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| The Korea Exchange building in Yeouido, Seoul / Korea Times file |
By Kim Bo-eun
The Korea Exchange has been fined by U.S. authorities for submitting false statements on its compliance with international financial regulations.
An order filed by the U.S. Commodity Futures Trading Commission (CFTC) July 12 says the KRX falsely stated in its annual certification that it was in compliance with the CFTC's order requiring that KRX to observe certain international financial management standards.
The CFTC's order, in addition to a penalty of $150,000, requires the KRX to receive assessment from an independent third party on its observance of these financial management standards. Reports of these assessments should be submitted to the CFTC on a regular basis over the next two years and six months.
In 2015, KRX was granted an exemption from certain registration requirements under the Commodity Exchange Act. In order to maintain that exemption, KRX is required to make an annual certification to the CFTC regarding its observations of international regulations on financial market infrastructures known as "Principles of Financial Market Infrastructures (PFMI)."
These regulations state financial market participants like the KRX should conduct daily tests to ensure financial stability in the event of an extreme but plausible market event.
KRX conducted these tests, but failed to use the results to evaluate the adequacy of and adjust its total financial resources.
KRX knew as of October 2017 that its practices were not consistent with PFMI and changed its policies accordingly in December 2017, but certified to the CFTC in a letter in February 2018 that it continued to observe the regulations.
"The letter did not disclose either the failure to use the tests to evaluate the sufficiency of its total financial resources on a daily basis or the remedial efforts that were ongoing," the commission stated.
"Therefore the Commission found that the letter was false and misleading."
