A rift has emerged among South Korea’s top financial regulators over the amendment to the Commercial Act that recently passed the National Assembly.
Financial Supervisory Service (FSS) Governor Lee Bok-hyun is openly at odds with the Financial Services Commission (FSC), the higher-level authority. Lee declared he would “put his job on the line” to back the amendment pushed through by the Democratic Party of Korea and other opposition parties. FSC Chairman Kim Byoung-hwan reaffirmed his longstanding position that the government’s proposed Capital Markets Act amendment should take precedence, citing concerns over the potential adverse side effects of the Commercial Act amendment.
Lee kicked off the debate on March 26. He warned that if Acting President Han Duck-soo exercises a veto against the amendment, foreign investors may lose confidence in the Korean stock market. “If the government vetoes the amendment, its commitment to protecting shareholder value will be called into question, and this could ultimately affect the stock and foreign exchange markets,” Lee said during an appearance on MBC radio in the morning.
Earlier, on March 13, Lee had already sparked backlash from the ruling People Power Party when he opposed the government’s veto on the Commercial Act amendment. He later proposed a public debate on the matter to the Federation of Korean Industries (FKI), a major business lobby group, but the FKI declined the offer. In his radio interview, he criticized the FKI for spreading misinformation, saying, “They call the Commercial Act amendment a ‘Galapagos regulation’ unique to Korea, but that’s fake news.”
Lee’s stance marks a clear break from the government’s official position. The administration has proposed amendments to the Capital Market Act to enhance minority shareholders' rights during mergers and spin-offs, which would apply to approximately 2,600 listed companies. Rather than revising the Commercial Act to impose sweeping restrictions on all of Korea’s one million companies, the government sought to limit the new obligations to listed firms.
Two hours after Lee’s radio interview, FSC Chairman Kim Byoung-hwan held a press briefing at the Government Complex in Seoul. “I’ve repeatedly stated that due to concerns about the side effects [of the Commercial Act amendment], we need thorough discussions of various alternatives, including the Capital Market Act amendment,” Kim said. “That position remains unchanged.”
Business organizations and lobby groups, including the Korea Chamber of Commerce and Industry (KCCI), have warned that the Commercial Act amendment could trigger a wave of lawsuits. “If the amendment includes a fiduciary duty of loyalty to shareholders, it could open the door to frequent lawsuits whenever shareholders incur losses,” said an official from one of the groups. “In that case, companies may become overly cautious and shy away from bold decisions that could temporarily impact stock prices, opting to maintain the status quo out of fear of litigation.”
However, FSC Chairman Kim clarified that the final decision on vetoing the bill does not fall under his jurisdiction. “The Ministry of Justice is responsible for the Commercial Act amendment, and the acting president will make the final decision,” he said. “It is not appropriate for the head of the FSC to publicly express an opinion on the matter.”
Experts have expressed concern that conflicting messages from top financial authorities could lead to unnecessary uncertainty in the market. “If the heads of regulatory bodies keep making uncoordinated statements, it only adds to market confusion,” said Ahn Dong-hyun, a professor at Seoul National University.
Some in the financial industry put it more bluntly: “The FSC is the supervisory authority over the FSS, but when the two say different things, it’s like watching a dysfunctional family.”
