Guidelines for the Financial Consumer Protection Act Released After Three Months, Will 'Exemption Criteria' Be Included? (Comprehensive)

Financial Sector Demands 'Exemption Criteria' with Detailed Guidelines
Financial Authorities Reluctant Over 'Immunity' Concerns
Concerns Persist Over Conservative Attitudes of Financial Firms for the Time Being

[Asia Economy Reporter Kim Jin-ho] Financial authorities will soon distribute guidelines on the core explanatory documents related to product sales as a follow-up measure to the enforcement of the Financial Consumer Protection Act (FCPA). However, the so-called ‘exemption criteria’ requested by the financial sector are unlikely to be included, casting doubt on the effectiveness of the guidelines. If specific cases are not clearly stated, it is expected that financial companies will maintain a conservative stance for the time being.

According to the financial sector on the 30th, the financial authorities plan to complete the distribution of the FCPA guidelines (compliance with explanation obligations, internal control standards, and financial product risk assessment standards) by mid-July at the latest. A financial authority official said, "We are currently accelerating preparations for the distribution of the guidelines and plan to provide sequential guidance from early to mid-next month."

The financial sector’s attention is focused on the ‘compliance with explanation obligations’ among the three FCPA guidelines, as this is the most challenging part at the frontline since the enforcement of the FCPA. Due to the burden of disputes surrounding the explanation obligation, so-called ‘soulless’ customer service is occurring among branch staff. The biggest inconvenience for customers is that the time required to subscribe to a fund, which used to take 20 minutes before the FCPA, has increased to up to one hour.

The industry hopes that the ‘compliance with explanation obligations’ guideline will include detailed instructions that branch staff should follow. They are requesting clear criteria that reduce product sales time to minimize customer inconvenience while ensuring no violation of the FCPA. A banking sector official said, "Since the possibility of legal violations is the biggest concern for financial companies after the enforcement of the FCPA, it is most important to have detailed guidelines including exemption criteria so that frontline branch staff can work smoothly."

On the other hand, financial authorities hold the view that such exemption criteria could effectively become a ‘get-out-of-jail-free card.’ A Financial Services Commission official expressed skepticism, saying, "We cannot accept financial companies relying solely on the guidelines without making efforts to interpret the regulations themselves." Accordingly, the guideline on compliance with explanation obligations to be distributed by the financial authorities is expected to be limited to guidance on efficient methods of fulfilling the explanation obligation, such as ‘it is acceptable to explain only the summary content,’ and principles and precautions for preparing the core explanatory documents.

The problem is that if the ‘compliance with explanation obligations’ guideline lacks clarity and specificity, confusion at the field level will continue for the time being. If specific cases are not stated, frontline financial company staff will inevitably treat consumers conservatively. A financial sector official said, "Since misinterpreting the guidelines could lead to violations of the FCPA in the future, wouldn’t it be natural to act cautiously and as safely as possible?"

Meanwhile, unlike the guideline on compliance with explanation obligations, the other two guidelines are reported to have no major issues. Regarding the internal control standards guideline, the financial authorities plan to specify the operation plans and items to be included in the standard internal control standards and standard consumer protection standards by association. The financial product risk assessment standards will be drafted by referring to domestic best practices as well as overseas cases such as the EU (European Union), based on the current standard investment solicitation rules related to risk grading.

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