Recently as concerns about deficiencies in internal control in the financial industry have arisen due to a series of financial incidents, such as mis-selling and large-scale embezzlement, the Financial Services Commission and the Financial Supervisory Service have announced improvement measures to require financial companies to independently establish and abide by effective internal control systems by placing greater responsibility on their representatives, boards, and officers’ responsibility to ensure such effective internal control. We summarize below the improvement measures announced by the financial supervisory authorities.
The authorities will impose comprehensive internal control management obligations on financial companies’ representative directors to take appropriate measures to prevent serious financial incidents. If, however, the financial companies have established reasonable regulations and systems to prevent and detect financial incidents and have endeavored to follow such regulations and systems in the normal course of their business operations, the representative director’s liability will be lifted or reduced.
The authorities will also impose internal oversight and supervisory obligations on the boards of financial companies. Boards will be given the authority to supervise their representative directors’ and officers’ internal control management work, and require representative directors to report on the implementation status of internal control management related obligations.
The authorities will clarify respective officers’ responsibility regarding financial companies’ internal control. They will prohibit officers from entrusting or shifting their responsibility to other persons while requiring them to personally conduct internal control management and supervision within the scope of their responsibility.
The financial supervisory authorities will finalize the details through legal review of the above proposed measures and the collection of opinions from the industry, after which they will proceed with the process of making the necessary amendments to the relevant laws and regulations.