Financial Supervisory Service Orders KB Securities to Compensate 60-70% for Lime Fund Investment Losses

[Asia Economy Reporter Minji Lee] The Financial Supervisory Service's Financial Dispute Mediation Committee (FDSMC) announced on the 31st that it has decided the compensation ratio for KB Securities' liability in the incomplete sale of Lime Fund to be 60-70%.

This FDSMC determined the compensation ratio only for KB Securities, which agreed to proceed with dispute mediation using the post-settlement method. In principle, compensation can be made when the loss from fund redemption is confirmed, but in the case of the Lime Fund, it may take at least 4-5 years to confirm the loss. Therefore, the FSS applied the post-settlement method for the first dispute mediation based on the 'estimated loss amount.' If repayment occurs later, the seller will pay investors the balance after deducting the excess compensation from the repayment amount.

The compensation ratio was decided considering previous dispute mediation cases and civil mediation precedents in courts. A 30% ratio was applied for violations of the suitability principle and duty to explain by branch sales staff, the same as in past cases such as the Dongyang CP and corporate bond incident and the overseas interest rate-linked derivative-linked fund (DLF) incident. Additionally, considering the head office's negligence in investor protection and the characteristics of the ultra-high-risk product, a common 30% was added, resulting in a 60% compensation ratio.

The FSS explained, "KB Securities, as both the fund seller and provider of total return swaps (TRS), should have made stronger efforts to protect investors, but considering the responsibility for causing numerous victims, the basic compensation ratio was set higher than that of the overseas interest rate-linked DLF (55%)."

The compensation ratio varies depending on the investor's own responsibility and the aggravating factors of the seller's liability. For example, if the product was sold as safe to a housewife in her 60s who did not understand the financial investment product itself and to elderly people reluctant to invest, 70% compensation is applied. If the risks of TRS, which caused total loss, were not explained, 60% compensation is applied.

An FSS official stated, "If KB Securities accepts the mediation proposal within 20 days, the mediation will be established," and added, "For the remaining subjects of mediation, we plan to encourage voluntary adjustment with compensation ratios ranging from 40% to 80%."

Meanwhile, Lime Asset Management caused a redemption delay incident involving 1.7 trillion KRW across 173 funds, resulting in 4,035 individual and 581 corporate victims. As of the 21st, a total of 673 dispute mediation applications have been received. Among these, 42 dispute mediation applications were filed regarding the Lime AI Star 1.5-year fund sold by KB Securities from January to March last year.

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