South Korea's Financial Regulator Orders NH Investment & Securities to Pay 60-70% Compensation on Bond Wrap Losses

According to the Financial Supervisory Service (FSS), on June 29, the dispute mediation committee ordered NH Investment & Securities to compensate two investors 60-70% of their losses from bond wrap mismanagement, marking the first time such compensation standards were set for this product type. The committee determined specific payments of 1.26 billion won and 390 million won respectively.

The committee calculated damage amounts by comparing expected redemption amounts based on target returns against actual returns received, rather than only counting principal losses. It also found violations of fiduciary duty in NH's practice of purchasing corporate commercial papers and bonds at prices above market value. However, conflicting court rulings complicate the outlook: one case ruled partially in favor of investors while another dismissed claims entirely. NH Investment & Securities has until July 10 to decide whether to accept the settlement; rejection would allow investors to pursue civil lawsuits with uncertain compensation standards.