BNK Kyongnam Bank ordered to compensate Lime investors

BNK Kyongnam Bank has been ordered by the Financial Supervisory Service (FSS) to compensate two investors for improperly selling them funds run by now-defunct Lime Asset Management.

A group of people that invested in the German Heritage derivative-linked (DLS) securities products demand compensation in front of the Financial Supervisory Service office in western Seoul on Monday. [YONHAP]

BNK Kyongnam Bank has been ordered by the Financial Supervisory Service (FSS) to compensate two investors for improperly selling them funds run by now-defunct Lime Asset Management.

FSS mediation concluded that the bank should provide 65 percent to 75 percent compensation.

Marketing professionals at the banks “intentionally omitted” information about product risk and “falsely explained” that stable income can be generated by the product.

The bank sold the funds in 2019. Investors were unable to recover 21 billion won ($16 million) from 161 accounts. Eighteen applications have been filed to the committee to resolve.

The FSS “plans for a rapid self-adjustment to be made” by the bank on rest of the investors that suffered damages in line with the committee’s standard of compensation, it said in a statement.

In principle, funds can either be redeemed or be compensated for if damages are confirmed from liquidation, according to the FSS.

On the same day, the committee discussed the German Heritage derivative-linked (DLS) securities products that were sold by seven brokerage firms for a year from 2017.

The committee did not release a conclusion as of reporting time.

The product is based on funds managed by Singapore’s Banjaran Asset Management that invest in Germam historic-site remodeling projects undertaken by the German Property Group, formerly known as Dolphin Trust.

Seven brokers, including Shinhan Securities, sold 488.5 billion won of the funds. More than 470 billion won of the funds invested have been frozen since June 2019.

The German real estate developer filed for bankruptcy in July 2020.

The brokerage firms are being suspected of not properly disclosing the risks and uncertainties associated with investing in the products to their customers.

The product from the German firm was described as the “pyramid scheme” that collapsed after taking in 1.5 billion euros ($1.55 billion) from investors. It was set up by businessman Charles Smethurst in 2008.

BY JIN MIN-JI [jin.minji@joongang.co.kr]