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At the Sanctions Deliberation Committee held on the 5th, the Financial Supervisory Service imposed a disciplinary punishment (corresponding to a cautious warning) to former head of the IBK IBK IBK IBK, who sold the Discovery Fund and Lime Fund that had been discontinued. The sanctions for executives and employees of financial companies are divided into five stages: recommendation of dismissal, suspension of work, reprimand warning, cautionary warning, and caution. Above the censure warning is categorized as severe disciplinary action restricting employment in financial companies for 3 to 5 years.
The IBK sanction review was the first sanction by the Financial Supervisory Service in connection with the insolvency of private equity funds in the banking sector. In the first place, the Financial Supervisory Service notified former chief Kim of severe disciplinary action. However, the actual disposition was decided with a lower cautionary warning.
The Financial Supervisory Service strongly raised management responsibility for lack of internal control. On the other hand, IBK is known to have demanded that the disciplinary level be lowered by emphasizing efforts to rescue victims. In fact, IBK decided to prepay up to 50% of the investment to the victims in connection with the Discovery Fund’s suspension of redemption in May last year. The prepayment target is the Discovery US Fintech Global Bond Fund. Also, for Lime Fund, 51% of the unrecovered balance will be paid first.
The banking sector is paying attention to how the results of this sanctions will affect the sanctions review of Woori and Shinhan Bank, which begins on the 25th.
In relation to the Lime Fund crisis, the Financial Supervisory Service was notified of a censure warning from Woori Financial Group Chairman Son Tae-seung, then Woori Bank president, and Jin Ok-dong, head of Shinhan Bank. If severe disciplinary action is taken, it is impossible to continue serving after the current term of office has ended. Re-employment in the financial sector is also prohibited for the next three to five years. Since the CEOs representing the two banks were caught in a disciplinary whirlpool, the company’s governance structure is expected to be affected in the future.
In the banking sector, there is also a prospect that the level of disciplinary action could be lowered as Chairman Son and Chairman Jin are on the verge of being disciplined for similar reasons as IBK.
However, there is a prospect that it is difficult to predict the outcome as the social impact of the Lyme crisis was large, and some banks are suspected of selling funds even though they are aware of insolvency.
The banks are planning to call on the FSS’s Sanctions Deliberation Committee that they have actively committed to consumer protection, such as accepting 100% compensation for trade finance fund investors and paying 50% of the principal to Lime Fund victims in advance.