The Financial Services Commission (FSC) approved 361.96 billion won in fines and 1.78 billion won in additional administrative penalties against seven banks. Six brokerages were ordered to pay another 9.28 billion won in fines and 1.61 billion won in administrative penalties.
The bank fines were about 40 percent below the revised proposal of roughly 600 billion won. Despite the reductions, the FSC said the combined penalties represented its largest monetary sanction.
The decision concludes a prolonged review of sales practices surrounding equity-linked securities (ELS) tied to the Hang Seng China Enterprises Index, commonly known as Hong Kong’s H Index.
The products link investment returns to the performance of underlying shares or indexes and can expose buyers to substantial losses of principal. Investors suffered heavy losses in early 2024 after the Hong Kong index slumped.
The FSC found that banks had failed to adequately explain investment risks and, in some cases, recommended products without properly considering customers’ financial circumstances.
Some sales materials omitted historical simulations of investment returns or changed the periods used in those simulations, leaving out information material to investors’ decisions.
Other materials oversimplified how returns and losses were determined without adequately explaining risks arising from fluctuations in the underlying assets.
KB Kookmin Bank received the largest fine at 172.33 billion won, followed by Hana Bank at 92.48 billion won, NH Nonghyup Bank at 40.18 billion won, Shinhan Bank at 38.75 billion won and Standard Chartered Bank Korea at 17.9 billion won.
Woori Bank was fined 331 million won. Sh Suhyup Bank received an administrative penalty of 42 million won but no separate fine.
Among brokerages, Korea Investment & Securities accounted for most of the fines at 9.25 billion won. The other firms sanctioned were Mirae Asset Securities, KB Securities, Shinhan Securities, NH Investment & Securities and Samsung Securities.
The FSC said it had conducted repeated deliberations and extensive legal and factual reviews because the case involved numerous consumers and major financial institutions under the Financial Consumer Protection Act.
The regulator also pledged to strengthen safeguards at the point of sale. Guidelines intended to improve explanations of investment products will take effect in the first quarter of 2027.
Copyright ⓒ Aju Press All rights reserved.