Lime Sales Top Rank Not Mirai Asset... Prosecution Targets 'Favoritism Suspicion'

The prosecution has launched a forced investigation into Mirae Asset Securities, which is suspected of providing preferential redemption benefits to 16 individuals, including Kim Sang-hee, a member of the Democratic Party of Korea, who invested in Lime Asset Management's fund 'Lime Martini No. 4,' drawing attention to whether the full details of the case will be revealed.

View of Mirae Asset headquarters in Jung-gu, Seoul.
[Image source=Yonhap News]

According to the legal community on the 1st, the Joint Investigation Unit for Financial and Securities Crimes of the Seoul Southern District Prosecutors' Office (Chief Prosecutor Dan Seong-han) sent prosecutors and investigators to Mirae Asset Securities and Yuanta Securities the day before to seize materials related to the allegations. These securities firms are suspected of providing preferential redemptions to influential figures such as members of the National Assembly and major clients in August to September 2019, just before the suspension of redemptions for the Lime fund.

In the financial and legal sectors, there is particular interest in how Mirae Asset Securities attracted influential clients despite selling relatively few Lime funds compared to other securities firms, and whether they actually provided preferential treatment such as early redemptions.

According to the Financial Supervisory Service and others, Mirae Asset Securities did not rank among the top ten in Lime fund sales. The amount is reported to be about 9.1 billion KRW, which is extremely small compared to Woori Bank (357.7 billion KRW), Shinhan Financial Investment (324.8 billion KRW), Shinhan Bank (276.9 billion KRW), and Daishin Securities (107.6 billion KRW). Its share of the total Lime fund sales amounting to 1.6679 trillion KRW is also negligible.

Suspicious of these points, the prosecution is expected to reconstruct the circumstances under which the 16 individuals, including Representative Kim, were encouraged to redeem, as well as the overall redemption process, based on the materials secured through the search and seizure the day before. At the same time, it will be necessary to examine whether such early redemption details were reported to Mirae Asset Securities' top decision-making line and whether related instructions were given to employees. Also, securities firms typically use official methods such as mobile messenger or text messages to notify customers when recommending redemptions, and legal experts advise that the prosecution should verify these records as well, since there is a possibility that preferential conditions are specified in the messages.

The prosecution stated, "We will thoroughly investigate all allegations." While some fund experts argue that "it is a natural measure for securities firms to request redemptions from customers if abnormal signs are detected," claiming that Mirae Asset Securities' early redemption was appropriate, the prosecution is accelerating the investigation, seeing the need to verify all raised suspicions.

The 'Lime Martini No. 4,' which has become the center of preferential treatment allegations, is one of the equity hedge funds launched after Lime Investment Advisory registered as an asset management company in January 2016. It is reported to have mainly received individual investments. Because of this, it has been evaluated as having the character of a 'small elite preferential fund.' In particular, since 80-90% of the total fund amount was invested in domestic stock products, redemptions were possible at any time, and it is known that if a redemption was requested, the investment could be recovered within five business days, which has also raised suspicions of preferential treatment. Considering that it usually takes more than a month for fund investors to receive their money after requesting redemption, five days is considered too fast.

Meanwhile, Mirae Asset Securities issued a statement on the 27th of last month, saying, "The controversial Lime fund preferential treatment allegations are not within Mirae Asset Securities but rather the domain of the asset management company Lime Asset Management. Moreover, since a public investigation has begun, Mirae Asset Securities can only confirm the facts by cooperating with the investigating agencies." They added, "Mirae Asset Securities will actively cooperate when there is a request for investigation cooperation or materials."