The Financial Supervisory Service is looking to scrutinize whether executives’ decision to exercise stock options that prompted a stock plunge at Kakao Pay was a sign of risk management deficiencies the financial services firm should address, according to an FSS official.

The CEO and two other executives at Kakao Pay stepped down Thursday amid criticism that their exercise of stock options in December last year, a month after the firm listed, brought an unwarranted stock dip. 

The CEO had previously offered to resign from the nomination to head Kakao Corp., which controls the payment subsidiary.

“By law, we can’t ask the company to adopt the type of internal oversight we think it should put in place to prevent a scandal like this. But we will see if the firm has any other weaknesses that could damage the reputation going forward,” the official said.

The official echoed a similar sentiment from the watchdog’s chief a day ago, when he said companies should bear in mind that exercising stock options should not come at the expense of retail investors.

However, the FSS, which aims to protect consumers from unfair financial practices, is wary of flagging the row as financial wrongdoing. In South Korea, stock options carry no lock-up periods that ban exercising them following an initial public offering.

“If the senior management had known about what was coming, probably something bad that could affect stock prices, and had acted on the intel without posting the news, then we have a problem. We will have to see if the sell-offs fall into this category,” the FSS official said.

Kakao, which is eyeing IPOs for Kakao Entertainment and Kakao Mobility this year, has introduced a two-year lock-up rule to prevent insiders from selling shares shortly after an IPO takes place. 

The change is seen as part of broader efforts, along with a shake-up at Kakao Pay, to alleviate public anger as it seeks to repair the company’s image ahead of new IPOs.

“Despite speculation over a delay in the plan, the spinoff IPOs will take place this year as promised. There could be a holdup, but the process will pick up speed once the company sees the public perception improving,” a source with knowledge of the matter said.