Financial Supervisory Service's 100% Compensation Plan for Lime Fund: ShinKum Investment "Under Internal Review"

Shin Geum Investment proactively announces up to 70% compensation plan for May
First-ever full compensation under consideration... "Will announce position after internal review"

[Asia Economy Reporter Minwoo Lee] As the Financial Supervisory Service (FSS) proposed an unprecedented full compensation plan for Lime Asset Management's Pluto TF-1 Fund (Trade Finance Fund), Shinhan Financial Investment, which had already presented a voluntary compensation plan, is now facing a dilemma. The company stated that it will review the clear scope and scale of compensation internally before responding.

On the 1st, a Shinhan Financial Investment official said regarding the FSS compensation plan, "We are reviewing it internally," and added, "We will clarify our position after understanding the future scope and scale of compensation." Previously, the company had voluntarily decided to compensate up to 70% of the principal (closed-type Trade Finance Fund, individual basis) related to the Lime Fund redemption suspension incident, but the FSS's unprecedented full compensation plan announced that day has deepened their concerns.

On the same day, the Financial Supervisory Service announced on the 1st that the Financial Dispute Mediation Committee held on the 30th of last month decided to cancel contracts due to "mistake" for four dispute mediation applications related to the Trade Finance Fund sold by Lime Asset Management since November 2018. It was judged that Lime Asset Management and Shinhan Financial Investment continued to sell the fund while deceiving investors about key information such as yield and investment risks despite recognizing the fund's insolvency, and thus recommended returning the full principal to investors of Pluto TF-1 Fund (Trade Finance Fund). This is the first case of 100% compensation decided by the FSS dispute mediation. Last year, the main compensation ratios in FSS dispute mediations were 40-80% for the overseas interest rate-linked derivative-linked fund (DLF) incident and 15-41% for the foreign exchange derivative product KIKO incident.

Earlier, on May 20th, Shinhan Financial Investment decided to compensate 30% of the principal (20% for corporate professional investors) for Lime domestic funds and open-type Trade Finance Funds, and 70% of the principal (50% for corporate professional investors) for closed-type Trade Finance Funds. This was the second case of a sales company voluntarily presenting a compensation plan related to this incident, following Shinyoung Securities. However, the FSS's 100% compensation decision has rendered this decision ineffective.

According to the FSS, among a total of 672 dispute mediation applications related to Lime Funds so far, 108 are related to the Trade Finance Fund. For the remaining Trade Finance Fund investment cases, methods such as voluntary adjustment will be applied according to the Dispute Mediation Committee's decision. The FSS expects that if voluntary adjustments proceed smoothly, up to 161.1 billion KRW of investment principal will be returned.

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