Investors Frustrated as Lime Fund Compensation Postponement Looms

Recommendation for 100% Investment Compensation
4 Sales Companies Unable to Reach Conclusion
Request for Additional Review Period
Response Deadline Extended by 1 Month

On the 1st, Jeong Seong-ung, Deputy Director of the Financial Supervisory Service in Yeouido, is announcing the results of the Lime Trade Finance Fund dispute mediation committee.
[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] Investor dissatisfaction is growing as Lime Asset Management's trade finance fund distributors have yet to reach a conclusion on whether to accept the financial authorities' recommendation to fully refund the principal investment.

According to the financial investment industry and financial authorities on the 28th, the four distributors that sold the trade finance funds?Woori Bank, Hana Bank, Mirae Asset Daewoo, and Shinhan Financial Investment?have not decided whether to accept the Financial Supervisory Service's (FSS) recommendation by the previous deadline and have requested an extension for further review. The FSS accepted the extension request and decided to extend the response deadline by one more month.

The FSS Dispute Mediation Committee decided on the 30th of last month that the distributors must refund 100% of the principal for four Lime trade finance funds sold since November 2018. It recommended the distributors pay full compensation for the investment, marking the first-ever case of 100% investor reimbursement, citing that the suspension of redemptions for the trade finance funds qualifies as a "contract cancellation due to mistake" under civil law. A significant factor was that the trade finance funds had already incurred losses of up to 98% at the time of sale, yet were marketed as sound products. The sales volumes of the trade finance funds are 65 billion KRW for Woori Bank, 42.5 billion KRW for Shinhan Financial Investment, 36.4 billion KRW for Hana Bank, and 9.1 billion KRW for Mirae Asset Daewoo.

As the Lime trade finance fund distributors continue to delay full compensation, investors cannot hide their disappointment and sense of betrayal. One victim of the Lime trade finance fund said, "The distributors who said they would abide by the FSS Dispute Mediation Committee's decision are now saying otherwise." Another victim criticized, "Selling fraudulent products and then breaking promises is the height of shamelessness," adding, "The stance of acting according to the FSS decision has completely disappeared."

Judging from the current situation, it resembles the past KIKO incident. In December last year, the FSS recommended six banks that sold KIKO compensate investors for 15-41% of their losses. However, except for Woori Bank, the other five banks did not accept the mediation proposal.

Currently, the trade finance fund distributors argue that it is excessive to bear full responsibility when they were unaware of the fund's insolvency. They are concerned that if they fully compensate according to the recommendation and then fail to recover all the money through subrogation claims against the asset manager, it could lead to breach of fiduciary duty issues from shareholders.

The Dispute Mediation Committee's decision is a recommendation without legal binding force. If the distributors do not accept it, compensation mediation will not proceed, and they will inevitably face legal lawsuits with investors later. An FSS official pointed out, "Despite selling products that are completely different in nature from general manufacturers, the Lime fund distributors are trying to bear only the level of responsibility of manufacturers," adding, "A change in awareness among distributors is necessary to protect investors and restore trust."

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