South Korea’s financial watchdog next month will begin its field investigation on the scandal from the suspension of investment return by Lime Asset Management Co., starting with major sellers of the troubled funds including Shinhan Financial Investment, Woori Bank and Hana Bank.

The Financial Supervisory Service (FSS) will initiate its first investigation on Lime Asset Management and Shinhan Financial Investment around early March for fraud and mis-selling allegations, before devising relief for victims, according to sources on Tuesday.

Shinhan is suspected of hiding risks in Lime’s Pluto TF 1 and can be charge of fraud for selling problematic product. Shinhan is denying intentional mis-selling.

Major sales agents Woori Bank and Hana Bank will be also subject to the on-site probe for misleading sale charges. Woori Bank is the biggest seller of the affected funds followed by Shinhan. If any irregularities are confirmed during the probe, the financial watchdog could launch an official investigation which would lead to disciplinary actions against the firms or employees.

Daishin Securities will be the first brokerage house to undergo an official probe, particularly on its Wealth Management Center in Banpo, a posh neighborhood in southern Seoul,

Investors are now preparing a lawsuit against the center, arguing that its employees didn’t draw up contracts and sold the products without examining their risk-tolerance.

The FSS said on Tuesday that total 38 feeder funds worth 243.8 billion won ($205.2 million) invested into Lime’s trade financing umbrella funds have been affected by Lime’s withdrawal suspension. Retail investment accounted for 168.7 billion won. Woori Bank sold the most 56.1 billion won worth the funds, followed by Shinhan at 45.4 billion won and Hana at 44.9 billion won.

Mirae Asset Daewoo was found to have sold 6.7 billion won worth the products, Shinyoung Securities 5.8 billion won, NH Investment Securities 5.5 billion won, Yuanta Securities 2.3 billion won, Daishin Securities 1.8 billion won and Kyongnam Bank 100 million won.

The financial authority plans to extend the scope of its inspection to Lime’s two umbrella funds - Pluto FI D-1 and TethysⅡ whose assets were also frozen by Lime last year due to liquidity problems.

By Pulse

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