DLF Incident Investors Win Compensation Lawsuit "60% Damage Payment"

On October 1, 2019, in front of the Financial Supervisory Service in Yeouido, Seoul, members of the Financial Justice Solidarity and the Emergency Countermeasures Committee for DLF-DLS Victims held a press conference condemning Woori Bank and KEB Hana Bank for selling DLF (Derivative Linked Fund) products. / Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Kim Daehyun] An investor who suffered losses after investing in derivative-linked funds (DLF) won the first trial lawsuit against the bank.

According to the court on the 4th, the Busan District Court East Branch Civil Agreement Division 2 (Chief Judge Jeong Jeongho) recently ruled partially in favor of plaintiffs in the first trial of an unjust enrichment claim filed by individual investors Mr. A and Mr. B against Hana Bank and its affiliated private bankers (PBs), ordering "the defendants to jointly pay 88.89 million KRW to Mr. A and 260.64 million KRW to Mr. B." This corresponds to 60% of the loss amount.

Previously, investors Mr. A and Mr. B invested 175.7 million KRW and 508.5 million KRW respectively in DLFs sold by Hana Bank in 2018.

DLF refers to funds that invest in derivative-linked securities (DLS) based on underlying assets such as interest rates, exchange rates, and credit ratings. In the second half of 2019, bond yields worldwide plummeted, causing principal losses in DLSs based on US, UK, and German bond yields and the DLFs invested in them.

The DLFs invested in by Mr. A and others were linked to UK and US Constant Maturity Swap (CMS) interest rates, and only about 15% of the principal investment was returned. They filed a lawsuit in October 2020, claiming that Hana Bank did not sufficiently explain the risks of the product.

The first trial ruled in favor of Mr. A and Mr. B. It was judged that the PBs did not faithfully explain the profit and loss structure of the product and violated obligations under the Capital Markets Act by emphasizing profitability and safety over risks.

The court stated, "The PBs violated their duty to explain matters that could influence the plaintiffs' reasonable investment decisions and actively recommended transactions that could involve risks, neglecting their duty to protect customers," and "Hana Bank also provided inadequate and inaccurate explanations during PB training, and excessive competition among PBs exacerbated the damage caused by the DLF incident."

However, the court limited the compensation responsibility to 60%, considering that Mr. A and Mr. B were negligent in reviewing the investment.

Hana Bank has appealed the first trial ruling.

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