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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] According to an exclusive report by Maeil Business Newspaper on the 19th, South Korea’s Financial Supervisory Service (FSS) is strongly considering imposing penalties on banks involved in the misselling of Hong Kong H-Index equity-linked securities (ELS) based on the number of sales rounds, rather than on each individual customer transaction.
The FSS plans to classify products sold under identical conditions as a single sales round, with one fine applied per round. This approach significantly reduces the potential penalty scale. Although a total of 170,000 ELS contracts were sold, applying the standard KRW 70 million fine to each case could have resulted in penalties reaching KRW 11.9 trillion.
Instead, regulators are focusing on shortcomings in the banks’ internal sales guidelines rather than misconduct by individual employees.
Over the past five years, the four major banks — KB Kookmin, Shinhan, Hana, and Woori — collectively conducted 3,233 sales rounds. At KRW 70 million per round, total fines are projected at approximately KRW 220 billion.
Some cases will likely be excluded due to the five-year statute of limitations, particularly those sold in the second half of 2020, as it will be difficult to complete the entire disciplinary process — including the FSS’s sanction review committee and the Financial Services Commission’s final approval — within this year.
In addition to these penalties, separate administrative fines under the Financial Consumer Protection Act — implemented in March 2021 — will also be imposed. Industry officials note that the combined burden from penalties and fines could reach into the trillion-won range.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
