The Financial Services Commission offices within Government Complex Seoul / Korea Times photo by Hong In-ki

The Financial Services Commission (FSC) is facing a growing wave of legal challenges as financial firms increasingly contest its sanctions and fines, signaling a broader pushback against the regulator’s more aggressive enforcement stance, according to industry officials, Wednesday.

This rise in litigation has coincided with a string of notable courtroom setbacks for authorities, putting the credibility and practical force of the country’s financial sanctions framework under pressure.

Most recently, U.S. trading firm Citadel Securities secured a lower court victory after contesting an 11.8 billion won ($7.98 million) fine imposed in 2023 over ultra-short-term algorithmic trading.

The case marked Korea’s first financial penalty targeting high-frequency trading and, at the time, represented the largest surcharge ever issued by the FSC. Regulators have since appealed, but the ruling exposed vulnerabilities in the legal rationale of the watchdog’s enforcement approach.

The sharp increase in legal disputes began after amendments to the Capital Markets Act in 2023 substantially raised monetary penalties, prompting both domestic and global investment banks, as well as asset managers, to challenge sanctions through administrative lawsuits.

The number of newly filed cases contesting FSC sanctions rose from 29 in 2021 to 85 in 2025 — nearly a threefold increase.

Although the FSC continues to prevail in many cases, its courtroom losses have become more frequent and increasingly costly. Refunds of fines overturned through litigation jumped from 180 million won in 2022 to 789 million won in 2025.

Several major cases have underscored this growing legal strain. ESK Asset Management, which was hit with the country’s first illegal short-selling fine of 3.8 billion won, won its initial court case overturning the penalty.

European brokerage Kepler Cheuvreux similarly secured a lower court ruling canceling a 1 billion won fine tied to illegal short selling.

Source: Korea Times News