A sanction issue related to Samsung Securities’ hub-branch practices that had blocked its move into the short-term note business has been resolved. The Financial Services Commission finalised the institutional penalty level as a warning that does not constitute a disqualifying reason for licensing, and the review of its short-term note licence is expected to regain pace.

The Financial Services Commission said it reviewed the institutional penalty related to Samsung Securities’ hub-branch sales practices at a regular meeting on Thursday afternoon and finalised an institutional warning.

Earlier, the commission held a subcommittee meeting ahead of its regular meeting on July 27 and discussed adjusting the penalty for Samsung Securities from a three-month partial suspension of branch operations to the less severe institutional warning.

After inspecting sales practices at Samsung Securities’ hub branches, where ultra-high-net-worth clients are concentrated, the Financial Supervisory Service identified some unsound sales practices and notified the firm of a heavy penalty involving a partial suspension of branch operations.

Financial authorities judged the violations could warrant consideration of a business suspension. They concluded, however, after considering the details of the violations and sanction cases involving other financial companies, that the matter did not rise to the level of restricting entry into the short-term note business.

An institutional warning is also classified as a heavy penalty, but it does not constitute a disqualifying reason for a short-term finance licence. Sanctions against financial companies are, in descending order of severity, revocation of registration or licence, business suspension, corrective order, institutional warning and institutional caution. The sanction threshold for restricting a short-term finance licence is a partial business suspension or heavier.

As a result, legal uncertainty surrounding Samsung Securities’ short-term note licence has also been resolved.

The licensing proposal for Samsung Securities had been pending ahead of a regular meeting of the commission because the penalty level had not been finalised. With the institutional penalty now confirmed, financial authorities are expected to proceed with the licensing review again.

However, the commission has a scheduled recess from regular meetings in August, so the proposal’s formal submission and vote are expected to take place as early as the regular meeting on Sept. 9.

If Samsung Securities receives approval, it will become the country’s eighth short-term note issuer. With final approval, it could raise funds through short-term notes based on its capital and expand investment banking and venture capital supply.