The Supreme Court canceled the Financial Services Commission's sanctions against NH Investment & Securities, including a three-month partial suspension of business, in connection with the "Optimus scandal."
The Supreme Court's First Division (Presiding Justice Shin Suk-hee) said on the 22nd it finalized the lower court ruling that ordered all sanctions to be canceled in the appeal filed by NH Investment & Securities against the Financial Services Commission and the governor of the Financial Supervisory Service seeking to overturn the partial suspension of business and other measures.
Earlier, in Mar. 2022, the Financial Services Commission disciplined NH Investment & Securities by suspending new private fund sales for three months. The Financial Supervisory Service also, in the same month, ordered NH Investment & Securities to suspend new private fund sales for three months and issued reprimand requests, including suspension and pay cuts, for eight current and former employees.
Optimus Asset Management sent an investment proposal to NH Investment & Securities in June 2019 to sell private funds. It said the funds raised through private fund sales would be invested in construction companies' accounts receivable for construction payments on projects ordered by government-affiliated and public institutions (public institution accounts receivable). NH Investment & Securities sold Optimus's private funds to 1,360 investors from June 2019 to May 2020. The amount invested this way was 679.4 billion won.
Optimus declared a suspension of fund redemptions in June 2020. A Financial Supervisory Service inspection found that Optimus invested money raised through private funds not in public institution accounts receivable but, via unlisted corporations' private bonds, in real estate development projects and individuals' stocks and derivatives.
Optimus asked the Korea Securities Depository (KSD) to register the names of bonds purchased with fund money using titles that could be mistaken for public institution accounts receivable. When NH Investment & Securities or the trustee bank requested fund asset statements, it provided statements listing the inclusion of public institution accounts receivable related to Korea Land & Housing Corporation (LH) or Busan Port Authority (BPA).
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) determined that NH Investment & Securities did not undergo sufficient verification procedures even though the target assets and structure of the Optimus funds were uncertain. They also said the company provided a definitive assessment to investors, saying "95% or more of the money is invested in public institution accounts receivable," and made improper solicitations, and thus imposed a partial business suspension and reprimand requests.
In the first trial, the court sided with NH Investment & Securities, ordering all sanctions by the Financial Services Commission and the FSS to be canceled. The Seoul Administrative Court said, "Under the Financial Investment Services and Capital Markets Act, NH Investment & Securities was not granted the authority to actively access fund management information or to request information from the asset management company," adding, "There was a limitation in that it had no choice but to rely solely on materials provided by the asset management company."
The court also said, "(The Optimus side) used a meticulous method of arbitrarily stamping a seal in the name of a staff member in the bank's trust business department to forge accounts receivable assignment contracts and then perforating them with a punch," adding, "It appears NH Investment & Securities did not recognize that unlisted companies' private bonds were included in the fund."
The Financial Services Commission and the FSS appealed but the second trial dismissed the appeal. The Supreme Court dismissed the final appeal, finding the lower court did not misunderstand the law.