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Shinhan Investment CEO steps down over Lime scandal, derivatives misselling

Shinhan Investment CEO Kim Byung-cheol (Shinhan Investment)
Shinhan Investment CEO Kim Byung-cheol (Shinhan Investment)

Shinhan Investment CEO Kim Byung-cheol resigned on Friday, taking responsibility for the brokerage’s role as a key sales channel for now-frozen Lime Asset funds and derivatives that caused huge losses for investors.

“In order for the company to win back customer trust and get back on track to normalize business, it would be right for me to take responsibility and step down,” Kim said during the company’s board meeting, according to Shinhan.

“I have been delaying this statement to prepare for measures to minimize losses,” he added.

Shinhan Investment was one of the four financial companies that signed a total return swap contract with hedge fund company Lime Asset Management, concerning the four controversial mother funds that suffered liquidity crunches.

Under a TRS contract, the financial institution actually buys assets and holds legal ownership over them while the hedge fund pays commissions to its partner. It helps fund operators like Lime Asset enjoy leverage.

Prosecutors last month launched a probe into Lime Asset and Shinhan Investment after the watchdog Financial Supervisory Service accused them of covering up potential losses from investors.

On top of it, Shinhan sold a combined 379.8 billion won ($306 million) worth of “German Heritage” derivatives-linked securities to its customers. The product is based on funds managed by Singapore’s Banjaran Asset Management that invest in German historic site remodeling projects conducted by German Property Group, formerly Dolphin Trust.

But the return on investment now looks bleak due to the repeated extension of maturity caused by the German authorities’ apparent reluctance to approve the project and other complications within between related parties.

Shinhan Financial Group’s board plans to draw up lists for potential candidates as soon as possible.

Kim was appointed CEO of the brokerage in March 2019.

By Jung Min-kyung (mkjung@heraldcorp.com)
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