[비즈한국] It has been confirmed that former LB Asset Management CEO Kim Hyung-seok, who resigned abruptly last year, and the company have lost their lawsuit against financial regulators to overturn the sanctions imposed on them. When it was discovered that Kim had continued to serve as CEO despite being disqualified from holding executive positions due to past sanctions, financial authorities issued penalties, including an institutional warning for LB Asset Management and a demand for Kim’s dismissal. While LB Asset Management and Kim argued that they "had no intention to conceal" the information, the court did not accept their claims.
LB Asset Management is a firm specializing in alternative investments such as real estate and social infrastructure. As of the end of 2023, its total assets under management reached 5.7 trillion won. A subsidiary of the LB Group, LB Asset Management is classified as a company affiliated with the pan-LG family. Shareholders of the LB Group, which owns 45% of LB Asset Management, include members of the LG family, such as Koo Bon-cheon, Senior Vice Chairman of LB Investment309960 (28.27% stake), his younger brother Koo Bon-wan, CEO of LB Hunet (26.65%), and Vice Chairman Koo’s eldest son, Koo Sang-mo (10.77%). Vice Chairman Koo Bon-cheon is a grandson of LG Group founder Koo In-hwoi. Koo Sang-mo (13.1%) and CEO Koo Bon-wan (12.1%) are also listed among the shareholders of LB Asset Management.
Former CEO Kim Hyung-seok co-founded LB Asset Management in 2016 through a joint investment with the LB Group. He is also a major shareholder, holding a 20% stake in the company (112,000 common shares). A former executive vice president of the real estate division at Mirae Asset Global Investments, Kim led LB Asset Management as CEO starting in July 2016.
Last year, Kim stepped down from his position unexpectedly. At the time, he had one year remaining in his term after being reappointed for a third term in 2022. On May 24, 2024, LB Asset Management publicly announced Kim's dismissal alongside the appointment of new co-CEOs Lee Jung-hwan and Kim Do-han. The company stated the reason for Kim’s resignation was his "dismissal due to measures taken following a Financial Supervisory Service (FSS) inspection."
Kim’s resignation followed the revelation that he had been serving consecutive terms as CEO despite being ineligible for the executive role. While working as an executive vice president at Mirae Asset Global Investments from 2016 to 2017, it was discovered by the FSS that Kim had used borrowed-name accounts for stock trading and failed to notify the company of his trade details. Consequently, in March 2018, he received a three-month suspension as a disciplinary measure against "illegal or improper acts by a retired employee."
Under the Capital Markets Act, employees of financial investment companies must trade investment products under their own names and report trade details to their firm on a quarterly basis. Relatedly, the Enforcement Decree of the Act on Corporate Governance of Financial Companies restricts the eligibility period for executives based on the type of sanctions received. A suspension results in a four-year disqualification, and a pay cut results in a three-year period. In Kim’s case, he was ineligible to serve as an executive for four years starting from March 2018.
However, Kim continued to serve as CEO of LB Asset Management. During the CEO appointment processes in March 2019 and March 2022, he submitted a disciplinary record confirmation form to LB Asset Management, but he checked "None" under the section for "disciplinary actions taken during tenure." This is why the company was unaware of the sanctions against him.
These facts were uncovered during an FSS inspection last March. The Financial Services Commission (FSC) issued an institutional warning and a fine of 62.4 million won to LB Asset Management for appointing and failing to disclose an ineligible executive, and ordered the dismissal of Kim. In April of the same year, Kim and LB Asset Management filed an administrative suit to revoke the financial authorities' sanctions, claiming they had no intention of concealing the history of sanctions or the lack of qualifications.
However, the court did not accept these arguments. On December 19, 2024, the 5th Division of the Seoul Administrative Court (Presiding Judge Kim Soon-yeol) dismissed all claims filed by LB Asset Management and Kim against the FSC and the FSS Governor seeking to overturn the dismissal demand and institutional warning.
The court ruled that Kim’s actions were intentional. It concluded that Kim was aware of the sanctions and, given his experience in the financial industry, could not have been ignorant of the fact that they constituted grounds for executive disqualification. The court also determined that his submission of a confirmation form stating he had no disciplinary record was intentional, as he had obtained the confirmation document before the record of his disqualification was officially processed. The court also highlighted the issue that Kim, as a director of LB Asset Management, had directly exercised his voting rights to appoint himself as CEO.
Regarding LB Asset Management, the court ruled that the company must take responsibility for violating the law regardless of whether there was malicious intent. The court stated, "Even if there was no intent to conceal the lack of eligibility, an institutional warning is an administrative sanction against acts that undermine the legislative purpose of ensuring sound management and financial market stability," adding, "Since the company allowed [Kim] to appoint his unqualified self as CEO while in his position and publicized it, it is appropriate for the company to bear the responsibility." The court emphasized that the public interest in restoring fairness to the financial market outweighs the disadvantages caused by the institutional warning.