FSS: Daishin Securities to Compensate 80% of Lime Fund Losses

Application of Incomplete Sales Allegations

[Asia Economy Reporter Park Jihwan] Individual investors who suffered losses after investing in Lime Asset Management's private equity funds sold by Daishin Securities are expected to receive compensation for 80% of their losses. This is about 20-30 percentage points higher than the compensation rates of other Lime fund sellers.

On the 29th, the Financial Supervisory Service announced that based on the results of the Dispute Mediation Committee meeting regarding Daishin Securities' fund sales case, it set the highest compensation rate of 80% among existing Lime fund sellers.

Considering that compensation rates of 60% by KB Securities, 55% by Woori, Shinhan, and Hana Banks, and 50% by Industrial Bank of Korea and Busan Bank were applied previously, this is a 20-30 percentage point higher compensation rate. The Dispute Mediation Committee explained, "There is significant responsibility for causing many high-value victims due to inadequate internal controls related to private fund launch and sales, as well as poor branch office supervision."

The key issue in this mediation was whether ‘contract cancellation’ due to fraudulent unfair transactions could be applied to the Lime funds sold by Daishin Securities. If contract cancellation is recognized, 100% compensation is possible, but if it is concluded as incomplete sales, only partial compensation is possible.

The committee judged that Daishin Securities’ inadequate internal controls related to product launch and sales, poor supervision of branch offices, and insufficient employee training materials and customer explanation materials make it difficult to consider this as fraudulent unfair transactions.

However, since the result falls short of the full compensation investors had demanded, there is a possibility that the mediation proposal may be rejected. Victims who do not accept this compensation rate can either file complaints again with the Financial Supervisory Service or choose to file individual civil lawsuits against Daishin Securities.