SEOUL, July 1 (Yonhap) -- A committee of South Korea's financial regulator said Wednesday that banks and brokerages are advised to fully return the principal of investments to consumers over missold funds.
The decision by the Financial Disputes Settlement Committee under the Financial Supervisory Service means investors -- 500 individual investors and 58 corporate investors -- can receive up to 161.1 billion won (US$134 million) in total from banks and brokerages if the mediation process goes well.
Investors, banks and brokerages can enter into mediation if they accept the committee's decision within 20 days after being formally informed of mediation.
It is the first time the committee has decided that financial companies need to return 100 percent of the principal of investments to consumers.
The misselling of investments by banks and brokerages came as local asset manager, Lime Asset Management Co., either falsely or insufficiently stated key information of their fund products.
It also said the banks and brokerages misled consumers by providing Lime Asset Management's inaccurate information to consumers without thoroughly checking it.
The committee also said that investors' contracts with four funds sold after November 2018 should be canceled as it is difficult to see that investors are responsible for gross negligence.
In April, the Seoul Southern District Court issued a warrant to detain Lee Jong-pil, a former vice president of Lime Asset Management, over his alleged involvement in the firm's cover-up of massive losses and subsequent suspension of fund redemption worth an estimated 1.6 trillion won.
The investigation has prompted spooked investors to scramble to withdraw their money. In October, the company froze withdrawals, citing an inability to liquidate enough assets to meet the redemption requests.