IBK under fire for engaging in 'mis-selling' of funds

By Lee Kyung-min

The Industrial Bank of Korea (IBK) is under fire for failing to return 69.5 billion won ($57.1 million) to 200 investors seeking a redemption from funds it sold, in what they say were “mis-selling” or “irresponsible sales practices.”

The dispute was brought to the fore after 30 investors staged a rally in front of the bank's headquarters in Seoul, Tuesday, saying the bank sold the financial products without making sure buyers understood the possible risks.

The collective action follows a similar fiasco involving high-risk derivative-linked funds (DLFs) sold by two of the country's major commercial banks ― Woori and Hana. Compensation procedures are ongoing for at least 1,000 people with up to 2,000 more expected to be eligible upon the maturity of the products they bought.

The state lender sold the funds, designed by Discovery Asset Management whose head is Jang Ha-won, the younger brother of former presidential chief of staff for policy Jang Ha-sung, in 2017.

The amount raised was then referred for management to Direct Lending Investments (DLI), a California-based asset management firm.

But the money under the firm's management remains frozen amid a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against DLI, March 22, over suspicions that the firm had knowingly inflated annual returns by up to 3 percent for years.

Some investors say the IBK made them buy the products without even asking for their signatures.

The bank said it set up a taskforce in February to look into the allegations. “We are aware of the investor concerns and are looking to see whether there were any irregularities involving the sales practice,” an IBK official said.