Lime Fund Sales per Person: Shinhan Bank Leads with 430 Million KRW... Shinhan Investment Corp. Also Sold 400 Million KRW Amid Fraud Allegations

[Asia Economy Reporter Ji-hwan Park] Among the financial companies that sold Lime Asset Management's suspended redemption private funds, Shinhan Bank had the largest sales amount per individual investor, reaching 430 million KRW. Shinhan Financial Investment, which is under suspicion of fraud related to the trade finance fund (Pluto TF No. 1), also exceeded 400 million KRW in sales per individual investor.

According to the Financial Supervisory Service on the 20th, as of the end of last year, redemption delays occurred in four master funds managed by Lime Asset Management and 173 sub-funds related to them. There are 18 sales companies for these sub-funds based on individual investors, with total sales amounting to 994.3 billion KRW.

The financial company with the largest sales amount to individual investors was Woori Bank, with 253.1 billion KRW. This was followed by Shinhan Bank (169.7 billion KRW), Shinhan Financial Investment (120.2 billion KRW), Hana Bank (79.8 billion KRW), and Daishin Securities (69.1 billion KRW).

The company with the highest sales amount per individual investor was Shinhan Bank at 430.71 million KRW. NH Investment & Securities (427.27 million KRW), Meritz Securities (418.13 million KRW), and Shinhan Financial Investment (407.1 million KRW) followed. The average sales amount per individual investor across all sales companies was 246.42 million KRW.

Currently, most of the top sales companies in terms of Lime Asset Management’s redemption-delayed funds are mainly commercial banks, which has led to considerable controversy over incomplete sales. Cases have been increasingly found where banks, which generally handle relatively stable financial products such as savings and deposits, failed to properly fulfill their explanatory obligations when selling high-risk private funds.

In particular, some sales companies are facing allegations beyond incomplete sales, including fraud. Shinhan Financial Investment is currently suspected of continuing to sell the trade finance fund while concealing the fact that the fund was deteriorating. Regarding this, the Financial Supervisory Service announced on the 14th, during the interim inspection results of Lime Asset Management, that such actions could constitute fraud or similar offenses.

The prosecution also conducted a search and seizure at Shinhan Financial Investment on the 19th. Previously, investors who suffered losses from Lime Asset Management’s redemption suspension filed complaints against the CEO and officials of Shinhan Financial Investment for violations of the Capital Markets Act. However, Shinhan Financial Investment maintains that it was unaware of the fund’s deterioration in advance and considers itself a victim as well.

Shinhan Financial Investment is also controversial for having entered into a total return swap (TRS) contract. A TRS contract is a type of financing where a securities company purchases assets on behalf of an investor by securing a margin deposit and receives fees in return. Upon contract termination, the securities company has the right to claim funds with priority over general investors. If securities companies such as Shinhan Financial Investment, Korea Investment & Securities, and KB Securities, which have TRS contracts, recover funds before general investors, the losses for general investors will increase. For this reason, financial authorities have requested TRS securities companies to make a magnanimous decision to share the burden, such as principal reduction.

However, securities companies have expressed reluctance, stating that "if the TRS loan principal, which is contractually supposed to be fully recovered, is forgiven, it could constitute a legal breach of trust." The remaining TRS balances in Lime funds are 500 billion KRW for Shinhan Financial Investment, 100 billion KRW for KB Securities, and 70 billion KRW for Korea Investment & Securities. An industry insider pointed out, "While customers are on the verge of losing almost all their investments, it is somewhat questionable that securities companies are taking all related profits."

However, it is known that there is no legal means to force securities companies to prioritize the recovery of TRS funds. Eun Sung-soo, Chairman of the Financial Services Commission, also stated at a press conference on the 'Financial Services Commission 2020 Work Plan' the day before, "TRS is also a type of contract, so it is difficult for financial authorities to force changes to contractual relationships."

This content was produced with the assistance of AI translation services.