Severe Disciplinary Actions for Lime Fund and Samsung Life... Confirmation Within the Year Unlikely (Comprehensive)

Sanctions Proposals Delayed Over a Year Without Final Confirmation, Postponed Repeatedly Over the New Year

Financial Services Commission Chairman Ko Seung-beom is speaking at the 'Meeting to Promote Innovation in Financial Platforms' held on the 15th at Front1 in Mapo-gu, Seoul. Photo by Mo Honam munonam@

[Asia Economy Reporter Oh Hyung-gil] Attention is focused on the Financial Services Commission's regular meeting scheduled for the 22nd of this month. Since it is usually held every other Wednesday, it is expected to be the last meeting of the year.

However, once again, agenda items involving disciplinary actions or severe sanctions against financial company CEOs have not been submitted and have been postponed until next year, leading to growing controversy over the background. Related companies are also expressing difficulties due to the uncertainty from the authorities.

According to the financial sector on the 21st, the agenda items that the FSC has been unable to finalize for over a year include CEO disciplinary actions based on inadequate internal control standards under the Financial Company Governance Act related to Lime Fund, and sanctions related to the comprehensive inspection of Samsung Life Insurance.

At last month's regular meeting, the FSC finalized sanctions such as partial suspension of business against Daishin Securities, Shinhan Financial Investment, and KB Securities for the incomplete sales of Lime Fund. This came about a year after the Financial Supervisory Service (FSS) decided on severe sanctions against these securities firms through its disciplinary committee in November last year.

However, disciplinary actions against CEOs who neglected internal controls have been postponed until next year. Previously, the FSS decided to close Daishin Securities' Banpo WM Center in Seoul and impose fines, and to partially suspend business and impose fines on Shinhan Financial Investment and KB Securities.

Along with this, former Daishin Securities CEO Na Jae-cheol (currently Chairman of the Korea Financial Investment Association), former Shinhan Financial Investment CEO Kim Hyung-jin, and former KB Securities CEO Yoon Kyung-eun were given 'job suspensions,' while KB Securities CEO Park Jung-rim received a 'reprimand.' These are all severe disciplinary measures, and if finalized, these former and current CEOs will be barred from reemployment in the financial sector for the next 3 to 4 years, which is expected to have significant repercussions.

The FSS cited the violation of the Enforcement Decree of the Financial Company Governance Act, which requires establishing effective internal control standards, as the basis for sanctions. However, the securities firms have protested that imposing severe disciplinary actions on CEOs based on deficiencies in internal control systems is excessive.

In particular, a variable emerged when, in August, the court ruled in favor of Sohn Tae-seung, Chairman of Woori Financial Group, in the first trial of his lawsuit against the FSS to cancel severe sanctions related to derivative-linked funds (DLF), stating that "whether internal controls were neglected under the Governance Act is not a reason for sanctions."

The final decision on sanctions against Samsung Life Insurance for unpaid cancer insurance hospitalization fees at convalescent hospitals has also been postponed beyond this year. The FSS conducted a comprehensive inspection of Samsung Life Insurance in 2019, and in December last year, the disciplinary committee decided on an 'institutional warning,' a severe sanction, and forwarded it to the FSC.

Since then, while the FSC processed some agenda items from the comprehensive inspection in July, it has been delaying decisions on contentious issues such as unpaid cancer insurance claims and violations of major shareholder transaction restrictions.

This issue also faces conflicting legal judgments. The Supreme Court upheld Samsung Life Insurance's position in a cancer insurance claim lawsuit filed by a co-representative of a cancer patient group, recognizing the second trial's ruling that hospitalization in a convalescent hospital for treating aftereffects or complications following cancer or cancer treatment is not directly related to cancer treatment.

A financial industry official said, "All the sanction agenda items have sharply divided opinions, and legal issues based on court rulings are at the core," adding, "The authorities say they will handle them promptly, but financial companies are in a difficult position having to wait indefinitely."

Meanwhile, since 2019, a total of 37 agenda items have been submitted more than twice to the FSC agenda subcommittee by the FSS. Four items took more than three months to complete, and including four items that have remained unresolved for over 200 days, there are still eight items under review.

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