The Securities and Futures Commission Approves Fines on Securities Firms Selling Lime Fund

[Asia Economy Reporter Park Jihwan] The Securities and Futures Commission (SFC) under the Financial Services Commission has resolved to impose fines on three Lime Fund distributors.

On the 8th, the SFC held an extraordinary meeting and announced that it had resolved to impose fines on the three Lime Fund distributors: Shinhan Financial Investment, Daishin Securities, and KB Securities. This agenda was discussed at the second regular meeting on the 20th of last month but no final conclusion was reached.

Earlier, in November last year, the Financial Supervisory Service (FSS) imposed suspensions on former CEOs Kim Hyungjin of Shinhan Financial Investment, Yoon Kyungeun of KB Securities, and Na Jaecheol of Daishin Securities (currently Chairman of the Korea Financial Investment Association) at a disciplinary hearing. Park Junglim, CEO of KB Securities, received a reprimand. The FSS also decided institutional sanctions including partial suspension of operations for KB Securities and Shinhan Financial Investment, and closure of the Banpo WM Center for Daishin Securities. Additionally, fines ranging from tens of millions to billions of Korean won were imposed on these securities firms.

The levels of disciplinary action are divided into five stages: caution, cautionary warning, reprimand, suspension, and dismissal recommendation. If a CEO receives a severe disciplinary action such as a reprimand or higher, their reappointment is restricted and they are barred from employment in the financial sector for 3 to 5 years. Suspension restricts employment in the financial sector for 4 years, and reprimand for 3 years.

With the resolution of the fine issue at the SFC meeting, it is expected that the disciplinary procedures against the related securities firms will accelerate. The final level of institutional sanctions and CEO disciplinary actions will be decided at the upcoming regular meeting of the Financial Services Commission. The SFC reviews fines and penalties, while institutional business suspensions and executive sanctions such as those against CEOs are reviewed and decided by the Financial Services Commission.

Following the Lime Fund incident, the disciplinary procedures by financial authorities against distributors and custodians involved in the Optimus Fund incident will also be intensified. The FSS plans to hold a disciplinary hearing on the 18th of this month targeting major distributors and custodians of the Optimus Fund, including NH Investment & Securities, the Korea Securities Depository, and NH Investment & Securities CEO Jung Young-chae, the largest distributor. The industry anticipates severe disciplinary measures for these parties as well, based on precedents such as the Lime Fund disciplinary actions.

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