Jung Il-moon, President of Korea Investment & Securities, "100% Compensation for Sales-Responsible Private Equity Funds"

[Asia Economy Reporter Junho Hwang] Korea Investment & Securities has made a bold decision to fully compensate 100% of the investment principal to customers who invested in products that have raised sales responsibility issues due to poor private equity funds.

President Ilmoon Jung stated at an online press conference on the 16th, "We have decided to compensate 100% of the loss relative to the principal to all customers who subscribed to products involving poor private equity funds with sales responsibility issues, based on new compensation standards." He added, "This is a proactive decision made to protect financial consumers and restore customer trust."

Accordingly, Korea Investment & Securities will provide 100% loss compensation for 10 products including Lime, Optimus, Discovery (US Fintech), Samsung Gen2, Pop Funding (Hastings), Pop Funding (Jarvis), Fidelis Trade Finance, Hastings Cultural Contents, Hastings Cordelia, and Mir Trust.

The total sales amount of these funds is approximately KRW 158.4 billion across 806 accounts. With some products already fully or partially compensated, the additional compensation amount Korea Investment & Securities is expected to pay is estimated at about KRW 80.5 billion. President Jung explained, "We prioritized restoring customer trust and strengthening long-term business capabilities based on this, over the short-term costs incurred."

To implement this measure, Korea Investment & Securities has strengthened its internal compensation standards. The criteria for determining compensation now include not only simple incomplete sales but also major recent causes of private equity fund incidents such as ▲ discrepancies between the operation strategy and assets stated in the prospectus, ▲ absence of actual operating assets and differing risk levels, ▲ discrepancies in guarantee existence and creditworthiness, ▲ occurrence of omitted risks in the prospectus, and ▲ illegal acts and breaches of the principle of good faith by counterparties.

New exclusion criteria for compensation products have also been introduced. Products that suffered losses due to market changes or were clearly notified about investment targets and strategies and operated normally are excluded from compensation.

Compensation payments are planned to be completed by next month after resolutions by the Consumer Protection Committee and procedural steps. Even if dispute mediation results or loss rates are confirmed separately in the future, already paid compensation will not be reclaimed. The strengthened internal compensation standards will also be applied if similar issues arise with other sold funds.

Additionally, efforts to recover investment assets and seek recourse from problematic counterparties (such as asset managers and other stakeholders) will be conducted simultaneously. To end incomplete sales through recurrence prevention, improvement plans to transform internal control processes related to product supply and sales into customer-centric systems have also been prepared.

President Jung said, "This decision reflects our clear commitment to 'right thinking toward customers' and prioritizes restoring customer trust in financial products." He added, "It is based on the judgment that contributing to improving sales and investment culture in the financial sector and restoring trust in the industry and financial products overall is urgently needed." He further explained, "We expect that by proactively implementing financial consumer protection policies, we will protect our valuable customers and contribute, albeit modestly, to restoring trust in financial products."