Korea Supreme Court revokes DLF sanctions on Woori Bank chair

Woori Financial Group chairman & CEO Son Tae-seung has been acquitted of charges

in relation to the DLF mis-selling incident in 2019 on 15 December 2022.

The first trial that took place in August 2021 found in favour of the two bankers.

In a response, the FSS and the Financial Services Commission (FSC) accepted the Supreme Court’s ruling and stated that they will introduce new measures to improve the effectiveness of internal control.

At the annual shareholders’ meeting on 25 March 2020, Son won the second term as the Woori Financial Group chair and CEO, while giving away his Woori Bank CEO role to Kwon Kwang-seok.

The ruling comes after the Seoul High Court in July dismissed the appeal by the Financial Supervisory Service (FSS) to impose sanctions on Son (pictured) and another senior executive at Woori Financial Group in relation to the misselling of derivative-linked funds (DLFs).

‘Regardless of the outcome of the lawsuit, the FSS evaluates the fact that the Supreme Court decision recognized the normative power of the internal control criteria establishment and operation standards in the Financial Company Governance Supervisory Regulations and that the appeal had practical benefits,’ stated the FSS.

The new guidelines will include fines and a ‘disciplinary warning,’ which could bar the executives from the industry for three years.

In the meantime, the Seoul Administrative Court in March ruled against Hana Bank – another main distributor of the DLFs in question and its executives, including ex-CEO Ham Young-joo in the second trial over their pledge to clear the penalty from the derivative-linked fund (DLF) scandal. Ham stepped down from his position as Hana Bank CEO in March 2021 after his six years and was succeeded by Park Sung-ho.

The respective fines for Woori Bank and Hana Bank were initially KRW25.5 billion (US$20.6m) and KRW22.8 billion, respectively, as proposed by the FSS on 30 January 2020, two months after the regulator concluded its interim investigation on the DLF crisis.

Australia watchdog creates structured products tags

The Australian Securities and Investments Commission (Asic) has updated its guidance on naming conventions for licensed Australian exchanges that admit exchange traded products (ETPs) following a public consultation earlier this year.

The Aussie regulator has divided the naming conventions into two levels of labelling including primary labels based on product type covering ‘ETF’ and ‘structured product’ based on product type; and secondary labels for products with specific risks or strategies covering ‘active’ and ‘complex’ structures. Most respondents did not object to the proposed structured product label.

Under the new guidance, primary labels will apply to all ETPs with the ‘managed fund’ label being phased out on the basis that it ‘was not effective’. Secondary labels aimed at active and complex strategies of the ETPs will only apply to products that meet specific criteria.

The new rules state that structured products include ‘products that are open-ended and structured as derivatives, redeemable preference shares or debt securities’. ‘Most respondents did not object to the proposed structured product label,’ said the watchdog. ‘However, it was argued that the label has negative connotations, and that exchange traded commodities (ETCs) should be carved out as a separate category of products.’