South Korean financial authorities have told securities firms to conduct a full review of their information technology security and internal control systems after a string of hacking incidents in the financial sector.

The Financial Supervisory Service on Tuesday held a meeting titled “meeting to strengthen investor-focused internal audit functions” with audit officials from 21 major brokerages and discussed ways to bolster IT security and investor protection systems.

Seo Jae-wan, deputy assistant governor for the financial investment sector, said, “In connection with the recent hacking situation in the financial sector, I ask each company to have a heightened sense of vigilance and conduct a full review of IT security and inspection systems.”

He added, “Please identify the possibility of investor losses swiftly and accurately and, if necessary, implement protective measures immediately.”

The FSS also asked firms to focus on checking whether internal controls to protect investors are actually working at brokerage sales sites, not only IT security.

Seo said he hoped audit organisations would closely examine whether investor protection processes were truly working “properly,” underscoring the role of audit functions.

He pointed to repeated illegal practices, including putting false or inadequate information in product prospectuses or using personal mobile phones in sales processes and leaving no record of investment solicitations.

He said there was major concern that internal controls had not worked properly even as habitual illegal conduct that does not follow even basic rules continued to be repeated.

The authorities also called for internal control standards to be raised in line with the securities industry’s apparent growth.

Seo said the foundation of the securities industry’s record-level quantitative growth was investors’ expectations for fairness and transparency in capital markets, and added that fundamental reflection was needed on whether current internal control levels at securities firms were meeting those expectations and providing sufficient trust.

He also stressed that the role of audit organisations should shift from a focus on detecting problems after the fact to a focus on prevention.

Seo said corporate audit organisations should devote all-out efforts to proactive investor protection through “preventive” audits rather than “after-the-fact” audits. He also asked management to expand human and material support for audit organisations to strengthen audit capabilities.

The meeting also shared recent results of checks on product design and manufacturing processes and points to note related to stock-lending sales that could arise in the process of performing duties as liquidity providers.

The FSS told brokerages to thoroughly provide investor guidance and manage risks so that measures to strengthen self-regulation of credit financing can take root in the field.

It also asked firms to check on their own whether follow-up measures to a comprehensive improvement plan for advertising operations aimed at eradicating false and exaggerated advertising were being properly implemented.

The securities industry said it would recheck across the sales process whether investor protection and risk management systems were actually working and would strengthen internal controls.