Woori Financial Group Chairman and CEO Son Tae-seung (Woori Financial Group)
The Supreme Court on Thursday upheld lower courts’ decision to accept an injunction request by the head of Woori Financial Group against the financial watchdog's penalty for improperly selling derivatives-linked products.
Since 2017, Woori Bank has been selling derivatives-linked products that were designed for investors to earn large amounts of money when the interest rates of major economies stay above a certain level. The problem occurred in 2019 when the interest rate around the world plummeted which caused investors to incur massive losses.
The Financial Supervisory Service imposed a penalty on Woori Financial Group Chairman Son Tae-sung as the financial watchdog saw that he was accountable for a lack of internal control to curb the misselling of derivatives-linked products. This penalty is influential as it could thwart Son, whose second term ends in March next year, from landing new jobs in the finance sector for at least three years. This is the third highest level of punishment out of five available options for the FSS.
In March 2020, Woori Financial Group filed an injunction to suspend the penalty.
Both of the lower courts ruled in favor of Son, saying there is no legal ground to impose a penalty on a staff member or an executive of a financial institution for “a failure to abide by internal control standards.” The court explained that financial institutes are obliged to only establish internal control standards under the current law and that the financial watchdog wrongfully applied this law to impose a penalty on Son.
The Supreme Court official added on Thursday that this ruling made it clear for the first time that a penalty for a financial company's violation of the obligation to "prepare" the internal control standards and the violation of the obligation to "comply with" the internal control standards should not be applied interchangeably.
After the ruling came out, the FSS released a statement and said the ruling on Thursday has some meaning as it recognized the regulative power of the 'setting and operating internal control standard’ and the financial regulator will find a way to create a better environment based on it.
Meanwhile, whether Son will be nominated to extend his term once again as Woori Financial Group chairman is expected to be discussed during a board of directors’ meeting held on Friday, according to industry sources.
When making the selection, the board members will likely consider another penalty that the financial regulator imposed on Son for misselling funds run by now-defunct Lime Asset Management. Son has not filed any injunction to suspend the penalty yet.
Adding to Son’s penalty situation, some industry insiders see that his reappointment is uncertain, as they speculate that there has been a nudge from the Yoon Suk-yeol administration that is against current banking group heads extending their terms.
If Son is reappointed as the chairman of the financial group, this will be his third term. Back in 2017, Son has been selected as Woori Financial Group’s chairman and in 2020 he secured his reappointment.
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