and Woori Bank on the 5th. The sanctions take effect upon notification of the inspection report.

The reprimand warning against Chairman Sohn was approved last month by FSS Governor Yoon Seok-heon, while the sanctions against the institution (Woori Bank)?a fine of 19.7 billion KRW and a six-month partial suspension of operations?were finalized last week at the regular meeting of the Financial Services Commission. The FSS initially proposed a fine of 22.7 billion KRW against Woori Bank, but it was reduced through the Financial Services Commission’s Securities and Futures Commission review.

The FSS issued the reprimand warning to Chairman Sohn based on the Financial Company Governance Act, which stipulates that "financial companies must establish internal control standards," and the Enforcement Decree, which requires "effective internal control standards." It was determined that the obligation to establish internal control standards was not fulfilled.

In the upcoming legal battle, the key issue is expected to be whether it is appropriate to hold management responsible for financial accidents based on these regulations. Chairman Sohn’s side argues that these regulations do not provide direct grounds for imposing sanctions on management when financial accidents occur.

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