"Sanction Unlawful for Not Considering Victim Compensation as a Mitigating Factor"... Court Sides with Former Samsung Securities Executive

Sanction for Mis-Selling KRW 23.2 Billion in Funds Overturned
Court: "Inequitable Given Differences in Losses and Investor Types"

A court has ruled that a pay-cut sanction imposed on a former executive of Samsung Securities for supervisory responsibility over the improper sale of funds worth about 23.2 billion won was unlawful.

According to legal sources on Nov. 8, the 12th Administrative Division of the Seoul Administrative Court, presided over by Judge Kang Jaewon, ruled in favor of A, a former Samsung Securities executive, in a lawsuit seeking to overturn a notice of action against a retired employee of a financial investment business filed against the governor of the Financial Supervisory Service (FSS). The court said, "The FSS abused its discretion by failing to properly consider mitigating factors, including the company's record of compensating victims."

Seoul Administrative Court. The Asia Business Daily DB

During A's tenure, from June to August 2019, Samsung Securities sold three types of the "Samsung Trust TA Asia Trade Finance Fund" to 10 professional investors in 11 transactions, for a total of 23.2 billion won. However, an FSS inspection later found that the company had recommended the investments as though investors were certain to recover their money, even though repayment of the principal was uncertain.

Following an ad hoc inspection in 2022, the FSS notified A in May 2025 of a sanction equivalent to a three-month pay cut, holding A responsible for failing to supervise the improper sales. The notice specified the sanction A would have received had A still been employed. A filed an administrative appeal, arguing that mitigating factors had not been properly taken into account. After the Central Administrative Appeals Commission rejected the appeal in November 2025, A filed a lawsuit.

The court ruled in A's favor, finding that the FSS had failed to properly consider mitigating factors, including the company's record of compensating victims. Before the sanction was imposed, Samsung Securities had compensated nine of the 10 victims for 80% of their losses calculated in U.S. dollars and informed the FSS. The court said, "The FSS did not take the compensation record into account when determining the sanction because the company had not begun efforts to compensate victims before the ad hoc inspection. The sanction was unlawful simply because this factor was not considered."

The court also noted that the sanction was on the same level as those imposed on other securities firms. Supervisors at Shinhan Securities, KB Securities and NH Investment & Securities received sanctions equivalent to three-month pay cuts for improper sales involving 63 cases worth 47.3 billion won, 31 cases worth 16.7 billion won and 1,888 cases worth 697.4 billion won, respectively. All the victims in those cases were retail investors, and the securities firms were also ordered to suspend business. By contrast, Samsung Securities' 10 victims were professional investors, and the sanction against the company was limited to an institutional warning. The court said, "Imposing the same sanction despite differences in the scale of losses and the types of investors was inequitable."

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