South Korea’s financial authorities will launch a new team that will be dedicated to monitoring and investigating private equity fund operators over the next three years after a recent series of asset freeze of private equity funds that have caused investors massive losses.

The decision was made at a meeting among Financial Services Commission (FSC), Financial Supervisory Service (FSS), Korea Securities Depository and Korea Deposit Insurance Corporation that was held in Seoul on Thursday to discuss how to deal with the recent fund redemption suspensions by a number of PEF operators, including Lime Asset Management, Optimus Asset Management and Discovery Asset Management.

The authorities decided to carry out a large-scale probe into PEFs including those that are not in trouble yet. They will require sellers and operators of total 10,304 PEFs in the country to implement a checkup on their own, and separately conduct a field inspection for total 233 PEF operators. To enhance efficiency in carrying out inspections, they will set up a new PEF monitoring division with 30 or more people.

Meanwhile, banks and brokerages are up in arms against the latest decision by FSS’ Financial Disputes Settlement Committee that advised the sellers of Lime Asset Management funds whose payment has been suspended a full return of investment principal to the funds’ victims.

The sellers including Woori Bank, Hana Bank, Shinhan Financial Investment, Mirae Asset Daewoo and Shinyoung Securities argue that following the committee’s decision could be subject to misconduct as the FSS could only make a recommendation and the court should rule a final decision.

According to sources from the financial industry on Thursday, the sellers began reviewing related laws regarding the committee’s decision.

By Choi Seung-jin, Jin Young-tae and Choi Mira

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