Shinhan Investment Corp. Finally Surrenders... Accepts FSC Recommendation for Full Principal Refund

"Some Parts of the FSC Dispute Mediation Proposal Are Difficult to Accept"

[Asia Economy Reporter Minwoo Lee] Shinhan Financial Investment has also accepted the Financial Supervisory Service (FSS) Dispute Mediation Committee's recommendation to fully refund the principal (42.5 billion KRW) to the victims of the Lime Trade Finance Fund (Pluto TF-1) managed by asset management company Pluto.

Shinhan Financial Investment held a board meeting on the 27th and made this decision. The company stated, "We decided to accept the FSS recommendation to keep our promise to customers, restore trust, and fulfill our social responsibility as a financial institution." This final acceptance came one month after postponing the related decision at last month's board meeting. With this, all four major distributors, including Hana Bank, Woori Bank, and Mirae Asset Daewoo, have accepted the FSS recommendation.

However, Shinhan Financial Investment also expressed that there are some disagreements regarding certain facts. Earlier in June, the FSS Dispute Mediation Committee decided that distributors must refund 100% of the principal for four Lime Trade Finance Fund cases sold after November 2018, judging that it falls under "contract cancellation due to mistake." This means there was a clear "mistake" at the time of the fund contract because the fund's insolvency, which was impossible to recover, was concealed and sold.

Regarding this, Shinhan Financial Investment stated, "We have legal disagreements about the 'cancellation due to mistake' recognized at the time of the dispute mediation decision, and concerns remain about the side effects that accepting the mediation decision could have on the capital market." They also said, "We cannot accept some facts recognized in the mediation decision related to the Prime Brokerage Service (PBS) division."

Additionally, Shinhan Financial Investment said it cannot accept many of the basic facts acknowledged in the mediation decision. Specifically, they argued that they cannot accept claims that ▲ Shinhan Financial Investment arbitrarily adjusted the base price, ▲ changed the fund investment structure together with Lime Asset Management to facilitate fund redemption, ▲ changed the investment structure to respond to the insolvency of the International Investment Group (IIG) fund and the conversion of the BAF fund to a closed type, and ▲ used funds from trade finance funds sold after November 2018 to pay redemption money for existing sub-funds.

Earlier, on the 19th, the prosecution held the first trial for Won Jong-jun, CEO of Lime Asset Management, and Lee, head of Lime's marketing division, who are charged with fraud under the Act on the Aggravated Punishment of Specific Economic Crimes and violations of the Capital Markets and Financial Investment Business Act.

The prosecution argued that the Lime Trade Finance Fund invested in the International Investment Group (IIG) fund and others using Shinhan Financial Investment's total return swap (TRS) loan funds from May 2017, and that even after CEO Won and others became aware of the IIG fund's insolvency in November of the following year, they continued selling the trade finance fund to conceal the insolvency. Furthermore, they judged that in this process, former Vice President Lee Jong-pil of Lime Asset Management conspired with former head Lim of Shinhan Financial Investment's PBS Business Division to change the investment structure by bundling 17 insolvent funds invested in IIG and 17 other profit funds among the 34 trade finance funds managed by Lime, causing losses to the 17 profit funds. Former head Lim is currently detained and on trial for these charges.

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