Financial Supervisory Service to Promote Dispute Mediation on Post-Settlement Method for Unconfirmed Loss Private Equity Funds

[Asia Economy Reporter Eunmo Koo] On the 14th, the Financial Supervisory Service (FSS) announced that it will promote dispute mediation on a post-settlement basis for private equity funds whose losses have not been confirmed, if the sales companies have agreed in advance.

Although the Lime Trade Finance Fund is undergoing the return of the principal investment amount (161.1 billion KRW) following dispute mediation for contract cancellation, dispute mediation for other private equity funds has been delayed as losses have not yet been confirmed, causing ongoing difficulties for investors. Compensation for fund losses is only possible once losses are confirmed through redemption or liquidation.

Earlier, on the previous day, Kim Han-jung, a member of the Democratic Party of Korea, also emphasized the need for prompt relief through dispute mediation based on estimated loss amounts during the National Assembly’s audit of the FSS before the Political Affairs Committee.

The FSS decided to promote dispute mediation based on estimated loss amounts if the sales company agrees in advance, even before the loss amount is confirmed, in order to uphold the purpose of the mediation system.

Dispute mediation will target cases where facts are confirmed through inspections of asset management companies and sales companies, objective loss estimation is possible through asset due diligence completion, and the sales company has agreed in advance to dispute mediation based on estimated loss amounts.

The estimation method involves first compensating based on the estimated loss amount (mediation decision), with additional recoveries settled afterward.

The mediation procedure includes confirming whether there was incomplete sales through on-site investigations such as three-party interviews, obtaining legal advice on the sales company’s liability and compensation ratio, and then recommending compensation on a post-settlement basis.

The FSS plans to select sales companies among Lime’s domestic fund sellers that meet the requirements for dispute mediation on a post-settlement basis and proceed with dispute mediation sequentially.

An FSS official stated, “If mediation is established, early dispute resolution is expected as the sales company’s advance payment through private reconciliation will be finally settled according to the compensation standards decided by the Dispute Mediation Committee.”

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