`Investment Trust Company Should Compensate Customers for Losses from Its Exposure to Bonds Issued by Daewoo Corp.`

It was ruled yesterday that the Korea Investment Trust Company (KITC), which put more than 10 percent of bonds issued by Daewoo Corp. by violating the regulation in 1999, should compensate customers for losses from its exposure to bonds issued by Daewoo Corp.

The dispute-settlement committee under the Financial Supervisory Commission (FSC) ruled yesterday that the KITC should pay Mr. Park, who filed a complaint, 3.2 million won in compensation because the KITC seemed to intentionally violate the regulation during the Daewoo crisis, which stated that `a company cannot put more than 10 percent of bonds issued by the same company in the same fund assets`. In relation to the ruling, two fund companies were confirmed to have violated the regulation, and 5,000 victims and 3 billion won of losses are estimated. A flood of damage suits against domestic investment trust companies by customers who suffered losses because of the firms` illegal activities is expected.

The FSC said that ``the KITC`s mid-term funds bought bonds issued by Daewoo Corp. amounting to 10.71 percent of 100 billion won fund assets in August, 1999, and the KITC bought bonds issued by Daewoo Corp. amounting to 25.02 percent of 200 billion won fund assets.``

A FSC official said that ``while investors were demanding the repurchase of the beneficiary certificates, the KITC`s fund managers bought the bonds, issued by Daewoo Corp., from a weak fund with money from a strong fund because some of the funds were short in cash.``

The KITC said that ``having considered the economic situation at that time, it was an unavoidable choice.`` The KITC said it would soon file a lawsuit against the ruling with a Seoul court.

Mr. Park deposited 20 million won in the mid-term fund of the KITC in Soowon in February, 1999, and 50 million won in the short-term fund. However, he lost 3.2 million won because the fund was excessively invested in the bonds issued by Daewoo, and then, requested the FSC for the dispute-settlement.

Kim Seung-Ryun srkim@donga.com