Republic of Korea: Financial Sector Assessment Program-Detailed Assessment of Compliance on the IOSCO Objectives and Principles of Securities Regulation
IMF Staff Country Reports, October 14, 2014
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Bibliographic details
- Published: October 14, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498383776.002
Summary of compliance and recent reforms
- The Korean authorities have made significant progress since the last FSAP in revising the securities regulatory framework, with the current framework achieving good overall compliance with the International Organization of Securities Commissions (IOSCO) Principles.
- Earlier legal impediments to international cooperation and exchange of information have been removed.
- Since 2011, Korea applies the Korean International Financial Reporting Standards (K-IFRS) that follow the International Financial Reporting Standards (IFRS).
Institutional structure, responsibilities, and transparency
- Regulators’ responsibilities are defined in legislation, but:
- The complexity of the structure obscures the transparency of the decision-making processes.
- Responsibility for deciding on a particular supervisory or enforcement action can lie either at the Financial Services Commission (FSC), Securities and Futures Commission (SFC), or Financial Supervisory Service (FSS), depending on the nature and gravity of action, but it is not always clear which one of them is ultimately in charge.
- The process is further complicated by the use of pre-deliberation committees at various levels.
- Recommendation: Publication of additional information on the decision-making structure and processes would be beneficial.
Role of self-regulatory organizations
- Self-regulatory organizations involved:
- Korea Exchange (KRX)
- Korea Financial Investment Association (KOFIA)
- Korean Institute of Certified Public Accountants (KICPA)
- These organizations also play a role in the regulatory and supervisory processes.
- Recommendation: Ensure that arrangements for gathering commercial input provide for equal and transparent treatment of market participants.
Operational cooperation, coordination, and independence concerns
- Operational cooperation and coordination between the various authorities is addressed by having the agencies represented in each others’ decision-making bodies.
- Concern: The full participation of the Minister of Strategy and Finance at the FSC Board has the potential of compromising the independence of the FSC’s supervisory and enforcement decisions.
- Recommendation: Consider ways to mitigate potential for undue political influence arising from such governance arrangements by, for example, restricting the participation of the Minister of Strategy and Finance in the supervisory and enforcement decisions.