Lee Bok-hyun, FSC Chairman, First Organizational Restructuring... 'Blocking Illegal Short Selling, Establishing Inspection Office'

Looking into the First Organizational Restructuring by Lee Bok-hyun, Financial Supervisory Service Chief
New Short-Selling Task Force Established and 'Information Collection' Function Added
Controversial 'Inspection' Duties... Inspection Office Created and Audit Responsible

Lee Bok-hyun, Governor of the Financial Supervisory Service. / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Song Seung-seop] Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), has carried out his first organizational restructuring ahead of his 100th day in office. As he had often stated that there would be “no major overhaul,” the changes were limited to adjusting the department structure that had faced significant external criticism, but it is evaluated that power was decisively given to necessary departments.

According to the financial sector on the 13th, the FSS announced on the 7th that it had amended its organizational management regulations. The biggest change was the establishment of a Short Selling Investigation Team within the Capital Market Investigation Bureau. The Capital Market Investigation Bureau was originally organized into four teams: Investigation Planning Team, Investigation Team 1, Investigation Team 2, and Derivatives Investigation Team. Investigations related to short selling were divided among Investigation Teams 1 and 2 and the Derivatives Investigation Team, with the head of the Derivatives Investigation Team concurrently serving as the leader of the short selling investigation unit. Due to the heavy workload involving various unfair trade cases, disclosure violation investigations, and derivatives supervision, there were limitations in actively monitoring short selling.

The newly established Short Selling Investigation Team will be responsible for investigating and supervising illegal short selling overall. In particular, the team will also handle the ‘collection of information’ related to unfair trading involving short selling. Until now, the FSS’s organizational regulations only stated that unfair trading related to short selling would be ‘investigated.’ This change is interpreted as a determination to detect and block illegal short selling as quickly as possible to prevent large-scale damage, rather than a reactive approach that only initiates inspections after significant harm has occurred.

The first investigation case for the team is the overall short selling activity during the stock market crash at home and abroad amid the spread of COVID-19 in March 2020. Domestic short selling transactions were frequent, exceeding an average of 1 trillion won per day. Despite efforts by the government and financial authorities at the time, the surge in short selling led to a temporary ban on short selling.

President Yoon Suk-yeol is receiving a work report from Kim Joo-hyun, Chairman of the Financial Services Commission, at the Presidential Office building in Yongsan-gu, Seoul on the 8th.

This move is also related to President Yoon Seok-yeol’s directives. On July 27, President Yoon instructed, “Financial authorities and related agencies such as the prosecution must establish countermeasures with the determination to eradicate illegal activities surrounding short selling.” On August 8, while receiving a business report from Financial Services Commission Chairman Kim Ju-hyun, he reiterated, “I hope illegal short selling and unfair trading, which can cause multiple damages, are thoroughly monitored and strictly punished.” The establishment of a dedicated short selling monitoring organization and strict punishment for illegal short selling were also part of President Yoon’s election pledges.

The Audit Office Takes Charge of Inspection, and the Financial Situation Analysis Team is Revived

Alongside this, an Inspection Office was newly established to oversee internal staff discipline and job inspections. The FSS Audit Office was organized into three teams: Team 1 (Audit Planning and General Affairs), Team 2 (Internal Control and Risk), and Team 3 (Job Inspection). The newly established Inspection Office absorbed the functions of Audit Office Team 3 and the Compliance Support Office (employee ethics and attendance), and is composed of the Inspection General Team and the Job Inspection Team. The Inspection General Team manages FSS employees’ financial investment product reporting, conflict of interest prevention, misconduct checks, and attendance management. The Job Inspection Team handles job audits, post-inspection measures, and receives reports of irregularities from FSS employees.

However, within the FSS, there is much interpretation that the Inspection Office restructuring was due to criticism from the Board of Audit and Inspection. It is known that the FSS was criticized in a recent regular audit by the Board for the organizational structure of its inspection department. This was because inspection duties were overseen not by the auditor but by the Senior Deputy Governor. Former Governor Jung Eun-bo transferred the Job Inspection Team, which was under the auditor, to then Senior Deputy Governor Lee Chan-woo, leading to concerns that the Senior Deputy Governor, who holds personnel authority, had excessive power by also controlling inspection authority over a key department. The newly established Inspection Office will be overseen by Auditor Kim Ki-young, not Senior Deputy Governor Lee Myung-soon.

The Financial Situation Analysis Team under the Supervisory General Bureau was also revived. This team performs functions such as collecting and identifying difficulties faced by financial companies and discovering factors that hinder the development of the financial industry. The Financial Situation Analysis Team had been reorganized into the Compliance Support Office during the February organizational restructuring.

In addition, the FSS created the position of Korean Language Officer and designated the head of the public relations department as the person responsible. The Korean Language Officer promotes tasks such as the development and preservation of the Korean language and encouraging the use of easy-to-understand terminology. The FSS National Proposal System, which started on July 7, will be managed by the Supervisory Coordination Bureau.

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