Over the past five years, the securities firms that received the most sanctions for misselling were three companies: KB, NH, and Daishin Securities Co. During this period, as sanctions were imposed in connection with the Lime and Optimus incidents, the largest fund redemption suspension cases in Korea, the amount of missold funds was tallied at 4 trillion won.
According to the People Power Party lawmaker Lee Heon-seung of the National Policy Committee, who received data from the Financial Supervisory Service on Oct. 19 titled "Status of sanctions and measures for securities firm misselling over the past five years," from 2020 to Aug., KB, NH, and Daishin Securities Co. each received three sanctions, the most. IBK, Shinhan, Hana, and Korea Investment & Securities each received two sanctions.
The securities firms that received three sanctions over the past five years were all sanctioned in connection with the Lime and Optimus incidents that occurred from 2019 to 2020.
In Dec. 2021, KB Securities received sanctions related to the Lime fund for violating the ban on improper solicitation and for violating the duty to explain, with a six-month partial suspension of institutional business and an institutional warning, respectively. The violation of the ban on improper solicitation involved sales of 155.9 billion won and 374 subscribers by number of cases. For the violation of the duty to explain, sales were 32 billion won with 66 subscribers. Afterward, at the beginning of this year, it was found to have missold a separate fund worth 200 million won and was sanctioned.
In Mar. 2022, NH Investment & Securities was also sanctioned for misselling related to the Optimus fund for violating the ban on improper solicitation and for violating the duty to confirm the contents of explanations. The related fund sales amounted to 697.4 billion won with 1,360 subscribers and 8 billion won with 3 subscribers, respectively. In 2023, it sold a fund worth 1.2 billion won without obtaining confirmation that the explanation of risks had been received, and was sanctioned. Daishin Securities Co. also received a total of three sanctions, including for misselling the Lime fund.
According to the FSS, during this period the total sales amount of funds sanctioned by the FSS for misselling was 3.8101 trillion won, with about 6,000 subscribers. An FSS official said, "Because sanctions during this period were imposed for major cases such as Lime, Optimus, and Discovery, the scale of sanctions was larger than in an average year," while adding, "Not only the major cases but also medium- and small-scale misselling continue to occur, and we are continuously monitoring them."
Meanwhile, in some cases, inspection delays were seen, with four to five years elapsing from misselling to FSS sanctions. Shinyoung Securities received sanctions in July last year for the Lime incident in 2019, and in Apr. this year, Korea Investment & Securities was sanctioned for misselling a private equity fund worth about 88.1 billion won, but the related case was confirmed to involve products sold through 2020.
A securities industry official said, "If sanctions are imposed belatedly for incidents that occurred long ago, it is not easy for the industry to devise measures to prevent recurrence," adding, "Each securities firm is strengthening internal controls, but accidents keep occurring in areas beyond their reach."