The FSC recently imposed sanctions on Shin Kong Life Insurance after discovering that the company – in its utilization of enterprise funds, real estate investments and management, and its implementation of controls over other business operations – had failed to properly comply with requirements governing corporate governance and real estate investment management. The FSC determined that the related internal control system deficiencies were so serious as to pose a likely hindrance to sound business management, and therefore violated Article 5, Paragraph 1, Subparagraphs 4 and 8 of the "Regulations Governing Implementation of Internal Control and Auditing System of Insurance Enterprises," which were issued by the FSC on the authority of Article 148-3, Paragraph 1 of the "Insurance Act." The FSC, acting on the basis of Article 171-1, Paragraph 4 of the "Insurance Act," handed Shin Kong Life Insurance an administrative fine of NT$3 million, on the basis of Article 149, Paragraph 1 of the same Act handed the company an official reprimand, and on the basis of Subparagraph 7 under the same paragraph ordered the company, beginning from the day next following delivery of the FSC's administrative ruling and continuing for three years, to suspend all granting of additional credit to (or conducting other types of transactions with) a list of six companies including Shin Kong Jasper Fitness Co., and to suspend all such dealings with the bank's former Chairperson Wu or companies in which former President Wu has invested and over which the former president has significant influence as defined in International Accounting Standards 28. This suspension will remain in force until Shin Kong Life Insurance has filed a specific corrective action plan and the FSC determines that proper corrective action has been taken, but the suspension does not apply to Shin Kong Wu Ho-Su Memorial Hospital, or to Shin Kong Financial Holding Co. ("SKFH") or its subsidiaries. In addition, acting in accordance with Article 149, Paragraph 1, Subparagraph 7 of the same Act, the FSC ordered Shin Kong Life Insurance to reduce the monthly salary of its Chairperson Pan by 30% for three months.
In addition, SKFH was found to have engaged in improper business management practices, which includes violations of the principles of corporate governance, and failure to fulfill its statutory duty to exercise proper management of subsidiaries. The deficiencies may have jeopardized sound operation of the SKFH Group, and Chairperson Hsu had failed to exercise proper oversight. The FSC, acting in accordance with Article 54, Paragraph 1 of the "Financial Holding Company Act," therefore ordered SKFH to take corrective action and suspended Chairperson Hsu from performing his duties for three months.