Possibility of Passing the 'Financial Sector Serious Accident Punishment Act' Within This Year

The amendment to the Financial Company Governance Act, known as the "Financial Sector Serious Accident Punishment Act," which holds CEOs accountable for internal controls within financial companies, is likely to pass the National Assembly within this year.

[Photo by Beopryul Newspaper]

On the 21st, the National Assembly's Political Affairs Committee's bill review subcommittee discussed and passed the "Partial Amendment to the Act on the Governance of Financial Companies."

The amendment focuses on strengthening the board of directors' supervisory role over internal controls in financial companies and requires submission of a "responsibility structure chart" to the Financial Services Commission that clarifies internal control management duties and responsibilities.

The "responsibility structure chart" is a document designating executives responsible for fulfilling internal control management duties, introduced in countries such as the UK to clarify individual executives' internal control responsibilities.

Under current law, financial companies are only obligated to establish "internal control standards." The amendment clarifies the internal control-related duties and responsibilities of executives and employees and enables sanctions accordingly.

According to the amendment, financial company executives must take management measures to ensure the effective operation of internal controls and risk management, and CEOs and others are the ultimate responsible parties for overall internal control, overseeing comprehensive management measures. Additionally, executives and CEOs must report significant matters learned during the management process to the CEO and the board of directors, respectively.

The amendment also introduces a provision imposing internal control management duties on financial company CEOs. Under this provision, if a financial company CEO fails to fulfill internal control management duties, the Financial Services Commission can impose the highest-level sanction, including a dismissal request. This is why the amendment is called the "Financial Sector Serious Accident Punishment Act."

The discussion on the amendment gained momentum following successive incidents of incomplete fund sales and internal misconduct allegations within financial companies. Although the amendment still needs to pass the full Political Affairs Committee and the National Assembly plenary session, it is widely analyzed that it will likely pass within the year due to no disagreements between ruling and opposition parties and strong will from the Financial Services Commission.

Kim Si-mok (48, Judicial Research and Training Institute class 33), a lawyer at Yulchon LLC, said, "The possibility of passing the governance law amendment, which includes the introduction of the responsibility structure chart, has increased. Even if it is not passed immediately, financial companies should proactively consider improving their systems in this direction, considering that internal control systems will be improved accordingly in the future."

Financial companies are seeking advice from law firms on how to establish the strengthened "internal control system" according to the amendment.

A lawyer from a major law firm specializing in finance said, "Large key banks and financial holding companies consult law firms and accounting firms on introducing the 'responsibility structure chart' system. The industry is already busy preparing systems, anticipating the amendment's passage through the National Assembly."

Reporter Im Hyun-kyung, Legal Times

※This article is based on content supplied by Law Times.

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