Bunjo Committee Decides Compensation Ratio for 2 Investors... "Did Not Explain Risks to Elderly Investors"
Both Parties Must Accept Adjustment Proposal Within 20 Days to Finalize... Will 273.9 Billion Won Damage Relief Be Settled?
Victims of Lime Asset Management private equity fund are shouting slogans demanding compensation in front of the Shinhan Bank headquarters in Jung-gu, Seoul. [Image source=Yonhap News]
[Asia Economy Reporter Kwangho Lee] Two investors who suffered losses after investing in Lime Asset Management private funds through Shinhan Bank will be compensated for 69?75% of their losses.
The Financial Supervisory Service (FSS) announced on the 20th that it held a dispute mediation committee regarding Shinhan Bank's sale of Lime funds and decided on compensation rates for two cases of incomplete sales.
The mediation committee determined compensation rates of 69% and 78% of the losses for the two Shinhan Bank Lime fund investors, respectively.
The committee recognized Shinhan Bank's liability for damages in both cases, citing negligence in investor protection efforts that caused the losses. The bank was found to have either failed to properly verify investors' risk profiles or to have prepared documents inaccurately while selling high-risk products.
The minimum compensation rate, the basic compensation ratio, is 55%. First, a 30% compensation rate was applied for violations of the suitability principle and duty to explain by branch sales staff, consistent with basic dispute mediation cases. An additional 25% was added considering the head office's negligence in investor protection.
The committee ordered Shinhan Bank to compensate at the highest rate of 75% for the case where a high-risk product was sold to an elderly investor who wanted principal protection. For the case where the investment profile of a small business seeking safe products was arbitrarily recorded as "aggressive investor type" and an ultra-high-risk product was sold, a 69% compensation was recommended.
The FSS plans to facilitate voluntary adjustments with compensation rates ranging from 40% to 80% for other investors who were not brought before the mediation committee.
The rates will be applied differentially depending on whether the seller violated the suitability principle and the investor's investment experience, among other factors.
The mediation committee's compensation decision is not binding; both the applicant claiming investment damages and the bank must accept the mediation proposal within 20 days for it to be established.
An FSS official said, "If the mediation process proceeds smoothly, the relief for the 273.9 billion KRW (458 accounts) in unpaid funds due to redemption delays is expected to be concluded."
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