Following recent hacking incidents in the financial sector, the Financial Supervisory Service (FSS) urged the securities industry today (October 7) to have each company exercise extraordinary vigilance and thoroughly reexamine their information technology (IT) security and inspection systems.

Seo Jae-wan, Deputy Governor of the Capital Market Supervision Department, made the remarks during a meeting held today with internal audit officials from major securities firms (totaling 21 companies) aimed at strengthening investor-centric internal audit functions.

He also requested that firms promptly and accurately assess the potential for investor damage and immediately implement protective measures when necessary.

Furthermore, Deputy Governor Seo emphasized the role of auditors, stating, "I hope you will closely examine whether investor protection processes are truly functioning 'properly.'"

He expressed deep concern that internal controls are failing to function properly even as chronic illegal practices of "failing to observe even the basics" continue to repeat, citing examples such as entering false or inadequate information in product manuals or using personal mobile phones for sales solicitations without leaving any record of the recommendations.

He added, "While the recent unprecedented quantitative growth of the securities industry is rooted in investor expectations for fairness and transparency in the capital market, fundamental contemplation and self-reflection are required regarding whether securities firms' current levels of internal control are meeting these expectations and providing sufficient trust."

Deputy Governor Seo urged that corporate audit organizations must concentrate all efforts on preemptive investor protection through "proactive audits" rather than "reactive audits after the fact," while also calling on management to actively enhance audit capabilities through human and material support.

During the meeting, the FSS provided guidance on recent findings from inspections of product design and manufacturing processes, as well as precautions related to stock lending and borrowing business practices during the execution of liquidity provider (LP) duties.

The FSS requested thorough guidance for investors to ensure the successful settlement of strengthened voluntary management measures for credit loans, which were introduced for preemptive risk management.

It also asked the firms to check whether follow-up measures regarding comprehensive improvements in advertising operations to eradicate false and exaggerated advertisements are being properly implemented.

Industry attendees stated that they would return to the basics to examine whether investor protection and risk management systems are operating properly across all sales processes and strengthen internal controls, the FSS conveyed.
(Photo: Yonhap News)