On the 28th of last month, the ‘Improved Bank Discovery Fund Fraud Damage Countermeasure Committee’ is performing in front of the Financial Supervisory Service in Yeouido, Yeongdeungpo-gu, Seoul, in front of the Financial Supervisory Service’s funeral performance to urge severe disciplinary action. /Photo = Yonhap News
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The Financial Supervisory Service decided on a disciplinary punishment equivalent to a cautious warning to the former head of the IBK Bank by asking for responsibility for selling’bad funds’ such as Lime and Discovery. Initially, the possibility of severe punishment was notified in advance, but the final level was lowered.
The Financial Supervisory Service held the Sanctions Deliberation Committee on the 5th, and decided to propose to the Financial Services Commission that IBK should be suspended for one month and impose a fine. The Financial Supervisory Service concluded that IBK violated the obligation to establish internal control standards under the Financial Companies Governance Act. At the time of the fund’s sale, the former head of IBK, Kim Do-jin, had a cautionary warning, and the former vice-chairman had a three-month salary cut.
Sanctions against financial company executives are strong in the following order: caution → cautious warning → reprimand warning → job suspension → dismissal recommendation. Those above the censure warning are classified as severe disciplinary action, and employment in the financial sector is restricted for the next 3 to 5 years. Prior to the sanctions review, the Financial Supervisory Service notified former chief Kim of the disciplinary measure equivalent to a censure warning, but on this day the level went down one level.
The sanctions trial is the advisory body of the FSS chief, and the decision here has no legal effect. The results of the deliberation are then finalized through the approval of the FSS, deliberation by the Securities and Futures Commission, and resolution by the Financial Services Commission.
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View of the Financial Supervisory Service in Yeouido, Seoul. /Hankyung DB
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IBK sold the products of Discovery Asset Management’s’Discovery US Fintech Global Bond Fund’ and’Discovery US Real Estate Senior Bond Fund’ for 3612 billion won and 318 billion won, respectively. However, the redemption of 69.5 billion won and 21.9 billion won, respectively, is delayed as US managers are unable to recover bonds invested in fund funds. Lime Asset Management’s Lime Repo Plus 9M, which caused a large-scale redemption suspension, also sold 29.4 billion won.
Like IBK, Shinhan Bank and Woori Bank, which sell insolvent funds and are facing sanctions by the Financial Supervisory Service, are drawing attention on how the decision will affect them.
The Financial Supervisory Service recently informed Woori Finance Chairman Son Tae-seung that he may be subject to a “significant job suspension” and Jin Ok-dong, the head of Shinhan Bank, to be sanctioned by a “cause warning”. Chairman Son was in charge of Woori Bank when the fund was sold. If the actual discipline goes down like this, then Chairman Son and Chairman Jin will be subject to a new term.
There is also a cautious prospect that the disciplinary level of other chief executives (CEOs) may be lowered in the financial sector as the results of the former chief Kim’s sanctions are disclosed. However, there is a view that it is difficult to predict the outcome as Shinhan-Woori Bank concentrated on selling Lime Fund, which had a greater social impact than the Discovery Fund. The trial for sanctions by the FSS against Shinhan and Woori Banks is scheduled for the 25th of this month.
Reporter Lim Hyun-woo [email protected]
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