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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] The Financial Supervisory Service (FSS) has issued verbal warnings to several domestic credit rating agencies for violations of internal control standards. The action follows findings that sales teams accessed non-disclosed corporate credit ratings and reviewed historical credit evaluation data without proper authorization. Seoul Credit Rating Agency (SCRA) was also flagged for potentially failing to meet licensing requirements due to insufficient personnel in credit evaluation and internal control functions.
On the 20th, financial authorities confirmed that the FSS conducted inspections of NICE Credit Rating, Seoul Credit Rating, Korea Investors Service (KIS), and Korea Ratings. The inspections revealed weaknesses in internal controls that could lead to conflicts of interest and the improper handling of confidential information.
Specifically, sales personnel in these agencies were able to access non-disclosed corporate credit ratings through internal systems and review historical credit evaluation data stored in shared company folders. The inspections also found a lack of effective restrictions on personnel transfers between evaluation and sales departments, which are meant to remain separate to prevent conflicts of interest.
Under the Financial Investment Services and Capital Markets Act, credit rating agencies are required to maintain internal controls that cover the separation of evaluation and sales functions, conflict-of-interest prevention, prohibition of unfair practices, and adoption of rating criteria suitable for the rated entity.
The inspections further identified deficiencies in documentation procedures. Agencies were found to accept important data from company representatives without directly verifying its accuracy or completeness. Evaluation committee materials were also not consistently distributed to committee members at least one day prior to meetings, as mandated.
Seoul Credit Rating was specifically instructed to expand its workforce, as the current number of credit evaluation professionals could put the agency in violation of licensing requirements. The law requires credit rating agencies to maintain at least 20 credit evaluation professionals, including five certified public accountants, to retain their license.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
