Hantoo Securities' 100% Compensation for Bad Funds Sparks Controversy... Industry Reaction 'Cold'

The Pretext for Refusing the Financial Supervisory Service's Dispute Resolution Method and Advocating for 100% Compensation Introduction

[Asia Economy Reporter Park Sun-mi] Korea Investment & Securities has decided to fully compensate customers for their principal investments in failed private equity funds such as Lime and Optimus, causing a ripple effect. This unprecedented preemptive action taken before the Financial Supervisory Service's Dispute Mediation Committee (DMC) recommendation is said to be increasing confusion among banks, securities firms, and investors who have already received or are awaiting compensation ratio recommendations.

According to the financial industry on the 21st, the National Private Equity Fund Fraud Victims Joint Countermeasure Committee plans to hold rallies in front of the Financial Supervisory Service and private equity fund distributors on the 22nd and 24th, demanding a complete rejection of the FSS's dispute mediation method and the active adoption of Korea Investment & Securities' private settlement method (100% compensation).

Victims argue that other private equity fund distributors should actively refer to Korea Investment & Securities' decision on the 16th to fully compensate customers for their principal investments in controversial failed private equity funds such as Lime, Optimus, and Discovery. The impact of Korea Investment & Securities' decision is growing to the extent that rallies are also planned in front of Industrial Bank of Korea, which has already decided to accept the 40-80% (individual basis) compensation ratio recommended by the FSS.

Unlike Industrial Bank of Korea, which recently accepted the Discovery Fund compensation ratio recommendation, the FSS clearly stated that there will be no readjustment by dismissing the Discovery Fund victims' request for compensation ratio readjustment based on 100% compensation cases.

Discovery Fund victims have requested a meeting with Yoon Jong-won, President of Industrial Bank of Korea, and asked for dispute mediation through private settlement, but Industrial Bank of Korea maintains its position of loss compensation through the FSS dispute mediation procedure. If the victims do not accept the FSS dispute mediation result by July 1, litigation is the only solution.

"Providing a Pretext That Confuses the Resolution of the Situation"

The financial industry's view on Korea Investment & Securities' voluntary 100% compensation decision is cold. Financial companies currently proceeding with loss compensation through the objective and guaranteed FSS dispute mediation procedure are concerned that Korea Investment & Securities' decision may provide a pretext for shifting to a private settlement method where compensation levels are decided through autonomous negotiations between the parties and financial companies.

An industry insider said, "In Korea Investment & Securities' case, the scale of failed private equity fund sales for which 100% compensation was decided, including Lime, Discovery, and Optimus, is only 158.4 billion KRW, and excluding funds that have already been compensated, the remaining compensation amount is about 80.5 billion KRW, so the impact is not significant. Other banks and securities firms with larger failed private equity fund sales find it difficult to make the same decision," he said.

Another industry insider pointed out, "Failed private equity fund distributors are smoothly proceeding with voluntary compensation based on the compensation ratio decisions of the FSS DMC to maintain objective fairness, but Korea Investment & Securities' case will stimulate investors' desire to receive 100% compensation," adding, "It could provide a pretext that further confuses the resolution of the situation."

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