Korea Investment & Securities decided to voluntarily compensate for over 450 cases related to the incomplete sale of a Belgian real estate fund.
On the 24th, according to materials received by Lee In-young, a member of the National Assembly’s Political Affairs Committee, from Korea Investment & Securities and the Financial Supervisory Service, out of the 883 complaints filed with Korea Investment & Securities regarding the Belgian fund as of the 13th, 458 cases were confirmed as incomplete sales, leading to a decision for voluntary compensation.
This accounts for 24.1% of the total 1,897 sales of the Belgian fund. In terms of monetary value, complaints were filed regarding 33.9 billion KRW out of a total establishment principal of 58.3 billion KRW, and a total of 6.07 billion KRW was decided as the voluntary compensation amount.
The fund, sold by Korea Investment & Securities, KB Kookmin Bank, and Woori Bank, was an investment in a long-term leasehold interest of a local office building used by a Belgian government agency, established in June 2019. The structure was intended to yield profit by selling the leasehold after a five-year operation, but resulted in a total loss due to rising interest rates and a downturn in the European real estate market.
As the largest seller, Korea Investment & Securities set the basic compensation rate between 30% and 60%, depending on the violation of suitability principles, duty to explain, and prohibition of undue solicitation. They allowed the compensation rate to be adjusted up to 80% by considering additional factors like financial vulnerability, new investment product subscriptions, and deductive factors such as experience with similar products and entrustment status.
Among the voluntary compensation cases, about half, 232 cases, had a compensation rate of 30% and 35%. There were 172 cases at 40% and 45%, 44 cases at 50% and 55%, and 9 cases at over 60%. KB Kookmin Bank is also conducting voluntary compensation in the range of 40% to 80%.
As of the 17th, 372 dispute complaints against Korea Investment & Securities and KB Kookmin Bank were filed with the Financial Supervisory Service (FSS), separate from complaints filed with the sellers. Of these, 90 cases were settled according to the seller’s voluntary compensation standards. In 166 cases, voluntary adjustment failed, leading the FSS to handle them by determining incomplete sales. The FSS is reviewing the remaining dispute complaints.
The FSS initiated an on-site inspection for incomplete sales with the three sellers last month, and compensation rates might increase depending on inspection results. This potential adjustment was confirmed by FSS Chairman Lee Chan-jin, who stated that if internal control violations related to incomplete sales are confirmed, the compensation standards for all dispute complaints, including those previously resolved, could be readjusted.
Lee In-young stated, “Cases confirmed as incomplete sales should receive compensation commensurate with their responsibility,” and stressed the need to review high-risk funds from a consumer protection perspective from the design stage. He added, “We will amend laws and systems to enable strong actions, including punitive sanctions, against financial companies that repeatedly cause incomplete sales.”