It was confirmed that the Financial Supervisory Service, objecting to the Financial Services Commission's decision ordering the resumption of reviews for issued-note licenses applied for by five securities firms, had put the matter back on the Financial Services Commission meeting agenda. Through a subcommittee, the Financial Services Commission decided to continue reviewing the issued-note license applications of the five securities firms, which means the FSS rejected this decision.
Inside and outside the authorities and the industry, some interpreted that the two agencies, which face a large-scale organizational reshuffle after the launch of the new administration, are showing tension over policy leadership.
According to financial authorities on the 19th, at the Financial Services Commission meeting on the 3rd, there was considerable discussion over whether to continue the review of issued-note licenses submitted as a reporting item by the five securities firms. The item was brought up at the request of the Financial Supervisory Service, and it was said that Financial Supervisory Service Governor Lee Chan-jin, who attended the meeting for the first time, spoke unusually long. Because of this, the meeting reportedly ended an hour later than expected.
As a result of the meeting, the commissioners decided to continue the review, but it was reported that there was considerable discord between the two agencies until a conclusion was reached.
The dispute began when the FSS last month reported to the Financial Services Commission that reviews should be halted for four securities firms—Samsung, Meritz, Hana, and Shinhan—excluding Kiwoom Securities. After receiving the FSS's view, the Financial Services Commission held a subcommittee and decided to continue the review. However, the FSS did not accept the decision made by the FSC subcommittee and raised the item to the FSC.
The Financial Services Commission views the FSS, which has only been entrusted with the review, as throwing a tantrum. Under the Capital Markets Act, the Financial Services Commission makes policy decisions to grant licenses to securities firms that apply for new businesses, but the FSS is pointing out matters not serious enough to halt reviews and is behaving as if it is leading the licensing decision.
Most commissioners who attended the Financial Services Commission meeting also said there is no reason not to grant a license to a securities firm if it meets the requirements. Even without considering the new administration's policy direction emphasizing the activation of venture capital, it would be problematic to block market entry from an overly regulatory stance when a securities firm that meets the requirements applies for a license.
By contrast, the FSS is said to view the judicial and internal-control risks of the securities firms seeking issued-note licenses as serious. The FSS reportedly said it confirmed some matters warranting concern regarding internal controls during a base-branch inspection of Samsung Securities. Meritz Securities is also undergoing a base-branch inspection, and a prosecution investigation is underway over unfair transactions related to Ehwa Technologies Information's bonds with warrants (BW) in the past. Shinhan Securities faces a 130 billion won derivative transaction loss incident, and Hana Securities is under investigation over hiring irregularities.
Some believe the FSS is concerned that, with risks at securities firms unresolved, a situation may arise where, despite a painstaking review, they still fail to meet licensing requirements. Securities firms are staking everything on this issued-note license, investing expense and effort. They argue that rather than both the financial authorities and the securities firms wasting their energy, it would be better to halt the review altogether.
The industry views this as stemming from inherent organizational differences: the Financial Services Commission decides the overall policy direction related to finance, while the FSS focuses much of its capacity on market oversight and sanctions. An industry official said, "From the Financial Services Commission's standpoint, it likely felt like overreach that the FSS, which is delegated to conduct the review, was pushing back, and from the FSS's standpoint, it may have seen the Financial Services Commission as putting the brakes on its judgment," adding, "The FSS bringing the item to the Financial Services Commission was likely a last resort to reiterate the FSS's position."
After the war of nerves between the two agencies, with the review of issued-note licenses resuming, the FSS will prioritize reviews for Kiwoom Securities and Hana Securities. The two securities firms are said to be giving presentations at the end of this month after evaluations by an external evaluation committee. The remaining three have not yet been notified of their schedules.
The securities firms that applied for issued-note licenses appear relieved. There were concerns that licenses would be delayed as the organizational reshuffles at the Financial Services Commission and the FSS overlapped, but with reviews resuming, there is an expectation that a conclusion can be reached within this year as scheduled.
A representative of a securities firm whose presentation schedule has not yet been set said, "Because the authorities did not share the progress, it was unclear whether the review would proceed," adding, "The fact that at least some securities firms will give presentations means reviews will proceed sequentially, which has somewhat eased concerns about a suspension of reviews."