Financial Supervisory Service Sanctions Raum and Port Korea for Involvement in 'Lime Employee Fund'...

[Asia Economy Reporter Park Jihwan] The financial authorities are preparing sanctions against Raum Asset Management and Port Korea Asset Management in connection with the unfair profit funds involving some employees of Lime Asset Management.

According to the financial authorities on the 19th, the Financial Supervisory Service (FSS) believes that Raum Asset Management and Port Korea Asset Management violated the Capital Markets Act by accepting a request from Lime Asset Management employees to design so-called 'OEM funds.'

Earlier, when suspicions of fund return recycling arose, the FSS conducted an inspection of Lime Asset Management in August last year and simultaneously inspected Raum Asset Management and Port Korea Asset Management. During this process, the FSS detected suspicious transactions between these asset management companies.

The FSS's judgment is that some employees of Lime Asset Management requested Raum Asset Management and Port Korea Asset Management to design so-called 'OEM funds,' and these asset managers accepted the request, violating the Capital Markets Act. Under the current Capital Markets Act, OEM (Original Equipment Manufacturer) funds created by asset management companies based on orders, instructions, or requests from fund distributors such as banks or securities firms are prohibited.

The person involved in this case is Lee Jongpil, former Chief Investment Officer (CIO) and Vice President of Lime Asset Management, who disappeared before the pre-arrest detention hearing (warrant substantive examination) in November last year after an arrest warrant was requested for an embezzlement case involving about 80 billion KRW at Lead, a KOSDAQ-listed company. It has also been revealed that employees who worked with Lee in the Alternative Investment Division of Lime Asset Management are involved. Currently, they have left the company.

Based on the inspection results, the FSS reported Lee and others to the prosecution twice, in September last year and February this year, on charges of fraud and breach of duty under the Act on the Aggravated Punishment of Specific Economic Crimes.

After learning that investing in convertible bonds (CB) of a specific KOSDAQ-listed company would yield significant profits, they created a dedicated fund with themselves as the sole beneficiaries. Subsequently, the dedicated fund was enrolled in OEM funds created by Raum Asset Management and Port Korea Asset Management, which purchased the KOSDAQ-listed company's CBs at a low price. By buying CBs below market price, they secured hundreds of billions of KRW in profits.

The FSS judged that Lee and others are suspected of breach of duty using job-related information. Additionally, Raum Asset Management and Port Korea Asset Management were found to have violated OEM fund regulations. The FSS plans to proceed with sanction procedures against Raum Asset Management and Port Korea Asset Management.

The FSS is also examining whether unfair trading occurred in the listed stocks invested in by Lime Asset Management through the funds. They intend to investigate whether Lime Asset Management conspired in stock price manipulation by providing funds through investments in listed company CBs (convertible bonds) and BWs (bond with warrants).

An FSS official stated, "If any suspicion of stock price manipulation or unfair trading is found during this inspection, an investigation will be launched immediately," adding, "If there are limitations in the investigation, we plan to cooperate with the prosecution."