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Newsletter | December 2014, Issue 4
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INSURANCE
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Amended Regulations on Audit and Sanctions of Financial Institutions
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On August 27, 2014, the Financial Services Commission ("FSC") adopted an amendment to the Regulation on the Audit and Sanctions of Financial Institutions (“Amended Regulations”). The Amended Regulations seek to increase the efficiency of financial administrative and supervisory affairs while improving due process and effectiveness of sanctions in the financial services industry. The Amended Regulations became effective as of September 1, 2014 (with some exceptions) and the below is a summary of the Amended Regulations:
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Financial Supervisory Service ("FSS") to report its Audit Plan to FSC
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The FSS is required to report its annual audit plan to the FSC at the beginning of a calendar year going forward. Such annual audit plan must contain information on basic principles of audits by the FSS, financial institutions subject to the FSS audit, audit objective, scope and period, etc. The FSC will monitor and discuss material aspects of the FSS audits based on the annual report.
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Prompt Reporting on Audit Result by the FSS
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As a result of an audit conducted by the FSS and if it is determined that there is a material concern for system risks, substantial damage to the soundness of financial institutions or harm to consumer interests, the Governor of the FSS must report on such concerns to the FSC on an immediate basis after the completion of the audit.
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Simplification of Procedural Matters for FSC Sanctions
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Pursuant to the former regulations, when the Governor of the FSS has made a proposal at a certain level of sanction to the FSC, the Governor may also attempt to send prior notices or conduct hearings, on behalf of the FSC for matters where the FSC has the authority to issue sanctions on violations of the IBA or subordinate regulations. However, as of January 1, 2015, such matters will be directly handled by the FSC pursuant to the amendments to the Regulations.
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Increased Sanctions for Repeated Institutional Cautions
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If an insurer has received repeated institutional cautions on three separate occasions or more within the most recent three years from the current date, such insurer may be subject to an institutional warning.
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This regulation on increased sanctions was introduced to improve the effectiveness of institutional caution and is applicable to acts committed on or after September 1, 2014.
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