South Korea’s Woori Bank will make it easier for investors to pull out of complex funds and toughen marketing guidelines after many consumers – mostly in senior age – have been heavily burned on their investments in the derivative-linked funds (DLFs) tied to 10-year German treasury bond the bank had sold.

The company announced on Wednesday the list of measures for consumer protections against exotic investment products including new contract terms to allow private equity fund investors to cancel their subscription within two days after the end of the fund sale. Over the period, the bank will also thoroughly monitor whether the fund is mis-sold or not.

The bank will allow public fund investors to withdraw their investment within 15 days after the completion of the fund sales without any penalty/. Local financial institutions have been conducting the so-called ‘fund recall policy’ since 2010 where financial institutions or banks return investment principal and sales commission to investors for mis-sold funds.

The measure comes after Woori Bank came under fire for neglecting to fully explaining buyers of the risks in the DLFs tied to 10-year German treasury bond yields. The nation’s financial authorities have launched in investigation on Woori Bank and KEB Hana Bank as the DLFs they sold generated colossal losses. Many of their customers who have invested in the risky funds are elderly people.

“We will respect the outcome of the investigation by the dispute settlement committee of the Financial Supervisory Service (FSS) and try hard to make compensations immediately,” said Woori Bank on Wednesday. KEB Hana Bank has also made a similar statement.

It also pledged to overhaul its entire marketing processes from product selection and sales to follow-up services, as well as overall marketing infrastructure and employees’ performance evaluation indicators.

Under the changed rules in fund sale, the bank will sell high-risk private equity funds only at its Two Chairs Premium Centers, the private banking service for wealthy customers. It now operates six such centers across the country and plans to add three more this year and four or five next year.

The bank said it has decided to put a cap on the sale of financial products that carry the risk of losing principal, and temporarily suspend sales of derivative structured products and leveraged and inverse funds that are risk-prone until the situation is settled.

By Lee Seung-hoon and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]