Securities and Futures Commission imposes 2 billion KRW fine on NongHyup Bank for 'OEM Fund'

[Asia Economy Reporter Park Jihwan] The Securities and Futures Commission under the Financial Services Commission has decided to impose a fine of 2 billion KRW on NH Nonghyup Bank for allegedly ordering and selling funds using the Original Equipment Manufacturer (OEM) method.

According to financial authorities on the 3rd, the Securities and Futures Commission believes that Nonghyup Bank ordered funds via the OEM method from Fine Asia Asset Management and Aram Asset Management between 2016 and 2018, then split and sold them as private funds with fewer than 49 investors to evade public fund regulations. OEM funds refer to funds created by asset management companies based on orders, instructions, or requests from fund sellers such as banks or securities firms. This is prohibited under the current Capital Markets Act.

This is the first case of sanctions against fund sellers of OEM funds. Until now, only asset management companies that created funds under instructions were subject to sanctions, while sellers were in a regulatory blind spot. The asset management companies Fine Asia Asset Management and Aram Asset Management received heavy penalties, including partial business suspension and fines, last November.

The original sanction proposal from the Financial Supervisory Service for Nonghyup Bank was about 10 billion KRW in fines, but it was reportedly reduced to around 2 billion KRW due to the assessment that the original amount was excessive. The Securities and Futures Commission's decision will be finalized through approval by the Financial Services Commission.

Nonghyup Bank stated, "It is difficult to accept the sanctions being enforced despite many legal controversies regarding this matter," and added, "We plan to actively explain our position at the upcoming Financial Services Commission meeting."