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| The headquarters of Financial Supervisory Service located on Yeouido, Seoul. / Korea Times file |
The Financial Supervisory Service's (FSS) dispute settlement committee decided Thursday that KB Securities ― one of the sellers of the problematic Lime fund products that resulted in huge losses for retail investors ― should provide compensation of up to 70 percent of their losses.
The order came prior to the calculation of the exact amount of losses incurred from the funds was confirmed. The FSS was aiming to reach a prompt resolution to the situation caused by the mis-selling of the problematic fund's products as soon as possible for the sake of victims who were also losing opportunity costs due to losses suffered from the funds.
The financial watchdog told sellers of the funds, including KB Securities, Shinhan Financial Investment and Daishin Securities, that they should compensate investors as soon as possible, even before the exact losses have been confirmed. KB Securities said it would consider the terms.
The FSS notified the securities firm that they should be prepared to provide compensation of between 60 percent and 70 percent of the losses in three representative cases. It also said KB Securities had committed errors and mistakes by mis-selling the fund products without closely explaining the full details of the risks. The financial authority also recommended the firm provide compensation of 40 percent to 80 percent of money lost to other investors according on a case by case basis.
Due to Lime Asset Management's refusal to redeem its 173 funds late last year, over 4,000 individual investors and about 580 institutional investors in the asset manager's funds products suffered losses of around 1.67 trillion won ($1.53 billion). A total of 673 cases have been filed with the financial watchdog's dispute settlement body ― 346 cases against banks and 327 cases against brokerage houses.
KB Securities got people to invest 58 billion won into Lime funds during January to March last year, and 42 cases were filed against the securities firm requesting dispute settlement by the FSS.
Regarding the FSS recommendation, a KB Securities' official said the company would determine its actions after careful consideration. If KB Securities accepts it, the decision has the legal effect equivalent to judicial reconciliation.
