The Financial Supervisory Service to Complete Private Fund Dispute Resolution by the First Half of This Year

[Asia Economy Reporter Park Jihwan] The Financial Supervisory Service (FSS) plans to complete dispute mediation for the five major private equity funds, including Lime and Optimus, by June.

On the 21st, the FSS announced that it aims to finalize the dispute mediation (compensation for damages) procedures between investors and sellers of major private equity funds such as Lime, Optimus, German Heritage, Discovery, and Italian Healthcare funds by the first half of this year.

So far, the FSS has completed dispute mediation for Lime funds amounting to approximately 1.1 trillion KRW. Contract cancellations due to errors total 161.1 billion KRW, post-settlement compensation amounts to 354.8 billion KRW, and dispute resolutions through advance payments or private settlements are around 600 million KRW.

To date, the five major redemption-delayed funds, including Lime, total 2.88 trillion KRW, accounting for 42% of all redemption-delayed funds (6.85 trillion KRW). Dispute complaints number 1,359, representing about 78% of the total. The FSS plans to promptly provide relief focusing on private equity funds with significant consumer damage. Optimus relief measures are expected to be visible by early next month, and for the remaining funds such as Heritage, relief is planned within the first half of the year.

The FSS also intends to accelerate sanctions against financial companies that committed illegal or unfair acts such as incomplete sales while selling major private equity funds. Currently, the financial authorities have completed the disciplinary review process for three securities firms that sold Lime funds (Shinhan Investment Corp., KB Securities, and Daishin Securities). The level of sanctions is currently being discussed by the Securities and Futures Commission under the Financial Services Commission. Sales banks such as Woori and Shinhan are undergoing disciplinary review procedures. Additionally, disciplinary review is underway for NH Investment & Securities, which sold Optimus funds, and Hana Bank, the custodian.

The FSS plans to complete a full inspection of private equity funds by the first half of this year. Since August last year, the asset management industry has been conducting voluntary inspections on 9,043 professional private equity funds. So far, 81.9% of all funds have undergone voluntary inspection. No significant unusual issues have been reported yet. In the comprehensive inspection of professional private equity managers conducted jointly by the FSS and the Korea Deposit Insurance Corporation, no large-scale illegal operations have been found so far.

The FSS prioritizes swift victim relief and plans to promote dispute mediation as soon as facts are confirmed through inspections, even before sanctions are finalized. For financial companies actively engaged in victim relief, the FSS operates a pre-sanction consultation system that takes this into account when imposing penalties.

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