Financial Services Commission Implements Sanctions Guidelines for Violations of Internal Control Management Obligations

Application Starting with Executives of Financial Companies Submitting Accountability Structure Diagrams

The Financial Services Commission announced on the 11th that it has finalized and will implement the enforcement guidelines for sanctions on violations of internal control management obligations by financial companies. These guidelines are based on the Financial Company Governance Act enacted in July and specify the criteria for sanctions against CEOs and executives of financial companies who violate internal control management obligations.

Regarding the major changes, first, the procedure for determining accountability has been strengthened. If a violation of internal control management obligations by an executive arises during an inspection, a 'Preliminary Materiality Review Committee' involving external members will be convened to assess the necessity of accountability.

Additionally, the grounds for sanction mitigation have been clarified. Efforts such as self-corrective measures or disciplinary actions taken by the financial company, as well as exemption reasons like policy finance operations, will be considered as reasons for sanction mitigation.

These guidelines will apply first to executives of financial companies that have submitted a responsibility structure chart, and for the nine financial holding companies and nine banks participating in the pilot operation, the guidelines will apply after the pilot period ends (until January 2, 2025).

The Financial Services Commission expects that these guidelines will enhance the predictability and transparency of sanctions for violations of internal control management obligations.

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