[Photo by MK DB]
South Korea’s Financial Supervisory Service (FSS) is out to go all the way, or the top court to appeal against lower court rulings relieving Sohn Tae-Seung, chief of Woori Financial Group, from liability in massive investors’ losses over mis-selling of derivative-linked funds, as its defeat can influence a host of other administrative suits against financiers.
The financial watchdog is preparing to take its legal case against Sohn, chairman and CEO of Woori Financial Group, to the Supreme Court, according to sources on Tuesday. It will decide on its move by Aug. 12.
FSS has been engaged in a legal battle with Sohn for nearly three years over its decision to punish him for the company’s alleged mis-selling of risky derivative-linked funds and related investors’ losses. The watchdog imposed Sohn a reprimand warning in December 2019 and finalized its punishment in March 2020.
A reprimand warning is the third highest in Korea’s five-level punishment system on financial institutions and bans the representative under charge from employment by a financial institution for three to five years after the current term. FSS has found Sohn liable for mis-selling by Woori Bank, the commercial lending unit of Woori Financial Group.
The bank is accused of being negligent in fully explaining the function of exotic financial products to novice investors of senior age. The fund in trouble caused retail investors massive losses after global bond interest rates plunged in the second half of 2019.
Sohn filed for an injunction against FSS’s decision of imposing a reprimand warning. The first court sided with Sohn after finding that the chairman violated only one count of accountability in preparing a process for selecting financial products. The court rejected the rest of the five claims filed by the FSS for its punitive action against Sohn. The FSS lost its appeal case.
The appeals court even cleared Sohn of the legal responsibility in preparing the standards for product selection.
The FSS cannot easily back down as doing so could affect other similar cases and shake its authority.
The financial authority is currently facing a legal battle with Hana Financial Group and its Chairman Ham Young-joo over punishing the top executive for the company’s violation of financial holding company law.
By Moon Il-ho and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]