Financial Supervisory Service Issues Reduced 'Warning for Accountability' Disciplinary Action to Chairman Sohn Tae-seung over 'Lime Scandal'

On the 2nd, victims of the Lime Fund held a rally in front of the Financial Supervisory Service in Yeouido, Seoul, urging for dispute mediation to protect victims of the Lime Fund./Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Song Seung-seop] Sohn Tae-seung, Chairman of Woori Financial Group, received a severe disciplinary action of a 'reprimand warning' at the Financial Supervisory Service's (FSS) Disciplinary Committee due to the suspension of redemptions in a private equity fund. The severity of the discipline was one level lower than the pre-notified suspension of duties.

According to the industry on the 9th, the FSS's third disciplinary committee session continued from 2 p.m. until midnight the previous day. Along with Chairman Sohn's severe disciplinary action, the committee imposed a three-month partial suspension of duties and a fine on Woori Bank. However, the partial suspension period was reduced from six months. The final decision will be confirmed after approval by the Financial Services Commission.

The reduction in the severity of the discipline is evaluated to partially reflect Woori Bank's efforts to protect consumers. Woori Bank had previously accepted both the dispute mediation proposal for the loss-uncertified fund and the dispute mediation proposal deciding on a full refund of the principal to the victims.

The FSS also stated that it would consider consumer protection measures and efforts to compensate victims when deciding the severity of the discipline. Accordingly, the FSS Financial Consumer Protection Department appeared as a reference at the disciplinary committee and expressed opinions on Woori Bank's subsequent efforts.

This disciplinary committee marked the start of an adversarial system where the FSS and the bank contested the issues. In the previous two disciplinary committees, explanations of disciplinary reasons by the Inspection Bureau and statements by the subjects were made. The main disputes centered on whether the bank had prior knowledge of the Lime Fund's insolvency and whether Woori Bank engaged in improper solicitation.

Shinhan Financial Group is conducting its disciplinary committee together with Woori Bank, but it is highly likely that a conclusion will be reached at the disciplinary committee scheduled for the 22nd. Although related to the Lime incident, the issues differ, and the policy appears to be to promptly finalize the disciplinary severity for banks whose subcommittees have concluded.