Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
FSS mulls punishment level on Lime fund scandals
Financial Supervisory Service (FSS) Governor Yoon Suk-heun speaks at a press briefing in this January 2020 file photo. / Yonhap
By Anna J. Park
By Anna J. Park
One of the most-heated issues surrounding the financial sector this year has been the mis-selling of Lime Asset Management's various fund products. The products were sold since last year at various financial institutions in Korea including most major banks and stock brokerages, resulting in a large-scale suspension of redemptions worth 1.67 trillion won ($1.42 billion) in total.
The Financial Supervisory Service (FSS) has long been working on its own investigation of the mis-selling of the unsound funds. In July, it advised some sellers that sold large portions of the funds to pay back 100 percent of the losses incurred by customers. Yet the decision was not about punishment, but just a provisional compensation recommendation for clients' financial damage.
The FSS is expected to hold a sanctions committee meeting sometime in October, deciding on official punishments for the mis-selling by the negligent financial institutions as well as the asset managers which created the funds.
Given that the financial authority has a recent precedent from earlier this year of imposing heavy sanctions on major bank CEOs for their responsibility in the mis-selling of some derivative-linked funds (DLFs), it is expected that not only Lime Asset Management ― the asset manager in the hot seat ― but also sellers of the funds will receive strong sanctions from the FSS.
There are five levels of FSS sanctions: revocation of registration, business suspension, correction order, warning and caution.
Out of the five, Lime Asset Management is expected to see its registration revoked at next month's committee meeting. The funds' sellers, including Shinhan Financial Investment, Daishin Securities, KB Securities, Shinhan Bank and Woori Bank among others, are also expected to receive a quite strong sanction. The FSS decided that the financial institutions' mis-selling reflects the failure of their internal monitoring and controls, and CEOs of the institutions are to be held accountable.
But the fact that Woori Financial Group Chairman Son Tae-seung and Hana Financial Group Vice Chairman Ham Young-joo filed lawsuits against the FSS' decision on their responsibility in the DLF cases earlier this year, similar sanctions in the Lime scandals could once again stir heated controversy.
An FSS official said the service would consider the aftermath of previous sanction decisions.
“Despite recent media reports about the FSS' possible sanctions, nothing has been decided,” an FSS official said during an interview. “Currently, the FSS is preparing for the upcoming sanctions committee meeting, though we cannot officially confirm the exact date.”