Son Tae-seung, Chairman of Woori Financial, Wins Financial Supervisory Service DLF Lawsuit (Comprehensive)

Court, "Cancel Financial Supervisory Service's Disciplinary Action"
Financial Supervisory Service, "Respect Court's Decision... Will Announce Appeal Decision Soon"

[Asia Economy Reporter Kim Jin-ho] Sohn Tae-seung, Chairman of Woori Financial Group, won the first trial in a lawsuit seeking to cancel the disciplinary action related to the overseas interest rate-linked derivative-linked fund (DLF) filed against the Financial Supervisory Service (FSS).

On the 27th, the Seoul Administrative Court Administrative Division 11 (Presiding Judge Kang Woo-chan) ruled in favor of the plaintiffs, Sohn and another person, in the cancellation lawsuit filed against the FSS.

Previously, in January last year, the FSS imposed a severe disciplinary warning on Chairman Sohn, holding him responsible for the DLF incident. At the time of the DLF sales, Sohn was the CEO of Woori Bank.

If a financial company executive receives a severe disciplinary action, they are prohibited from employment in financial companies for the next three years. Accordingly, in March last year, Sohn filed a lawsuit to cancel the disciplinary action and requested a provisional injunction to suspend the disciplinary effect until the judgment was made, which the court accepted.

The key issue in this lawsuit was whether the violation of the obligation to establish internal control standards under the Financial Company Governance Act (Governance Act) could be grounds for severe disciplinary action against a CEO. The current Governance Act stipulates that "financial companies must establish standards and procedures (internal control standards) that financial company executives and employees must comply with when performing their duties to comply with laws, manage soundly, and protect shareholders and stakeholders."

The FSS has maintained that Sohn’s disciplinary action was justified based on this, arguing that he failed to establish "effective" internal control standards. On the other hand, Sohn’s side argued that since internal control standards had already been established, disciplining management for deficiencies was unfair.

The court ultimately ruled in favor of Sohn. In the first trial of the cancellation lawsuit, the court ordered the cancellation of the FSS’s disciplinary warning against Chairman Sohn. It appears the court considered disciplining management solely for deficiencies as excessive.

Regarding this, the FSS stated that it will conduct a thorough analysis upon receiving the judgment and decide whether to appeal. After the ruling, the FSS said, "We respect the court’s decision" and added, "We will carefully review the detailed contents such as the standards for the obligation to establish internal control standards and organize our position."

Meanwhile, the financial sector is paying close attention to the outcome of Sohn’s lawsuit. Depending on the court’s judgment, the severity of disciplinary actions against other financial company CEOs related to private equity funds is likely to be significantly reduced. Previously, the Financial Services Commission also indicated that it would decide the sanctions for other CEOs based on the court’s ruling.

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