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The headquarters of Shinhan Investment & Securities in Seoul. (Photo: Shinhan Investment & Securities) |
[Alpha Biz= Paul Lee] SEOUL, Oct. 16 — The Financial Supervisory Service (FSS) has issued an institutional warning to Shinhan Investment & Securities in connection with a ₩130 billion (approx. USD 95 million) trading scandal that occurred last year. The decision comes roughly one year after the FSS launched an on-site investigation in October 2023.
According to industry sources, the FSS sent an official notice of disciplinary action to Shinhan Investment & Securities on Tuesday afternoon, informing the company of the institutional warning.
The incident took place between August and October 2023, when employees responsible for liquidity provision (LP) trading incurred massive losses totaling ₩130 billion during a sharp stock market decline. In an attempt to conceal the losses, they allegedly falsified transaction records, registering them as if legitimate trading contracts had been executed.
The FSS began investigating the case in October 2023, and the employees involved have since been sentenced to three years in prison.
With the regulatory decision finalized, uncertainty surrounding Shinhan’s commercial paper (short-term note) license review has eased. Under Korean law, only penalties of business suspension or higher can disqualify a financial institution from receiving such authorization. Since the company received an institutional warning, it is unlikely to face major obstacles in obtaining its license.
Regulatory penalties for financial firms are classified in five tiers: Institutional Caution, Institutional Warning, Corrective Order, Business Suspension, and License Revocation.
The FSS also issued a reprimand warning (munchik-gyeonggo) to former CEO Kim Sang-tae, who had voluntarily resigned after taking responsibility for the incident. Executives who receive reprimand warnings are barred from serving in executive roles at financial institutions for three years.
Since the incident, Shinhan Investment & Securities has significantly expanded its compliance and internal audit teams, adding a Compliance Monitoring Department and creating a Data Analytics Audit Unit to strengthen internal controls.
The financial regulator, meanwhile, has stated that it will expedite its review of pending commercial paper license applications, suggesting that the disciplinary process for Shinhan was concluded faster than initially expected.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
