On May 14, financial sources reported that Lee suggested the potential for a reduction in the penalty during a press briefing regarding the Hong Kong ELS. The FSS is expected to complete its supplementary review by the end of this month and resubmit its findings to the Financial Commission.
Previously, during its ninth regular meeting, the Financial Commission discussed the results of inspections on banks and securities firms related to the Hong Kong ELS and requested the FSS to review its findings due to some factual inaccuracies and legal interpretations. This marks the first time in eight years that the Financial Commission has publicly rejected a proposal from the FSS, following the Samsung Biologics accounting scandal.
However, the nature of the two cases differs significantly. In the Samsung Biologics case, the core issue was whether accounting fraud occurred and the judgment of accounting violations. After the review, the penalties actually increased. In contrast, the current focus regarding the Hong Kong ELS is on how to justify the large penalty based on applicable standards and legal principles rather than the facts of improper sales.
The FSS had previously decided on a total penalty of approximately 1.4 trillion won against five banks, including KB Kookmin, Shinhan, Hana, NH Nonghyup, and SC First Bank. Initially, penalties were discussed at around 4 trillion won, but this was reduced to about 2 trillion won, reflecting the banks' voluntary compensation efforts, and further decreased through the sanction review process.
The possibility of additional reductions arises from concerns that the existing calculation method could be contested in future litigation. Under the Financial Consumer Protection Act, penalties are determined based on various factors, including the scale of sales, the degree of violations, efforts for victim restitution, and the responsibility of each seller. The banking sector has already undertaken significant voluntary compensation and may argue that the current penalty is excessive, given the varying sales amounts and levels of improper sales among different sellers. Additionally, this case represents the first major penalty imposed on the banking sector for improper sales since the implementation of the Financial Consumer Protection Act.
The financial sector anticipates that the FSS will reorganize the basis for penalties and the degree of violations by each seller during the supplementary review process before submitting an adjusted proposal. If a penalty in the hundreds of billions of won is confirmed, the likelihood of administrative lawsuits from the banking sector increases, prompting authorities to enhance their legal defenses before the final decision is made.
* This article has been translated by AI.
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