FSS Unable to Reach Conclusion on 2nd Disciplinary Hearing for NH Investment and Hana Bank

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] The Financial Supervisory Service (FSS) discussed the level of sanctions against NH Investment & Securities and Hana Bank, the custodian, in relation to the Optimus Fund redemption suspension incident, but no conclusion was reached.

On the afternoon of the 4th, the FSS held a disciplinary committee meeting to reconsider and review the corrective measures following the sector inspection results for the fund distributor NH Investment & Securities and Hana Bank. Following the first disciplinary meeting held on the 19th of last month, the meeting continued late into the night, but it was determined that further deliberation was necessary.

The FSS stated, "We listened to statements and explanations from multiple company officials and the FSS inspection department," and "It was decided to resume the meeting at a later date."

Jung Young-pae, CEO of NH Investment & Securities, who was pre-notified of a '3-month suspension from duty' sanction proposal, appeared in person at the disciplinary meeting again after the first session and actively presented his defense. If the suspension sanction is finalized, CEO Jung will face restrictions on future employment in the financial sector.

Not only CEO Jung personally, but institutional sanctions against NH Investment & Securities are also reported to have been notified with a heavy disciplinary proposal. NH Investment & Securities was the company that sold the most Optimus Funds, accounting for about 84% (432.7 billion KRW) of the total redemption suspension amount sold through NH Investment & Securities.

However, NH Investment & Securities has maintained that they themselves were victims deceived by Optimus's fraudulent intentions. The fact that NH Investment & Securities recently publicly expressed their intention to become the largest shareholder of the bridge management company that will take over and manage the Optimus Fund, as part of efforts to protect consumers, could also serve as a defense argument.

There is also an analysis that the growing voices inside and outside the financial sector criticizing the excessive responsibility placed solely on the CEOs of distributors in the private equity fund insolvency incident could act as a variable in the disciplinary committee's decision.

Hana Bank, the custodian of the Optimus Fund, is also reported to have been pre-notified of a heavy disciplinary proposal such as an 'institutional warning.' However, even if the FSS disciplinary committee decides on the level of sanctions, the final decision is not confirmed. Depending on the case, additional reviews by the Securities and Futures Commission and approval by the Financial Services Commission are required.