FSS Warns of Firm Action, Expulsion for Illegal Acts by Private Asset Managers

The Financial Supervisory Service (FSS) has announced that it will take strong action, including aggressively expelling private asset management companies from the market, stating that their illegal activities stem from inadequate internal controls.

The FSS held an information session for chief executive officers (CEOs) of private asset managers at its main office in Yeouido, Seoul, this morning (October 2), briefing some 170 attendees, including CEOs of newly established private asset management firms, on major cases of regulatory violations.

According to regulatory authorities, the number of registered private asset managers increased from 273 at the end of 2021 to 430 at the end of last year.

As of last year, the average number of executives and employees per private asset management company stood at a meager 14.4.

The FSS expressed concern that while the number of private asset managers is growing, each firm operates with a small workforce, which can lead to regulatory violations caused by a lack of familiarity with operations, ultimately resulting in insufficient investor protection.

Major regulatory violations introduced included breaches of the ban on using job-related information, such as family-owned corporations acquiring beneficiary certificates by utilizing undisclosed information like exchangeable bonds and convertible bonds slated for inclusion in funds.

There were also cases where compliance officers, whose role is to check compliance with internal control standards, were not appointed, or where compliance officers performed essential asset management duties that they are prohibited from carrying out, such as evaluating fund asset values or drafting operational instructions.

Seo Jae-wan, Deputy Governor for Financial Investment at the FSS, pointed out, "Despite our continuous guidance on past sanction cases, similar illegal activities continue to occur. This can only be attributed to a lack of attention from CEOs, who are the ultimate persons responsible for internal controls."

He emphasized, "Going forward, we will take resolute action against illegal acts that infringe upon investor interests or undermine the order of the capital market," adding, "We plan to hold them strictly accountable through active market expulsions and other measures."

The FSS plans to continue communicating with the industry through formats such as CEO briefings and compliance officer workshops.

The Korea Financial Investment Association also decided to strengthen education programs related to regulations and internal controls for private asset managers.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.