[Exclusive] To Introduce Accountability Structure... KOFIA and Compliance Officers from 15 Securities Firms Head to the UK

Implementation of Financial Sector Accountability Structure in July
Major Securities Firms and Asset Management Companies Must Submit by July Next Year
KOFIA Develops Standard Accountability Structure and Launches TF

It has been confirmed that the Korea Financial Investment Association (KOFIA) visited the UK with compliance officers from 15 domestic securities firms to study advanced cases of responsibility maps. With the implementation of responsibility maps scheduled for July, the purpose was to conduct on-site investigations and refer to cases to alleviate difficulties faced by the securities industry due to the introduction of the system. KOFIA plans to prepare a standard example of responsibility maps for small and medium-sized securities firms that find it difficult to establish responsibility maps on their own, and also operate a task force (TF) for information sharing within the securities industry.

Seo Yu-seok, Chairman of the Korea Financial Investment Association, delivering a greeting at the 2024 New Year Press Corps Meeting held on January 23 at the Korea Financial Investment Association in Yeongdeungpo-gu, Seoul.
Photo by Korea Financial Investment Association

According to KOFIA on the 6th, Lee Bong-hyun, Executive Director of the Self-Regulation Headquarters at KOFIA, along with compliance officers from 15 domestic securities firms including Korea Investment & Securities and NH Investment & Securities, embarked on a business trip to the UK at the end of February. The reason for their visit to the UK was to refer to the UK’s cases of responsibility maps. The Financial Services Commission and the Financial Supervisory Service conducted legislative notices and regulatory change notices on enforcement decrees and supervisory regulations last month to specify delegated matters following the amendment of the "Financial Companies Governance Act (Governance Act)".

The Governance Act, passed by the National Assembly in December last year, centers on the responsibility map, which preemptively records internal control responsibilities for each executive. The responsibility map means assigning executives the obligation to manage internal control measures and clearly specifying the board of directors’ role in internal control.

The UK was the first country to introduce responsibility maps, and the UK Financial Conduct Authority (FCA) has 27 overarching responsibilities related to responsibility maps, including payment, clearing and settlement, investment management, and financial and investment advisory. A KOFIA official explained, "We conducted on-site investigations related to the system implementation by visiting local law firms, accounting firms conducting consulting, and the International Capital Market Association," adding, "Although securities firms and asset managers have been granted a grace period, it is a time-consuming task to enumerate responsibilities according to all business and organizational structures of each company, so preparations must be made now."

The submission timing for responsibility maps varies depending on the industry sector and asset size. In the financial investment industry, securities firms with assets exceeding 5 trillion KRW and large asset managers with assets under management exceeding 20 trillion KRW must submit by July next year, while other companies must submit by July 2026.

However, since responsibility maps themselves are newly established this time, many in the industry expressed difficulties. Since there were no precedents on how to implement them, securities firms find it challenging to grasp how to prepare responsibility maps suited to Korea’s circumstances. A representative from a large domestic securities firm said, "Financial holding companies, financial firms, and large securities and asset management firms are currently contracting with domestic law firms for consultation," adding, "Small and medium-sized firms complain that it is not easy to organize their organizational structure, articles of incorporation, and systems to align with the introduction of responsibility maps."

KOFIA plans to prepare a standard example of responsibility maps reflecting these industry difficulties, similar to the standard investment solicitation rules. Earlier, in January this year, at a press conference marking his first anniversary in office, KOFIA Chairman Seo Yoo-seok announced plans to prepare a "standard example of responsibility maps" for the financial investment industry. Chairman Seo said, "Having a responsibility map does not guarantee 100% prevention of incidents or accidents, but it is a significant change in that internal control tasks, which were previously done only by specific departments or employees, are now voluntarily undertaken by all executives," and added, "The association plans to create a standard responsibility map that the industry can use and support its adoption."

However, since it is necessary to clarify organizational structures, roles, and responsibility relationships according to each company’s business, and to include detailed contents such as exemption criteria, it is expected to take considerable time to prepare the example. Along with this, KOFIA plans to form and operate a TF involving department heads from individual companies to share opinions within the financial investment industry and inspect the operational status of each company’s systems in preparation for the full-scale implementation of the system.

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