If you appeal, you will be burdened with a prolonged legal battle, and if you give up on appeal, you may be criticized for ‘ignoring the victim’s consumer’
(yunhap news)
Jung Eun-bo, head of the Financial Supervisory Service, is in a dilemma. This is because it is burdensome no matter what choice you make over whether to appeal the lawsuit over cancellation of heavy disciplinary action against Woori Financial Group Chairman Son Tae-seung.
The Financial Supervisory Service must decide on an appeal against Chairman Sohn’s defeat in the first trial of the cancellation of heavy disciplinary action related to the overseas interest rate-linked derivative-linked product (DLF) situation by the 17th. As it is the first case of an administrative lawsuit between the Financial Supervisory Service and the head of a financial company related to a private equity fund, the financial industry is drawing attention.
DLF is a fund that invests in derivative-linked securities (DLS) whose underlying assets are interest rates, exchange rates, and credit ratings. As bond interest rates plummeted in 2019, large-scale principal losses occurred in DLS, which used US, UK, and German bond rates as an underlying asset, and DLF, which was invested in it.
If the FSS appeals, the court battle will inevitably be lengthy. It is because it is self-evident that if the appeal process is entered, it will eventually go to the Supreme Court. Even if they lose in the second trial, they can go to the Supreme Court. There are cases where the Supreme Court, which is a legal trial, overturns the result even if the trial court loses in the first or second trial.
If the Financial Supervisory Service appeals, there is a possibility that Chairman Sohn will again apply for suspension of the enforcement of the severe disciplinary sanctions until a judgment is issued. In the first trial, Chairman Son applied for an injunction to suspend the disciplinary effect.
Director Jung’s burden is that he must hold the disciplinary action related to private equity on hold until the Supreme Court. As this is the first case in the case of Chairman Son, the outcome of the trial will affect the level of disciplinary action of other financial companies. It is practically difficult to decide on the disciplinary action of other financial companies until the final litigation results between the Financial Supervisory Service and Chairman Son come out.
On the other hand, if the appeal is waived, the disciplinary process against the financial company becomes relatively easy. The level of disciplinary action can be adjusted by opening a sanction against private equity-related financial companies and their employees.
The problem is that the FSS’s prestige as a supervisory authority is diminished, and private equity fund victims are no longer able to discuss the faults of financial companies.
The purpose of the establishment of the Financial Supervisory Service is to stabilize the financial market. In the process, illegal acts of financial companies and executives and employees are discovered and disciplined, which is called the ‘financial prosecution’.
According to the data of the Board of Audit and Inspection in July last year, there were 3,243 investors (general + professional) involved in DLF, and the investment amounted to 795 billion won. Among them, individual investors amounted to 3004 (2,780 people from 100 million won to less than 500 million won) among general investors. According to the interim inspection data related to DLF released by the Financial Supervisory Service in 2019, on-site inspections were conducted on two banks, three securities companies, and five asset management companies.
If the disciplinary cancellation lawsuit ends with Chairman Sohn’s victory, cases of financial companies dissatisfaction with the FSS inspection and sanctions may increase. Above all, it becomes difficult for DLF victims to complain of injustice, and financial companies that sold the product have a justification to reduce their liability.
A FSS official said, “Even if you lose completely, you have to appeal.
An official from the financial sector said, “Chairman Jung’s concerns will be deep because he always thinks about ‘responsibility’ no matter what issue he sees. is bound to be criticized,” he said.
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