Board of Audit and Inspection: "Financial Supervisory Service confirmed incomplete DLS sales but took no action"

Announcement of Public Audit Results on Overseas Interest Rate-Linked DLS Issues... "Confirmed Intentionality of Private Equity Funds to Evade Public Offering Regulations"

[Asia Economy Reporter Ryu Jeong-min] The Board of Audit and Inspection has revealed that the Financial Supervisory Service (FSS) confirmed the incomplete sales of derivative-linked securities (DLS) by securities companies but failed to take appropriate measures.

On the 5th, the Board of Audit and Inspection announced the results of a public audit related to derivative-linked funds (DLF) linked to overseas interest rates.

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The Board of Audit and Inspection stated, "As part of the first public audit request in November 2019, regarding the case where financial companies split overseas interest rate-linked DLS to evade regulations and incorporated and sold them through private equity funds, the audit confirmed that the FSS identified the incomplete sales of DLS by securities companies but did not take appropriate measures such as imposing fines according to relevant laws."

Furthermore, the Board pointed out, "The FSS either did not initiate inspections or, despite confirming intentionality, did not consider notifying investigative agencies regarding financial companies splitting and issuing the same securities into multiple private equity funds to evade public offering regulations, resulting in the Financial Services Commission failing to take appropriate action."

The Board of Audit and Inspection requested the FSS Governor to thoroughly perform duties and notified to investigate and take appropriate measures regarding the splitting and issuance of the same securities into multiple private equity funds to evade public offering regulations.

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