FSS: "Securities Firm Audits Will Focus on Investor Protection...Sanctions for Lenient Audits"

Seo Jaewan, Deputy Governor of the Financial Supervisory Service, stated on October 1, "The top priority and task in capital market supervision and inspection is 'investor protection,'" adding, "Going forward, the operation of supervisory and inspection work will also be completely revamped to focus on 'investor protection.'" He also warned that any lenient or negligent audits that are discovered will be strictly sanctioned.



The Financial Supervisory Service announced that on the morning of October 1, it held a workshop for securities firm auditors at the Korea Financial Investment Association in Yeouido, sharing cases of unsound business practices and weaknesses in internal controls that had been identified during previous inspections.

At this event, Deputy Governor Seo urged the audit organizations of financial investment companies to boldly move away from the traditional approach of post-detection and disciplinary action, and instead significantly strengthen 'preventive audits' by making 'investor protection' the top internal control standard.

He particularly emphasized that the CEO, as the person with ultimate responsibility for internal controls, should spare no effort or support in strengthening internal controls for proactive investor protection. He said, "By completely overhauling the fairness of internal audit and disciplinary procedures, as well as the independence of audit personnel and organizations, from the perspective of investor protection, please establish an internal control system in which investors can have confidence and invest with trust."

In addition, he warned that if any cases of lenient or negligent audits that ignore investor harm are discovered, there will be strict inspection and sanctions. He also stated that exemplary cases where internal audits have prevented investor harm will be actively considered in future inspections and sanctions.

The representatives from securities firms who attended the event also expressed their determination to maximize their audit capabilities as the company's internal 'watchdogs,' ensuring that there are no blind spots for investor protection throughout the entire process of product design, sales, and management.

A Financial Supervisory Service official said, "Through this workshop, we expect securities firms to redefine their internal audit organizations and work systems from the perspective of 'preventive investor protection,' and to make every effort to strengthen their internal control capabilities."

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