NH Investment to provide full compensation for Optimus mis-selling

NH Investment & Securities CEO Chung Young-chae speaks during a press conference held at the firm's headquarters at the Yeouido financial district in Seoul, Tuesday. Courtesy of NH Investment & Securities

By Anna J. Park

NH Investment & Securities has decided to fully compensate its customers who lost money due to the brokerage company's mis-selling of troubled funds from Optimus Asset Management.

In a press conference, NH Investment & Securities said that it was finally decided at the company's board meeting earlier in the day to return 100 percent of the original principal paid by the victims, in order both to respect the order of the Financial Supervisory Services (FSS) and to implement customer protection to the fullest.

With the decision, a total of 831 retail investors will receive 278 billion won ($247 million) as soon as possible. Last year, NH Investment gave out nearly half of the money to the victims as an emergency step to minimize financial damage. The rest of the money will also be returned to the victims.

“Through the decision, the company believes that it serves to protect the interest of NH Investment shareholders, in order to preserve the firm's customer-oriented management philosophy, to win back customers' trust and to focus on fully responding to new business opportunities in fast-changing industries,” Chung Young-chae, the brokerage firm's CEO, said during the press conference.

The FSS ordered NH Investment early last month to implement the annulment of the contract and to compensate the entire amount of 278 billion won to end-investors.

“While it was factually impossible for the Optimus fund to make an investment into state-led fixed trade receivables, NH Investment & Securities, which was the seller, explained to end-investors that the fund product invested more than 95 percent of its assets into the state-led fixed trade receivables, as the brokerage firm only relied upon the asset manager's product documents,” read the FSS' statement about the decision made last month.

NH Investment & Securities also announced that it will sue Hana Bank and the Korea Depository Securities (KDS), as it is seeking claims for indemnity, as the brokerage firm claimed that Hana Bank failed to curb fraud in the fund as the fund's trust bank. NH Investment also alleged that KDS allowed the fund's explanatory statements to be erroneously changed, causing misinformation.

“It will contribute to the advancement of the country's capital market to figure out clearly where the responsibility lies,” CEO Chung said.

Meanwhile, regarding another mis-selling conflict case involving the problematic Discovery Asset Management funds, the FSS also ordered the Industrial Bank of Korea (IBK) Tuesday to compensate up to 80 percent of the end-investors' principal.