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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] South Korea’s financial authorities have imposed fines on banks for improper sales of Hong Kong equity-linked securities (ELS), signaling a potential escalation in regulatory enforcement.
On January 3, the Financial Supervisory Service (FSS) fined KB Kookmin Bank, Hana Bank, and Shinhan Bank KRW 36 million, KRW 24 million, and KRW 10 million, respectively.
Investigations revealed that the banks failed to properly record the contract signing process when selling Hong Kong ELS products to investors. Under the Financial Investment Services and Capital Markets Act, trustees entering into high-risk financial trust contracts must record the contract process and provide the recording to the investor.
In particular, KB Kookmin Bank did not obtain investors’ acknowledgment that they understood the product explanation, through signatures or other verification methods, during the sales process. According to the law, financial investment service providers must explain investment products in a way that general investors can understand and confirm comprehension through signatures or equivalent methods.
The fines imposed targeted cases nearing the statute of limitations for fines (five years from the sale), focusing on relatively minor issues with no significant disputes, to clear these matters first.
This move is expected to trigger more robust regulatory action against Hong Kong ELS sales. Banks still face the possibility of additional administrative fines, disciplinary measures against institutions and individuals, and further sanctions.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
