On April 1, 2025, the Financial Supervisory Service (FSS) announced that Korea Investment & Securities is undergoing an accounting review due to significant discrepancies in its financial reporting. The review comes in light of the company's recent admission that it overstated its operating revenue by approximately 5.7 trillion won over a five-year period, from 2019 to 2023.
During a press briefing held at the FSS headquarters in Yeouido, Seoul, FSS department head Ham Yong-il stated, "The review has begun, and the process will be thoroughly examined." He emphasized that the FSS will assess the size, rate, and intentionality of the accounting discrepancies before deciding whether to escalate the review to a more formal audit.
Korea Investment & Securities had previously disclosed the revised figures for its business reports on March 21, 2025, indicating that its operating revenue had been overstated due to internal accounting errors. The company explained that the inaccuracies stemmed from how foreign exchange gains and losses were recorded in its financial statements. Specifically, gains from foreign exchange transactions in the retail and FX departments were mistakenly classified as revenue, inflating the company's reported sales figures.
The adjustments to the annual revenue figures were substantial. For instance, the revised figures for 2019 showed a decrease from 9.9236 trillion won to 9.6820 trillion won, while the 2020 figures were adjusted from 15.2 trillion won to 14.56 trillion won. Similarly, the adjustments continued for the following years: 2021 saw a change from 11.6060 trillion won to 12.4305 trillion won, 2022's figures were revised from 20.8065 trillion won to 21.6689 trillion won, and 2023 was adjusted from 22.0848 trillion won to 19.3540 trillion won.
Ham noted that the FSS's review will involve verifying whether the accounting treatment of Korea Investment & Securities' five-year business report adhered to established standards. The thorough examination will include requests for additional data and interviews with relevant personnel. If the review determines that there was gross negligence or intent to deceive, the FSS could initiate a formal audit.
In light of these developments, the financial community is closely monitoring the situation. The potential for regulatory sanctions looms, especially if the FSS finds that Korea Investment & Securities engaged in serious violations of accounting standards. The FSS's actions may serve as a warning to other financial institutions regarding the importance of accurate financial reporting.
Korea Investment & Securities has maintained that the discrepancies were the result of simple mistakes and have asserted that the adjustments made to operating revenue and expenses did not affect their overall net profit. The company has stated, "Since both sales and expenses increased by the same amount, net profit remains unchanged." However, industry experts caution that the implications of such errors can be far-reaching, potentially undermining investor confidence.
The case echoes previous incidents in the financial sector, such as the case of Kiwoom Securities, which faced sanctions in 2021 for similar accounting misrepresentations. Kiwoom was penalized 16 million won and received institutional warnings after it was found that they had misreported foreign exchange transaction gains and losses in their business reports from 2015 to 2019.
The ongoing review of Korea Investment & Securities highlights the critical role of regulatory bodies like the FSS in maintaining transparency and accountability within the financial sector. As the review progresses, stakeholders are keenly aware of the potential consequences for the company and the broader implications for the industry.
In conclusion, the FSS's decision to initiate an accounting review of Korea Investment & Securities underscores the importance of accurate financial reporting and the need for rigorous oversight in the financial sector. As the investigation unfolds, it will be vital for the company to address these discrepancies and restore confidence among investors and stakeholders.
