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This article was published on November 11, 2020 at 6:44 a.m. The Bell payment pageIt is an article expressed in

The Financial Supervision Service confirmed the severe punishment of the CEO of a securities company that sells Lime Asset Management Fund. KB Securities CEO Park Jung-rim received a warning for reprimands that were one notch lower than the previous notice, and Shinhan Investment and Daishin Securities received a suspension from the former CEOs and a cautious warning. Institutional sanctions were also included, such as the closure of the WM center and some suspension of work. As the only acting CEO Park Jung-rim is subject to severe punishment, legal battles over retirement are expected to be inevitable.

On the 10th, the Financial Oversight Service held the third sanctions review committee for Daishin Securities, Shinhan Investment Corp, KB Securities and five former and current CEOs related to the situation of Lime Asset Management. The Sanctions Deliberation Committee lowered the level of disciplinary action against some of the executives and employees, but imposed severe disciplinary action beyond the censure warning.

The sanctions trial suspended Kim Hyung-jin, former CEO of Shinhan Financial Investment, Na Jae-cheol, former CEO of Daishin Securities (currently president of the Financial Investment Association) and Yoon Kyung-eun, former CEO of KB Securities, and issued a reprimand to current CEO Park Jung-lim. Representative Park Jung-rim is one notch lower than the previous notice. Former Shinhan Financial Investment CEO Kim Byeong-cheol received a cautious warning.

The Financial Supervision Service found that KB Securities and Shinhan Investment Corp. violated three laws of the capital market. △ Violation of the prohibition on the use of illegal methods in order to conceal illegal transactions by investors related to the Lime Trade Finance Fund (Article 71 of the Capital Market Law) △ Violation of the prohibition of unfair solicitation of investment products such as the Lime Trade Finance Fund and the specific money trust German Heritage DLS (capital markets Article 49 of the Law) △ Violation of the obligation to establish internal control standards (Article 24 of the Government Structure Law). As a result of the institutional sanctions, it was decided to propose the suspension of work and the imposition of a fine on the Financial Services Commission. The firing (retirement) and suspension (retirement) of related employees other than the CEO are also proposed to the Financial Services Commission.

Daishin Securities also found that it violated its obligation to prohibit unfair solicitation and to establish internal control standards. The Financial Supervision Service decided to close the Banpo WM Center at Daishin Securities and impose a fine on the Financial Services Commission. Penalties for employees are the same as for Shingeumtu and KB Securities.

This day’s sanctions trial lasted from 2:00 p.m. until late at night. In attendance were representatives Park Jung-lim, former CEO Yoon Gyeong-eun, former CEO Kim Hyung-jin, and former CEO Kim Byeong-cheol. Former CEO Na Jae-cheol decided not to attend because he felt it would not be appropriate to address Daishin Securities’ days as president of the Kumtoo Association, similar to the first and second sanctions.

Previously, the Financial Supervision Service imposed sanctions twice, on the 29th of last month and on the 5th of this month, but could not conclude. This is because the number of employees subject to disciplinary action, including the CEO, was more than 10 in one company. It is reported that a fierce battle ensued between the seller and the Financial Supervision Service over executive sanctions.

The Financial Oversight Service appears to have used the “poor internal control” that was the reason for the disciplinary action as the main reason. Before issuing the final measure, the Financial Supervision Service required the seller to present a written opinion explaining the lack of internal control. While admitting mistakes in the Lime Management sales process, the sales companies said the level of discipline was excessive.

As the will of the FSS to punish severely, it is analyzed that the result was expected. From 2016 until the end of September this year, 1,218 of the 1,270 agendas subject to FSS sanctions were approved when the FSS announced the disciplinary opinion. Woori Bank and Hana Bank also made three calls earlier this year about consolidated derivative products (DLS and DLF), but it was decided to punish severely under the original plan.

Interest is also centered on how securities firms respond. While efforts have been made to resolve the situation, including full compensation and active recall, it is difficult to accept the results easily with the conclusion of severe disciplinary action.

In particular, KB Securities, whose current CEO has been subject to severe disciplinary action, is very likely to review legal actions. It seems likely that a plan to suspend the effect through a court battle will be seen as influential. Earlier, Woori Bank and Hana Bank filed a lawsuit to suspend the executive order as they were in danger of being misused due to severe punishment by the CEO.

Shinhan Investment Corp. was more interested in institutional disciplinary action because former CEO Kim Byeong-cheol, who previously served as the Lime Asset Management Fund, resigned. In the event of an institutional warning beyond the business suspension, no new business permits can be obtained for the next two years. Shinhan Investment Corp. is concerned that new business will be difficult to allow due to some business suspensions. In a situation where the private equity industry has collapsed, suspending some operations is probably not a painful discipline. Previously, Samsung Securities received a partial suspension of business from a new investment brokerage business for six months and a penalty for negligence due to the “cheated stock” dividend accident.

Daishin Securities responded that it participated in the Sanctions Deliberation Committee and made an active call for the insolvency of internal control. Daishin Securities officials said, “I attended the sanctions review committee and conveyed the company’s position in detail,” and said, “I will disclose my position on the results later.”

The results of the FSS sanctions review are finalized through regular meetings of the Securities and Futures Commission and the Financial Services Commission. However, there is the possibility that the level of disciplinary action will be adjusted during this process. From the end of this year until the beginning of next year, a decision on disciplinary action is expected.