The Financial Supervisory Commission has fined FarGlory Life Insurance a record NT$14.4 million. The firm's former chairman and president, who are father and son, have been removed from their positions and face a five-year ban from the financial industry.
Under the oversight of the new chief of the Financial Supervisory Commission Wellington Koo, Taiwan's top financial regulator has used a carrot and stick approach to crack down on financial institutions.
Either uphold strict internal controls, or else face stiff penalties. Its current target is FarGlory Life Insurance. The insurance bureau of the commission states: FarGlory Life seriously lacked internal controls when it handled its land and construction investment development work. It did not separate its business and capital. It seriously violated rules regulating transactions between related parties. The penalty of NT$14.4 million is the largest ever imposed on the insurance industry. Moreover, FarGlory Life is banned from making new investments in property for three years.
That is to say, it did not have an effective separation of the capital for its life insurance and for its real estate businesses. The impression was that this had been going on a long time. The insurance bureau had previously fined and corrected (FarGlory), but this kind of behavior ultimately was never improved (by the company).
The FSC stated in April 2011, FarGlory was fined NT$11.7 million and banned from investing in property for a year due to deficiencies in its capital operation and life insurance business. From the FSC's view, FarGlory has been a persistent offender. Also this time: it removed the firm's former chairman Chao Teng-hsiung and his son who was its president George Chao from their positions, as well as another executive. A former board member Hsu Tzu-chiang was also removed. All were banned from working in the financial industry for five years.
"Interested parties" in the financial industry is a very, very serious matter. It involves transfer of benefits. If you have an "interested party" in a transaction, this is very serious. It could be seen as an insider trading situation.
The FSC emphasized that the heavy fine imposed on FarGlory Life is based on relevant regulations under the insurance law and from conducting financial inspections of the insurance industry.It said the decisions on the case are not trying to target a single company.