"Stop Self-Serving Practices"... FSS Summons Securities Firms, Calls for Stronger Internal Controls

The Financial Supervisory Service has convened compliance officers from 21 securities firms to strengthen internal controls within securities companies.

On September 21, the Financial Supervisory Service held a meeting for compliance officers from securities firms at the Korea Financial Investment Association in Yeouido, Seoul, aimed at reinforcing investor-centered internal controls.

Suh Jaewan, Deputy Governor of the Financial Supervisory Service, stated, "Recently, securities companies have achieved significant external growth alongside the development of the capital market, which has also led to an increase in their responsibilities as financial institutions. However, there is ongoing criticism of certain business practices that seem to 'enrich only the securities companies,' such as inducing credit and unsettled transactions or passing on fees and costs to clients. Furthermore, in some major branches, there have been serious cases of poor internal controls, including illegal excessive trading, unauthorized discretionary transactions, and unauthorized access to clients' credit information."

He continued, "The recent assessment of the appropriateness in the design and manufacture of high-risk products found that the preemptive investor protection process remains insufficient. The compliance department must act as a 'red team' within the company, executing control and oversight responsibilities from the product planning and review stages."

Deputy Governor Suh also emphasized, "In accordance with the recently implemented responsibility structure, management—including the CEO—must meaningfully carry out their internal control management duties. In addition, management should actively support the compliance department by ensuring it has sufficient authority and human and material resources, so that the internal control system can be thoroughly evaluated and improved."

The Financial Supervisory Service plans to communicate with the market and conduct on-site supervision, with the goal of reorganizing the internal control systems of financial investment companies to be more focused on investor protection.

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