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The Financial Supervisory Service Dispute Mediation Committee (Bunjo Committee) recently made a decision to compensate investors for 60-70% of the Lime Asset Management Fund’s investment loss to KB Securities. This is the first compensation recommendation decision derived by applying a post settlement method to a fund whose damage has not been determined.
After KB Securities, Woori Bank is said to be the dominant financial company for dispute settlement in this way. In the first half of the year (January-June), the Financial Supervisory Service plans to expand the targets for dispute settlement using a post settlement method to recover damage to investors caused by the Lime Fund.
According to the financial authorities on the 4th, in principle, if the damage is confirmed by redemption or liquidation, damages can be compensated. However, damage to investors continued as dispute settlement was delayed due to a delay in determining damages. Some investors complained, “It will take 3 to 5 years for the dispute to be settled after the damage is confirmed. How do you wait?”
Accordingly, the Financial Supervisory Service decided to pursue dispute settlement based on estimated damages (unrepayable amount) if the fund seller agrees to the post settlement method. Carried out.
The reason KB Securities and Woori Bank became the first targets for on-site investigations is that they have a large sales fund and have shown positive intentions to resolve disputes through post settlement. The Financial Supervisory Service also received legal advice regarding the vendor’s liability and the compensation ratio.
Three of the 42 dispute settlement applications for the’Lime AI Star 1.5Y’ fund (58 billion won, 119 accounts) sold by KB Securities from January to March 2019 were rejected at the Branch Committee held on the 30th of last month. The Branch Committee saw that KB Securities is liable for damages, and recommended that 60-70% of investment losses be compensated. If the investor and KB Securities accept the mediation decision within 20 days of receiving it, the mediation will take effect.
In the case of Woori Bank, the FSS inspection, which was conducted separately from the on-site investigation, is currently in the final stage, and dispute settlement will be possible after the FSS sanction deliberation committee ends in the first quarter (January-March). It is reported that the lime fund sold by Woori Bank is 270 billion won and the number of investors is about 1,300.
An official from the Financial Supervisory Service said, “Among the sellers, inspections and sanctions have been finalized to some extent, and those with a willingness to agree are subject to dispute settlement through post settlement.” Woori Bank is a strong target for the next dispute settlement as the field investigation has been completed, but the fact that inspection and sanction procedures remain, is expected to be a variable.
The official said, “The important thing is that the financial companies agree,” and said, “I’m going to check with the financial companies again.”
The Financial Supervisory Service plans to settle disputes in the first half of the year if the financial companies that sold Lime funds such as Shinhan, Enterprises, Industry, Busan, Hana Bank, Shinhan Investment and Daishin Securities agree.
The Financial Supervisory Service is in a position that it is difficult to promote dispute settlement for many financial companies at once because of its manpower limitations. However, looking at the case of KB Securities, it is expected that there will be more financial companies agreeing to the follow-up settlement method, and it is also considering a plan to promote dispute settlement for multiple financial companies at the same time.