Woori, Hana face lawsuit over DLF fiasco

A group of investors are planning to file a lawsuit against Woori Bank and KEB Hanna Bank for their “irresponsible marketing” of high-risk derivative products that are expected to see them suffer billions of won in losses, a team organizing the suit said Tuesday.

The products in question, derivative-linked funds (DLF), are structured to track the performance of underlying assets such as interest rates and government-issued bond yields. Their returns are determined by the movements of those assets.

The Financial Consumer Agency (FCA), a consumer rights group, and Logos, a law firm, said up to five people will file suits against the two banks for negligence as early as this week.

More people will join the suit after establishing standing following further legal consultations on specific charges and damages.

“The first batch of complainants will claim that their financial losses were incurred as a direct result of what is largely known as ‘mis-selling’ or incomplete sales, which in easy and simple terms means fraudulent, irresponsible marketing,” an official from Logos said.

Most of the victims are, he said, in their 60s whose primary income is retirement benefits from various financial products sold and managed by banks and insurers.

“Documents with their signatures will show that they should not have been classified as an investor group willing to endure losses, a clear and willful mistake resulting from negligence by bank sales officials,” he added.

Before purchasing a financial product, sellers are required to collect written consent with a statement of how much of a risk the investors are willing to take.

The sales representatives should have made it clear that the victims understood the high-risk products including the ensuing risks and losses, asking for a signature was treated as a mere formality, the official said.

“The sales officials should have clearly explained the investment risks. Their deliberate failure or neglect at best caused the losses and they should he held duly accountable,” he added.

The funds worth over 169 billion won ($142 million) sold by the two banks will mature from Thursday through Nov. 19.

The Financial Supervisory Service will soon determine the amount of compensation the banks must pay victims.