The Financial Supervisory Service notified a sanction at the level of an institution warning in connection with the 130 billion won financial accident that occurred at Shinhan Investment Corp. last year. It came one year after it began an on-site inspection in Oct. last year.
According to the investment banking industry on the 16th, the FSS sent an official letter the previous afternoon notifying Shinhan Investment Corp. of an institution warning disposition.
The accident occurred over two months from Aug. to Oct. last year. Employees who served as liquidity providers (LPs) recorded a loss of 130 billion won due to a stock price plunge during futures transactions, and to conceal it, they falsely registered the deals as if they had entered into ordinary transaction contracts.
The FSS began an inspection into the case in Oct. last year, and the employees involved are known to be serving three-year prison terms.
As the FSS set the level of sanctions, uncertainty over sanctions that had been a concern ahead of the commercial paper review has been somewhat eased. Under current law, the level of sanction that constitutes a disqualification for a commercial paper license is business suspension or higher; since an institution warning was issued, the commercial paper license is not expected to face major setbacks going forward. Sanction levels for financial companies are classified as institution caution, institution warning, corrective order, business suspension, and registration or license cancellation.
The FSS issued a reprimand warning against former President Kim Sang-tae. Kim resigned voluntarily, taking responsibility for the case. Sanctions against executives of financial firms include dismissal recommendation, suspension from duty, reprimand warning, cautionary warning, and caution. If a reprimand warning is received, the person cannot be appointed as an executive at a financial company for the next three years.
After the incident, Shinhan Investment Corp. substantially expanded its compliance officer personnel and created an audit information analysis team to strengthen internal controls. Financial authorities also said they would accelerate reviews of companies that applied for authorization as they fully begin screening for commercial paper licensing. Accordingly, the level of sanctions for this case appears to have been decided faster than expected.