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The Financial Oversight Service decided severe disciplinary action against the former and current CEOs of three securities companies selling the Lime Fund at the end of the three-time sanctions review committee.
Three former CEOs were suspended from their jobs as reported in advance, and KB Securities CEO Park Jung-lim was relieved due to a censorship warning. In the case of Shinhan Investment and KB Securities, part of the business was suspended and Daishin Securities’ Banpo WM Center was closed, which became a problem due to the massive sale of Lime Fund.
In the Sanctions Deliberation Committee held on the 10th, the Financial Supervision Service deliberated on the measures to be taken against the distributors of Lime Fund Shinhan Investment, Daishin Securities and KB Securities, and confirmed the level of sanctions.
The incumbents Kim Hyung-jin and Kim Byung-cheol, former CEOs of Shinhan Financial Investment, and Yoon Kyung-eun, former CEO of KB Securities, Park Jung-lim, current CEO of KB Securities, and Na Jae-cheol , current president of the Association of Financial Investments, were subject to personal sanctions.
Among them, CEO Park Jung-rim, who was most interested in why he was currently in office, received a censorship warning. This is the level of reduction after receiving prior notice of suspension from work. Former CEO Yoon Gyeong-eun, former CEO Kim Hyung-jin, and former CEO Na Jae-cheol were suspended from work as previously notified. Former CEO Kim Byeong-cheol received a cautionary warning that was lowered to one level.
The level of sanctions for executives of financial companies is divided into recommendation of dismissal, suspension of employment, warning of censorship, cautious warning and caution, and those who are above the warning of censure have restricted employment in the financial sector for the next 3 to 5 years. In the case of CEO Park Jung-rim, the suspension was avoided, but it was not easy to return to the office due to a censorship warning.
The FSS deliberated on the maximum dismissal of the relevant employee. The level of sanctions for employees is determined in the order of dismissal, suspension, salary reduction, reprimand, and status.
The Financial Supervision Service decided institutional sanctions that impose a partial suspension of business and fines for Shinhan Investment and KB Securities. In case of commercial suspension, the new business cannot be approved for three years. FSS institutional sanctions include caution as a minor discipline, warning from an institution as severe discipline, suspension from work, and cancellation of licenses.
Both institutions prohibit the use of fraudulent methods for the purpose of concealing illegal transactions by investors related to the Lime Trade Finance Fund (article 71 of the Capital Markets Law), the prohibition of unfair solicitation of financial investment products (article 49 of the Capital Markets Law) and the obligation to establish internal control standards (it was considered that he had violated article 24) of the Corporate Governance Law.
In the case of Shinhan Investment Corp, it also violated the prohibition on unfair solicitation of specific money trusts in German-inherited private equity securities (DLS).
Daishin Securities, which is believed to have violated the obligation to prohibit the Lime Fund’s unfair application and the obligation to establish internal control standards, suggested closing the Banpo WM Center and imposing a fine.
The Sanctions Deliberation Committee is the advisory body of the Governor of the Financial Supervision Service and the results of the review have no legal effect. The details of the sanctions will be finalized through the approval of the Financial Supervision Service, the deliberation of the Securities and Futures Commission and the resolution of the Financial Services Commission for each issue of the follow-up measures. The final conclusion is expected to come out early next month.
Meanwhile, these brokerage firms provide a total return exchange (TRS) to Lime Asset Management and are suspected of selling Lime funds even though they have knowledge of fund fraud. In response to this, the sellers demonstrated that the severe disciplinary action was excessive and also filed petitions requesting disciplinary action. Therefore, when the level of sanctions is finally determined in the future, the possibility of administrative litigation on the part of providers will be forecasted.
