IBK fined 4.7 bln won over 'Discovery fund' fiasco

SEOUL, Feb. 16 (Yonhap) -- South Korea's financial regulator decided Wednesday to fine the state-run Industrial Bank of Korea (IBK) 4.71 billion won (US$3.93 million) and order a partial business suspension for one month for selling fraudulent funds that caused massive losses to customers.

Local firm Discovery Asset Management Co. sold investment funds named "Discovery" between 2017 and 2019, and the IBK sold a large portion of the funds.

But their redemption was suspended in 2019, after U.S. securities authorities froze the assets of a U.S. firm that was operating the funds upon learning that it made false reports. The frozen funds came to 256.2 billion won, and IBK accounted for some 30 percent of the total.

After a monthslong deliberation, the Financial Services Commission (FSC) decided Wednesday to impose the fine, suspend part of its private equity fund-related businesses for one month and take disciplinary measures against several officials.

The regulator cited the IBK's failure to sell the funds without informing consumers of their risks and its violation of rules regarding advertisement of financial products as reasons for the decision.

The regulator also approved a three-month suspension of asset management firm chief Jang Ha-won from his post, a three-month suspension of some businesses of the firm, along with 65 million won in fine.

Jang is a younger brother of South Korean Ambassador to China Jang Ha-sung.

"We will take additional stern measures when other irregularities are confirmed through police investigation and court ruling," the FSC said in a release.

Police have conducted a separate investigation into the case.

The fund fiasco has drawn keen attention not just for the scale of the losses to customers but also because some high-profile people had invested.

Of them, Ambassador Jang and Kim Sang-jo, President Moon Jae-in's former chief of staff for policy, were found to have invested about 6 billion won and 400 million won, respectively, in the funds.

Former lawmaker Chae Yi-bae, who currently works for the ruling Democratic Party, was also known to have made an investment

Suspicions have been raised that Jang and Kim received some special favor for redemption, but they have denied any illegality over the course of their investment.

graceoh@yna.co.kr
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