Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Hana may face another setback for 'misselling' of risky fund
Victims of a redemption fiasco by Lime Asset Management hold a rally in front of Shinhan Financial Group headquarters in central Seoul on July 10. Shinhan Investment and Shinhan Bank engaged in mis-selling of the risky fund products to investors. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Hana Bank, NongHyup Bank and Shinhan Bank ― three major retailers of a trade finance fund managed by a Korean fund operator ― are in growing anxiety over the potential suspension of the financial product's redemption.
The concern comes as Fidelis Asset Management failed recently to pay early redemption fees over the fund sold by Hana Bank. The lender sold the fund worth 28.3 billion won ($23.44 million). The fund reached maturity at the end of May 2020.
But with Fidelis suspending the early repayment of the fund, its expiration date will be delayed by six months to the end of November.
“The coronavirus outbreak delayed the redemption plan,” a spokesman at Hana Bank said, declining to comment further.
This is putting an additional burden on the already-dismal fund market, here, after the “Lime fiasco,” whose estimated damages to investors here could top 1.6 trillion won. Starting this year, Lime Asset Management received negative publicity by failing to provide proper information about its fund products' potential high risks before selling them to investors.
Shinhan Bank and Woori Bank, two sellers of the Lime funds, face investigation from the Financial Supervisory Service (FSS) for what the authority views as “reckless” selling of the risky financial products. The FSS is expected to finish its investigation in July at the earliest with the regulator considering imposing sanctions on the lenders in September.
Even if the size of the fund managed by Fidelis is not as large as those from the Lime incident, worries are the latest redemption delay may similarly end up causing losses for its investors. The delay stemmed from the deteriorating market sentiment surrounding the trade finance fund due to the global shock from the pandemic.
Shinhan Bank also sold the Fidelis fund worth 180 billion won. Its expiration has not arrived yet, but the lender is also facing a similar setback after selling another trade finance fund managed by Arumdree Asset Management due to a delay in its redemption of invested capital.
“The expiration date for redemption of the Fidelis fund is yet to come,” an official at Shinhan Bank said. “Even if the fund operator failed to pay redemption fees on time to some other sellers, it is too early to conclude that we may also similarly fall victim over the same issue.”
According to data compiled by the FSS, a total of 13 private equity firms (PEFs), against which the authority received requests for dispute settlement over risky funds, sold funds worth more than 5 trillion won to financial organizations. Banks were a major sales channel, accounting for a quarter of the total sales.
Yun Chang-hyun, a lawmaker from the main opposition United Future Party, urged financial authorities to tighten its supervisory systems not to repeat the similar fund-related woes. “Financial supervisory authorities should self-reform and be more responsible for any consequences (from financial fiascos),” he said in a recent seminar.