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| Financial Supervisory Service Governor Jeong Eun-bo, left, and Woori Financial Group Chairman Son Tae-seung / Yonhap |
Civic groups urge watchdog to continue legal battle
By Park Jae-hyuk
Speculation is growing that the Financial Supervisory Service (FSS) may abandon its legal battle with Woori Financial Group Chairman Son Tae-seung, as the watchdog is apparently facing multiple difficulties appealing a recent court ruling that ordered it to revoke a heavy sanction it had placed on him.
According to the Financial Services Commission's (FSC) litigation guidelines, the FSS under the supervision of the FSC must make its decision on the appeal and notify the Ministry of Justice of its decision by Sept. 10, seven days after receiving the written judgment from the court.
The FSS received the document on Sept. 3, a week after the Seoul Administrative Court ruled in favor of Son in a lawsuit he had filed to ask the court to order the watchdog to revoke a "reprimand warning" on him regarding his part in Woori Bank's mis-selling of derivative-linked funds (DLFs), which led to massive losses of its customers' investments.
After announcing on the day of the ruling that it would make its decision on the appeal as soon as it finishes reviewing the written judgment, the FSS has reiterated that it is discussing the matter with the FSC and legal experts.
However, the FSC has maintained a negative stance on the heavy sanctions imposed by the FSS on CEOs of financial groups involved in the fund fiasco, and legal experts have expressed skepticism about the likelihood of the higher court overruling the lower court's decision.
FSS Governor Jeong Eun-bo's underscoring of the importance of relying less on "reactive sanctions" is also interpreted as a signal of his intention to resolve the watchdog's conflict with Woori, which was first sparked by his hawkish predecessor, Yoon Suk-heun.
"Our duty as a financial supervisor is supporting financial firms, not regulating them," Jeong said in a speech last month marking his appointment. "The FSS is a supplier of financial supervisory services for the private sector."
Another unfavorable factor for its appeal is that the FSS needs to look for new lawyers, because its legal representatives in the first trial moved last month to law firm Jipyong from HMP Law.
Observers view the fact that the court agreed to the necessity of sanctions against Son, despite its objection to the level of punishment, as a possible reason for the FSS to drop the appeal, because the watchdog can avoid criticism for its previous decision to discipline him.
"Nothing has been decided yet regarding the appeal," an FSS spokesman said. "We will make an announcement as soon as we make our decision."
Those who support the FSS lodging an appeal mention that it has been unprecedented for a state-run institution to accept the decision in the first trial of a controversial lawsuit without any judicial precedent.
In addition, the FSS's decision may affect the ongoing lawsuit with Hana Financial Group Vice Chairman Ham Young-joo, who also asked the court to order the watchdog to revoke a heavy sanction it had slapped on him for his responsibility in Hana Bank's mis-selling of DLFs. The ruling on this case is expected to be made in January next year at the earliest.
If the FSS decides not to appeal the ruling involving the Woori chairman, it can be interpreted as it also abandoning the legal battle with the Hana vice chairman.
Against this backdrop, progressive civic groups issued a statement earlier this week to call for the FSS to lodge an appeal to protect financial consumers. Financial lobby groups, on the other hand, urged the financial authorities to enable companies to control their internal affairs autonomously.
