FSS Dispute Mediation Committee Recognizes Kyongnam Bank's Liability for Lime Fund Compensation

[Asia Economy Reporter Song Hwajeong] The Financial Dispute Mediation Committee (FDMC) of the Financial Supervisory Service recognized Kyongnam Bank's liability for damages due to the incomplete sales of Lime domestic funds and Credit Insured (CI) funds on the 14th, and decided to compensate two investors at rates of 70% and 65%, respectively.

The FDMC acknowledged Kyongnam Bank's liability for damages in both cases referred, considering that the sales staff arbitrarily classified the investors' risk appetite as aggressive, omitted explanations about high-risk investment targets, incorrectly described the possibility of stable returns, and neglected proper internal controls such as prior product review while selling high-risk products, which caused numerous high-value victims.

The FDMC confirmed Kyongnam Bank's violation of the suitability principle and duty of explanation under the Capital Markets Act regarding the investors, setting the basic compensation ratio at 30%. Taking into account the bank's negligence in investor protection as a fund seller, which caused numerous high-value damages, a common weighting factor of 20% was applied, and an additional 10% reflecting the investors' individual circumstances was included to determine the compensation ratio. For general investor A, considering violations of the suitability principle, duty of explanation, and failure to conduct monitoring calls, a compensation ratio of 70% was decided. For general investor B, considering violations of the suitability principle and duty of explanation, a compensation ratio of 65% was determined.

An official from the Financial Supervisory Service stated, "The FDMC plans to promptly facilitate voluntary adjustments for the remaining affected investors based on this compensation standard. If the mediation process proceeds smoothly, it is expected that the relief for damages related to the 21 billion KRW (161 accounts) unpaid due to redemption delays will be concluded."

Kyongnam Bank sold Lime domestic funds (4 funds, 15.8 billion KRW) and CI funds (2 funds, 11.9 billion KRW) in 2019, which led to numerous investor damages due to redemption suspensions. As of this day, a total of 18 dispute mediation applications (10 for domestic funds, 8 for CI funds) have been filed against Kyongnam Bank related to these funds.

This dispute mediation is established if both parties accept the mediation proposal within 20 days after its receipt. For the remaining mediation targets, the FDMC plans to handle them through voluntary adjustments or other methods according to the compensation standards.

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