A new rule adopted by the nation's financial regulators concerning officials meeting with private financiers, lawyers, accountants and other professionals has generated fears that it will hamper dialogue with the private sector.
The Financial Services Commission (FSC) has announced that the new rule will take effect on 17 April, reports The Korea Times.
Officials at the FSC as well as the Financial Supervisory Service (FSS) who are in charge of audits, regulations, permissions and examinations of unfair practices in the capital market will be subject to the rule.
When they meet outsiders such as accountants and lawyers, and executives and employees of banks, securities firms or insurers as well as those working for other firms listed on the stock market, they must report the contact to the auditors of the FSC and FSS. Meetings with those who have retired from the FSC and FSS and currently working at these firms should also be reported. The FSS is an integrated financial regulator that examines and supervises financial institutions under the broad oversight of the FSC which is a government agency with the statutory authority over financial policy and regulatory supervision.
Officials who omit reporting meetings with outsiders will be subject to penalties. If the outsider makes a solicitation or tries to offer a bribe, the official should immediately stop the meeting and report it to the auditor. Casual encounters such as those at seminars or social gatherings are exempt from the obligation.
The rule was adopted following a recommendation by the Committee to Innovate Finance and Administration, the FSC's advisory group.
The FSC explained that it expects to enhance fairness and create more trust in the market through transparent and systematic management of contacts with outsiders.
However, the financial industry fears that the new rule will prompt the regulator to shun communication with the market.
"It is crucial for the regulator to listen to the market and be aware of what's going on there. As the new rule will make officials shun such meetings, policies they set up will likely fail to reflect reality," said an executive who refused to reveal his name.