Brokerages fiercely fight back over Lime sanctions

Former Shinhan Investment CEO Kim Byung-chul heads to a sanctions review committee meeting at the Financial Supervisory Service on Yeouido, Seoul, Thursday. / Yonhap

By Kim Bo-eun

Brokerages that promoted Lime Asset Management's funds are battling to reduce penalties set to be imposed on their former and current chiefs over the mis-selling of the “products.”

The Financial Supervisory Service (FSS) held a sanctions review committee meeting Thursday where former and incumbent CEOs of three securities firms ― Shinhan, Daishin and KB ― attended to fight against their notified penalties. But the meeting failed to reach a conclusion and discussions will resume Nov. 5.

The authority is known to have determined that the subjects be suspended from their positions and told them this before the meeting.

The suspension would bar the former and current CEOs from serving in the financial sector for four years.

The FSS believes the sanctions are justified because as chiefs of the securities firms they were responsible for ensuring the company had functioning internal control systems.

Based on investigations, the FSS said the “sellers” of Lime's funds were responsible for misleading investors by conveying information in the investment proposal to them without a thorough review. Lime's investment proposals were found to have included false information on the rate of return and risks associated with the investment.

In some of the cases, officials of the securities firms were found to have identified investors as risk-takers even though they were not.

The former and incumbent CEOs contend that there are no legal grounds for the sanctions the FSS intends to impose.

Proposed revisions to corporate governance regulations that enable CEOs to be punished when their companies' internal control systems fail remain pending at the National Assembly.

The current Corporate Governance Law does state that financial firms need internal control systems.

In March, the financial authorities imposed weighty sanctions on the former heads of Woori and Hana banks over the same failure in ensuring the lenders had proper internal control systems.

Both Woori Financial Group Chairman Son Tae-seung and Hana Financial Group Vice Chairman Ham Young-joo, who each served as head of the group's banks, were sanctioned, preventing them from serving in the financial sector. But they filed injunctions as well as a suit to to nullify the penalties. The injunction requests were accepted, enabling Son and Ham to retain their positions.