Bill Proposed to Triple Consumer Damage Fines for Financial Companies and Strengthen CEO Accountability

Proposed Amendment to the Financial Company Governance Act
Presenting More Specific Obligations Than the Current 'Internal Control Standards'

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyo-jin] A bill has been proposed to impose a penalty fine three times the amount of loss on financial companies that cause damage to financial consumers due to poor internal controls. The bill also includes provisions to clarify the obligations of financial company representatives regarding consumer protection.

On the 15th, Kim Han-jung, a member of the Democratic Party of Korea, officially proposed the "Amendment to the Act on the Governance of Financial Companies" to strengthen the responsibilities and duties of financial company representatives for the protection of financial consumers.

This amendment contains provisions to impose responsibilities and duties on financial companies and their representatives to protect financial consumers against incomplete sales and poor management, which have been the causes of consecutive financial accidents.

The amendment strengthens the internal control standards and risk management standards of financial companies and explicitly includes matters related to "financial consumer protection." The current law requires financial company employees to comply with internal control standards when performing their duties and to establish risk management standards to recognize, evaluate, and monitor risks arising from asset management, among others. The amendment explicitly states that consumer protection measures should be concretized when establishing these standards.

Furthermore, the amendment clarifies the responsibilities and duties of financial company representatives regarding financial consumer protection. Representatives of financial companies must establish measures to ensure compliance with internal control and risk management standards, conduct regular inspections, and set disciplinary action criteria for violations. Violations will be subject to sanctions. Additionally, a punitive penalty fine system is introduced, imposing a fine three times the amount of consumer damage caused by violations of internal control and risk management standards, emphasizing the thorough duty of care by financial companies.

Representative Kim said, "The recent private equity fund incident is a stark example of what situation we face when soundness regulations or market discipline do not function properly," and pointed out, "It is necessary to strengthen the management responsibility and duty of care of sales companies to prevent incomplete sales and illegal acts by asset managers."

He also emphasized, "Public trust in the capital market is greatly declining due to consecutive financial accidents," and added, "Before the National Assembly prepares legal and institutional measures, financial companies should proactively establish voluntary trust recovery plans."

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