Concerns Over Disruptions to Lime's Early Next Month On-Site Investigation Due to COVID-19

Activation of Emergency Response System Across All Financial Sectors
FSS Reviewing Investigation Schedule Internally

[Asia Economy Reporter Kim Hyo-jin] Due to the spread of the novel coronavirus infection (COVID-19), the Financial Supervisory Service's (FSS) on-site investigation schedule regarding the Lime Asset Management private equity fund redemption suspension incident is likely to be delayed. As the entire financial sector is focusing all efforts on preventing the spread of COVID-19, the FSS is responding by setting policies such as temporarily suspending inspection activities.

According to financial authorities and the financial sector on the 26th, the FSS is internally reconsidering the on-site investigation schedule concerning allegations of fraud in the operation and design process of the Lime fund and suspicions of incomplete sales by sales companies.

An FSS official stated, "As the entire financial sector is operating an emergency response system due to the spread of COVID-19, we are discussing whether it is appropriate to proceed with the investigation as scheduled," adding, "It seems that a decision will be made after comprehensively reviewing the trends over the next few days."

The FSS recently formed a joint on-site investigation team centered on the Dispute Mediation Division 2, with participation from related regional inspection offices. The original plan was to send investigation personnel to each site early next month and begin full-scale investigation activities, starting with the trade finance fund, where a significant portion of illegal activities has been confirmed.

The first on-site investigation targets included Lime Asset Management, Shinhan Financial Investment, and Woori Bank and Hana Bank, which sold a large volume of the trade finance fund. Shinhan Financial Investment is accused of fraud for selling the trade finance fund (Pluto TF No. 1) despite knowing about its deterioration, along with Lime Asset Management. Woori Bank, Hana Bank, and others are also suspected of incomplete sales as major sales companies.

Meanwhile, on the 24th, FSS Governor Yoon Seok-heon held an in-house financial situation briefing and instructed to focus on blocking COVID-19 in the financial sector and preventing financial consumer damage. Accordingly, the FSS decided to temporarily suspend on-site inspections in certain areas designated as 'severely affected regions' until the spread of COVID-19 subsides and to minimize inspections in other regions as much as possible.

There are also voices that estimate a low possibility of delay in the on-site investigation schedule. A financial sector official pointed out, "In the case of the Lime incident, since investors are suffering huge losses immediately, it is different in nature from inspections or investigations that are conducted occasionally."

Meanwhile, according to data analyzed by Kim Sung-won, a member of the National Assembly's Political Affairs Committee from the United Future Party, which was submitted by the FSS, a total of 30 financial companies, including 21 securities firms and 9 banks (including 5 special banks), sold Lime Asset Management's funds and collected fees from 2017 to last year.

The sales commissions (including fees) these financial companies received from customers while selling the funds amounted to 9.4 billion KRW in 2017, 16.9 billion KRW in 2018, and 25.1 billion KRW in 2019, totaling 51.4 billion KRW. Among securities firms and banks, Shinhan Financial Investment earned the highest fees, making a total of 13.5 billion KRW over three years.

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