Daishin Securities Faces ESG Downgrade Over Incomplete Sales of Lime Fund

[Asia Economy Reporter Koh Hyung-kwang] Daishin Securities' ESG rating was downgraded as it came under investigation by authorities for the incomplete sale of Lime Asset Management's funds. ESG is a sustainability management indicator that comprehensively evaluates Environmental Management (E), Social Responsibility Management (S), and Governance (G).

According to industry sources on the 11th, the Korea Corporate Governance Service held an ESG rating committee meeting the previous day and downgraded Daishin Securities' ESG rating from 'B+' to 'B'. The B rating is the third from the bottom. ESG ratings are determined by integrating three individual evaluation indicators, each graded on a seven-level scale: S, A+, A, B+, B, C, and D. The Corporate Governance Service has traditionally adjusted ratings once every six months but decided to adjust them quarterly starting this year.

Daishin Securities' integrated rating dropped as it underwent investigations by the Financial Supervisory Service and a prosecutor's office search due to the incomplete sale of Lime funds. As of the end of July last year, when the Lime scandal broke out, Daishin Securities had sold 1.176 trillion KRW, accounting for 21% of the total Lime fund sales balance of 5.7 trillion KRW. This was the largest amount among financial companies that sold Lime funds. Approximately 1 trillion KRW of this was sold at a single Daishin Securities Banpo branch. It is highly unusual for one branch to sell such a large volume of a specific asset management company's funds, indicating aggressive sales efforts toward customers.

Daishin Securities also sparked controversy by taking the lead in preventing investors from redeeming their investments. When suspicions arose in July last year that Lime Asset Management engaged in 'rolling over' to manage private fund returns, Daishin Securities immediately gathered investors the following month and held several seminars to reassure them and prevent redemptions. However, shortly afterward, Lime Asset Management announced a large-scale suspension of redemptions, and investors who trusted Daishin Securities' explanations and refrained from redeeming found their funds locked. Investors have filed lawsuits against Daishin Securities, alleging that the risks of losses were concealed during the fund sales process, and investigations are ongoing.

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