Financial Supervisory Service Begins First Comprehensive Inspection of Hana Financial Investment Securities... On-site Main Inspection on the 24th

From the 12th, preliminary tests followed by on-site main inspections at the end of this month... Expected to be limited to one location this year, 'Financial Sector on Alert'

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] The Financial Supervisory Service (FSS) has launched a comprehensive inspection of Hana Financial Investment. The FSS completed a preliminary data submission request to Hana Financial Investment in mid-last month, and following the preliminary inspection based on this, it plans to begin the on-site main inspection at the end of this month.

According to financial authorities on the 11th, the FSS selected Hana Financial Investment as the first target for this year's comprehensive inspection of securities firms. Accordingly, in mid-last month, the FSS requested preliminary data submission for the comprehensive inspection from Hana Financial Investment. The FSS comprehensive inspection proceeds in the order of preliminary data request, preliminary inspection, and on-site main audit. The FSS's preliminary inspection of Hana Financial Investment will be conducted over five business days from the 12th to the 19th.

The on-site main inspection is scheduled from the 24th to the 16th of next month. The FSS plans to conduct the inspection based on indicators such as △appropriateness of financial risk management △unfair business practices infringing on investor interests △vulnerable areas of internal control △acts undermining fair order in the capital market △appropriateness of capital market infrastructure functions.

The FSS initially planned comprehensive inspections for three securities firms but, considering manpower shortages due to full-scale investigations of various private equity funds, it plans to reduce the actual comprehensive inspections to only Hana Financial Investment. An FSS official explained, "Due to the full inspection related to the private equity fund redemption suspension incident, the originally planned comprehensive inspections of securities firms have become difficult," adding, "It is highly likely that only Hana Financial Investment will undergo a comprehensive inspection this year."

The FSS will also conduct comprehensive inspections of Hana Financial Group and Hana Bank within this month. The financial sector is closely watching the financial authorities’ comprehensive inspections focusing not only on holding companies but also on affiliated companies in banking and securities sectors. The FSS is expected to examine Hana Bank, a distributor of Lime Asset Management funds and Italian healthcare funds, for incomplete sales and poor internal control issues. Additionally, it will check whether Hana Bank properly performed its trustee duties related to the recent Optimus incident. Optimus Asset Management reportedly instructed Hana Bank to purchase non-performing loans while requesting the Korea Securities Depository to register them as public institution accounts receivable, thereby forging fund statements.

This inspection is unusual as it is taking place during the vacation season. Typically, the FSS conducts comprehensive inspections in the first half of the year, from April to May, and takes a break during the vacation months of July and August. This is interpreted as being due to the impact of the novel coronavirus disease (COVID-19), which intensified from March, preventing any comprehensive inspections from being conducted so far.

After completing comprehensive inspections of Hana Financial Group and Hana Bank, the FSS plans to begin comprehensive inspections of Woori Financial Group and Woori Bank within this year. It also plans to conduct a comprehensive inspection next month on Kyobo Life Insurance, where Chairman Shin Chang-jae and financial investors (FIs) are engaged in litigation related to a put option.

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