FSS looks into Lime’s halt of fund re­demp­tion

The Korea Times - - FINANCE - By Kim Bo-eun [email protected]­re­atimes.co.kr

The Fi­nan­cial Su­per­vi­sory Ser­vice (FSS) is look­ing into Lime As­set Man­age­ment’s de­ci­sion to halt re­demp­tion of its pri­vate eq­uity funds (PEFs) over the past few weeks due to a liq­uid­ity short­age.

Lime de­layed pay­ment on three funds, Sept. 1, and de­cided Thurs­day to halt re­demp­tion of other funds worth 620 bil­lion won ($518.61 mil­lion) in­vested in pri­vate bonds and Mez­za­nine in­stru­ments, a hy­brid of debt and eq­uity cap­i­tal.

An FSS of­fi­cial said the same day that the agency was not con­duct­ing a full-scale inspection, but had re­quested Lime to sub­mit doc­u­ments on the mat­ter.

Lime, the largest hedge fund man­ager here in terms of funds, said the mea­sure was taken to pre­vent losses for in­vestors.

Around 3,000 in­di­vid­u­als are known to have in­vested in the funds, which were sold through 30 fi­nan­cial in­sti­tu­tions, in­clud­ing banks and bro­ker­ages such as Daishin Se­cu­ri­ties, Woori Bank, Shin­han In­vest­ment, KB Se­cu­ri­ties, Ky­obo Se­cu­ri­ties, Shin­han Bank and Korea In­vest­ment & Se­cu­ri­ties.

The de­lay in fund re­demp­tion does not mean the in­vestors will not be able to get their money back.

How­ever, they will be un­able to get it back when they want it, which is in­creas­ing con­cern among them.

The in­vest­ment in Mez­za­nine in­stru­ments, com­prised of con­vert­ible bonds and bonds with stock pur­chase war­rants, is seen to have been af­fected by the bear­ish stock mar­ket.

This is be­cause it in­vested in bonds of com­pa­nies on the Kos­daq bourse, the share prices of which have dropped amid mar­ket cir­cum­stances.

Lime cur­rently man­ages 5 tril­lion won in eq­uity funds.

But in­vestors have been re­quest­ing a re­sale of their in­vest­ments af­ter sus­pi­cions arose over Lime ma­nip­u­lat­ing its earn­ings rate.

Ear­lier this month, Lime de­layed the re­demp­tion of three funds, amount­ing to 27.4 bil­lion won.

In Au­gust, the FSS con­ducted an on-site inspection of Lime on al­le­ga­tions of il­le­gal trad­ing prac­tices in­clud­ing “stock park­ing.”

Stock park­ing is a prac­tice of sell­ing shares to an­other party un­der the premise that the orig­i­nal owner will buy them back af­ter a short pe­riod, in­tended to con­ceal a stock’s real own­er­ship to ap­pear to com­ply with reg­u­la­tions.

Lime has de­nied the al­le­ga­tions of il­licit trad­ing prac­tices.


The head­quar­ters of the Fi­nan­cial Su­per­vi­sory Ser­vice in Yeouido, Seoul

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