[Rhym Full Compensation Decision D-1] Seller Likely to Provide First Ever 100% Compensation

Sellers Likely to Accept Adjustment Plan After Two Months of Deliberation
Some Criticize Financial Supervisory Authorities for Avoiding Responsibility

[Asia Economy Reporter Kim Hyo-jin] Lime Trade Finance Fund (Pluto TF-1) distributors are known to have held a board meeting on the 27th and decided to accept the Financial Supervisory Service's dispute mediation proposal of '100% compensation of investment principal.' Returning 100% of the principal to investors is the first case in the history of financial investment product dispute mediation.

This decision is expected to have a significant impact as it could apply not only to other Lime funds whose redemptions have been suspended but also to other fund cases including Optimus Asset Management. Some critics argue that following the Derivative Linked Fund (DLF) incident and the Lime scandal, the financial authorities have been evading responsibility and shifting all the blame onto financial institutions.

According to financial circles on the 26th, Hana Bank and Woori Bank, distributors of the Lime Trade Finance Fund, have confirmed that despite the burden of setting a precedent for full compensation of investment principal, they have decided to accept the Financial Supervisory Service's mediation proposal. These banks reportedly focused especially on persuading some board members who had strongly opposed accepting the proposal over the past month, in order to consolidate the entire board's opinion.

Mirae Asset Daewoo, which had the smallest sales amount among the four distributors, is also reported to have finalized acceptance. Shinhan Financial Investment is currently in the final stages of persuading its board members, leaning toward acceptance. Shinhan Financial Investment is emphasizing acceptance of the proposal for consumer protection from a magnanimous perspective, although some board members are reportedly opposed.

A distributor official said, "We have decided to prioritize 100% compensation on the grounds of contract cancellation due to error," adding, "Concerns about breach of trust have also diminished, so we understand that the board members will accept it."

Earlier, the Financial Supervisory Service's Dispute Mediation Committee passed a mediation proposal in June recommending full compensation of the investment principal. The basis for 100% compensation was applied as 'contract cancellation due to error.' Article 109 of the Civil Act stipulates that if there is an error in an important part of a contract or other legal act, the contract can be canceled.

Recognition of Responsibility for 'Inducing Investor Error'
Possible Impact on Other Fund Cases

The Financial Supervisory Service explained that this is a concept that can be applied even if gross negligence by the distributor is not confirmed. Since the distributor induced investment by explaining the contents of a falsely prepared investment proposal as is, it can be argued that they bear responsibility for causing investor error.

In other words, the distributors accepted returning the full investment principal because they made contracts that induced investor error. This is expected to have a considerable impact on compensation for other private equity funds with problems similar to Lime, causing a ripple effect.

A distributor official B said, "No one wants the situation to escalate into a prolonged lawsuit by rejecting the mediation proposal," adding, "There was a strong internal voice in favor of a magnanimous decision from the beginning." However, the official also said, "Distributors still maintain the claim that they suffered damages from Lime Asset Management," and "They will proceed with the process of claiming indemnity rights against Lime Asset Management in the future."

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