Incomplete Sales at Hyundai Motor Securities 'Institutional Warning'

The regulatory authorities issued a formal warning to Hyundai Motor Securities for incomplete sales practices.

According to financial sources on the 29th, the Financial Supervisory Service uncovered violations such as incomplete sales of financial investment products and breaches of investment advertising procedures during its inspection of Hyundai Motor Securities. They violated obligations under the Capital Markets Act, including the duty to comply with suitability principles, the duty to explain important matters, and the prohibition of unfair solicitation during the fund sales process. Three former employees involved in fund sales were subjected to disciplinary actions equivalent to a three-month salary reduction or a reprimand.

Hyundai Motor Securities sold 178 cases of funds worth 40.6 billion KRW from June 2017 to June 2019. It was found that they violated the duty to explain by recommending investments based on expired (2-year validity) investment propensity data or by omitting and distorting important information.

Team A of Hyundai Motor Securities launched a fund investing in Italian healthcare bonds in October 2017, using the phrase "invests only in accounts receivable with relatively stable and predictable cash flows." It was revealed that they used investment proposals containing information that could mislead investors into believing that Italian healthcare bonds were similar to Italian government bonds in terms of creditworthiness.

Team B of Hyundai Motor Securities was found to have omitted investment risks when launching fund products from June to July 2017. They did not actively disclose that if the local developer, who provided credit enhancement, had poor sales performance, the repayment of principal and interest would be uncertain.

It was also pointed out that two employees from Hyundai Motor Securities Branch C sent investment advertising text messages to customers in June 2017 without prior approval from the compliance officer.

Aegis Asset Management failed to submit regular reports on derivative trading status of general private collective investment schemes within one month from the reference date from June 2017 to September last year. The regulatory authorities imposed a fine of 54 million KRW.