KPIC Corporation fined for violating financial-industrial separation rules

KPIC Corporation, the largest shareholder of Korea Petro Chemical IND, has been sanctioned by the Korea Fair Trade Commission for violating the principle of financial-industrial separation. The company held shares in a financial firm for about 18 months while it was classified as a general holding company. Although it has since lost that status, it could not escape sanctions for the past violation.

The Fair Trade Commission said Sunday it decided to issue a corrective order and impose a fine of 31 million won ($23,400) on KPIC Corporation for breaching the conduct restrictions applicable to holding companies.

According to the Fair Trade Commission, KPIC Corporation held 333,333 shares — a 6.67 percent stake — in Sparklab Partners, a financial services company, from July 5, 2023 to Dec. 31, 2024, a period of about 18 months, while it was still classified as a general holding company.

Article 18, Paragraph 2, Item 5 of the Fair Trade Act prohibits general holding companies from owning shares in domestic companies engaged in financial or insurance businesses. The provision is intended to curb the concentration of economic power that arises when industrial capital controls financial capital, and to promote fair market competition.

KPIC Corporation converted to a general holding company in December 2013. When the asset threshold for holding company status was raised from 100 billion won to 500 billion won in July 2017, the company — whose total assets stood in the 400 billion won range — fell short of the revised requirement.

However, existing holding companies established or converted before the law was amended were granted a 10-year grace period, allowing KPIC Corporation to retain its holding company status until June 30, 2027.

Nevertheless, as of the end of 2024, the company's holding ratio — the proportion of subsidiary share value relative to total assets — fell below the legally required 50 percent threshold, and it was removed from holding company status under the Fair Trade Act on Dec. 31 of that year.

The Fair Trade Commission issued a conduct prohibition order to prevent the same violation from recurring should KPIC Corporation revert to holding company status in the future. It also decided to impose the 31 million won fine for the legal violations committed while the company was still a holding company.

The commission said the action was significant in that it sanctioned a breach of conduct restrictions that undermined the purpose of the holding company regime and reinforced accountability and awareness of legal compliance. It added that it would continue to closely monitor legal violations by holding companies and impose strict sanctions when violations are detected.