FSS: "We Did Not Specifically Target Beneficiaries in the Inspection... It Will Be Revealed Through Prosecutors' Investigation"

Democratic Party lawmaker Kim Sang-hee is staging a sit-in protest denying allegations that she received preferential redemption just before the Lime scandal in the lobby of the Financial Supervisory Service in Yeouido, Seoul, on the 25th. [Image source=Yonhap News]

Prior to the large-scale suspension of redemptions in the Lime Fund incident, there were reports of preferential redemptions granted to influential figures including multi-term members of the National Assembly. In relation to this, the Financial Supervisory Service (FSS) reiterated its position that it did not conduct inspections by pre-identifying beneficiaries. Furthermore, it stated that it would actively cooperate with the prosecution’s investigation and clarify any illegal activities through ongoing inspections.

On the 27th, the FSS explained in a briefing document, "Even after the FSS inspections of Lime and two other asset management companies, various suspicions such as pre-redemptions and misappropriation of fund investments have been raised," adding, "Additional inspections were conducted to verify the facts of these suspicions and to support victims by identifying any illegal acts."

It further stated, "There was inevitably a reasonable suspicion that preferential treatment had been provided," and clarified, "The inspections were not conducted by pre-identifying beneficiaries, and all those confirmed as significant beneficiaries were listed in the press release." The FSS also said, "Specific facts regarding preferential redemptions will be clearly revealed through future prosecution investigations." Ham Yong-il, Deputy Governor of the FSS, also stated during a media briefing on the 24th, "We did not deliberately seek out influential figures; these issues emerged during the inspection process aimed at identifying problems with the relevant employees."

The FSS announced that just before the Lime Fund’s large-scale suspension of redemptions in August to September 2019, when four Lime funds faced asset deterioration and liquidity shortages leading to insufficient funds for redemption responses, there was evidence that preferential redemptions were made to some investors using 12.5 billion KRW from other fund monies and 450 million KRW from the asset management company’s proprietary funds. A total of 29 beneficiaries requested redemptions from the four funds, and the FSS judged that responding to redemptions by injecting other fund monies or proprietary funds despite the inability to redeem with its own funds constituted preferential treatment.

The FSS also stated that among the investors who withdrew money early were some influential figures including A Central Association (20 billion KRW), B Listed Company (5 billion KRW), and multi-term members of the National Assembly (200 million KRW). Subsequently, multi-term National Assembly member Kim Sang-hee of the Democratic Party (four terms) was identified.

Earlier that day, Representative Kim refuted the FSS’s announcement of preferential redemptions. In a statement, he said, "The facts were mixed and generalized, deliberately distorted and publicized to create the misunderstanding that I was involved in preferential redemptions," adding, "The FSS’s political maneuver has completely negated my over ten years of political career. The FSS has suddenly transformed me into a shameless politician who sucks the tears of the people."

Representative Kim also said, "Mirae Asset Securities tried to submit a document to the FSS stating that 'they recommended redemptions to customers based on market conditions' and that 'all 16 subscribers of the Lime Martini No. 4 Fund simultaneously redeemed following their recommendation,' but the FSS said, 'We will accept a verbal explanation instead' and told them not to send the document," questioning, "Why is the FSS blocking Mirae Asset Securities’ fact verification? Are they afraid that their own inadequate investigation and political manipulation will be exposed?"

Regarding Representative Kim’s claims, the FSS responded, "Citing explanations from employees or others as if they were the official position of Mirae Asset Securities risks distorting the facts, so it is advisable to wait for the prosecution’s investigation," adding, "We plan to actively cooperate with the prosecution and will further clarify any illegal activities during the redemption process through ongoing inspections."

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