“Focus on Safe and Unproductive Areas by Financial Investment Companies”
“Supplying Venture Capital is the Reason for Financial Companies’ Existence and Their Fundamental Role”
Lee Chan-jin, Governor of the Financial Supervisory Service (third from left), delivers a speech at the meeting between the Financial Supervisory Service and CEOs of financial investment companies held at the Korea Financial Investment Association in Yeouido on the 8th. /Yonhap News
Lee Chan-jin, the Governor of the Financial Supervisory Service, met with representatives of financial investment companies and said, “We should not make the mistake of creating blind spots in internal control for the sake of short-term performance, nor should we repeat the behavior of not even ‘locking the barn door after the horse is stolen’.” This comment directly addresses the repeated large-scale investor damage caused by the inadequate selling practices of securities companies and asset management firms, ranging from issues with Lime and Optimus funds to the Hong Kong ELS (Equity-Linked Securities) incident.
On the 8th, Governor Lee held a meeting with the financial investment industry at the conference hall of the Korea Financial Investment Association in Yeouido, Seoul, and revealed these remarks. The meeting was attended by Seo Yoo-seok, chairman of the Korea Financial Investment Association, and CEOs from 26 securities and asset management firms. Lee pointed out, “Although our capital market and financial investment industry have achieved remarkable growth in size, it is necessary to critically examine if qualitative growth and enhancement of investor benefits have been balanced.”
He emphasized, “As a common sense and principle, if employees themselves do not fully understand a product or cannot confidently recommend it to their family, it should not be sold.” He also instructed CEOs to ensure a culture of proactive investor protection is established at all stages before business activities commence. Additionally, he called for innovation in internal control, stating, “Please grant independent and substantial authority to internal control organizations.”
He also asked financial investment companies to actively respond to unfair practices such as market manipulation and fraudulent trading. He said, “Please actively fulfill the role of a ‘Whistle Blower’ in response to illegal activities that disrupt market order,” adding, “It would be better if there are no instances of what is commonly known as ‘eating and running’.”
On that day, Governor Lee also emphasized ‘productive finance,’ a key pledge of the Lee Jae-myung government. He pointed out, “The financial investment industry has tended to focus on relatively safe and unproductive areas of investment rather than on challenging and productive ones.”
He added, “Supplying venture capital is the reason for the existence of financial investment companies and their ‘fundamental role,’” and said, “Please become the key players in the productive finance platform in Korea by boldly and sufficiently supplying funds where needed.” Furthermore, he mentioned, “As a person responsible for fostering the capital market, I will also actively promote investments such as the Kospi Index DTF and startups.”
Meanwhile, Lee urged securities firms, which are retirement pension operators, and asset management companies, which supply retirement pension products, to work on securing the trust of the retirement pension system. He stated, “By focusing on the management of TDF (Target Date Funds), which are representative lifecycle products, ensure that returns can be enhanced from a long-term perspective.” He also suggested, “We will work with relevant ministries to gradually expand the investment limit on high-risk retirement pension products (currently 70%) and provide tax benefits similar to those in the United States,” indicating support measures for retirement pensions.