After a bill on the board of directors' duty of fidelity to shareholders passed the National Assembly's Legislation and Judiciary Committee, Lee Bok-hyun, the head of the Financial Supervisory Service, criticized, saying, "I have concerns that it was passed too hastily." In the market, there have been claims to broaden the target of fidelity to include shareholders as it has been 'companies' so far, which led to corporate management contrary to the interests of shareholders. The National Assembly responded to this, but the head noted that while he agrees with the larger proposition of capital market advancement, the current proposal has significant side effects.
On the 5th, after a meeting of the 'CEO's meeting of securities firms' held by the Korea Financial Investment Association in Yeouido, Seoul, the head stated, "I do not think that the amendment to the Commercial Act is absolutely evil," but added, "I cannot support passing (the National Assembly) with just one obligation provision, as the devil is in the details."
This follows the opposition party's unilateral approval of the amendment to the Commercial Act at the international Legislation and Judiciary Committee meeting held on the 26th of last month. Subsequently, National Assembly Speaker Woo Won-sik urged both parties to reach an agreement and postponed the presentation of the amendment to the Commercial Act at the plenary session.
On that day, the head expressed concerns, saying, "The system should be designed by scrutinizing one by one the issues that may arise when the law is implemented, but I have doubts that the Commercial Act was passed too hastily in the Legislation and Judiciary Committee," and noted, "I have supported the advancement plan of the Capital Markets Act, but it is difficult to support passing in the current manner."
He also stated that the law is unclear, which could lead to interpretive issues. The head remarked, "The total shareholders and entire shareholders in the current provisions do not precisely match the existing legal concepts, so there may be interpretive issues," adding, "Excessive criminalization is worrisome, and it should be amended simultaneously with the Capital Markets Act, and appropriate protective measures for directors should also be established."
He stated, "The current proposal that is (on the National Assembly) cannot work," and further remarked, "If it does not work in procedural law, it will be difficult regardless of the principles." He explained that even if the Commercial Act is amended, unless issues regarding securing information for shareholders and stakeholders, mergers, and physical divisions are resolved through amendments to the Capital Markets Act, it would be difficult to protect shareholder interests.
The head noted, "It is difficult to agree to pass only the Commercial Act under such political circumstances without discussing the amendment of the Capital Markets Act." He indicated that the amendment to the Commercial Act could significantly increase the likelihood of directors becoming involved in lawsuits. He said, "When restructuring a group's business or enhancing (a corporation's) efficiency, the role of directors is necessary," adding, "If they actively take on roles, the legal risks increase." He pointed out that mechanisms such as coverage or insurance for directors are needed.
Meanwhile, on that day, the head expressed concerns about the competition over fees for exchange-traded funds (ETFs) among asset management firms. He remarked, "Due to lowering fees, there may be movements to shift the declining revenue to higher fees for other ETFs or to reduce the compensation of management companies, passing costs onto third parties," adding, "Some confirmations have been made." He stated, "I think this needs to be addressed in the major inspection process or during the improvement of the system."
He stated that he would prioritize inspections of securities firms' captive sales during the first half of the year. Captive sales refer to leveraging affiliates to invest in corporate bonds of issuing companies to secure underwriting. The head explained, "If the criticism regarding wrap accounts is Season 1 of establishing fair trade in the bond market, then normalizing dirty practices in the bond market, such as captives, is Season 2." He continued, "I think we should focus our inspection capabilities in the first half of the year and improve any unfair aspects within the bond market."
Regarding the allegations of stock manipulation by the major shareholders of SAMBU Construction, he noted, "It is difficult to deny that some stakeholders have realized profits exceeding 10 billion won," while also stating, "It is difficult to establish unfair trading based solely on one specific fact, so we are currently conducting a broad verification of funds."