법무법인(유한) 율촌 | Yulchon LLC

Yulchon's Dispute Resolution Group and Corporate & Finance Group successfully represented Woori Asset Management in the appeal of a judgment entered in a lawsuit filed by investors in "Woori2Star Derivative Investment Fund KW-8" against the asset manager, distributor and trustee.
 

The fund invested mostly in OTC derivatives linked to common shares of KEPCO and Woori Finance Holdings. The fund had agreed to trade up to KRW 20 billion worth of OTC derivatives through BNP Paribas and solicited investors with a prospectus indicating BNP Paribas as the counterparty to OTC derivatives transactions. As the fund amount rose to approximately KRW 28 billion, Woori Asset Management had to change the counterparty to Lehman Brothers, which went bankrupt in September 2008. Investors subsequently filed three lawsuits in three different courts against Woori Asset Management.
 

The issue in all three cases was whether Woori Asset Management exercised the duty of care of a prudent manager when it changed the counterparty to Lehman Brothers, especially since Lehman Brother's credit rating was lower than that of BNP Paribas, and Woori Asset Management did not obtain the investors’ consent before changing the counterparty. One trial court ruled in favor of Woori Asset Management, but the other two decided against it.

On appeal, Yulchon's arguments questioned the binding force of the prospectus, raised the importance of asset managers' discretion, pointed out differences between the prospectus and the trust agreement, and demonstrated the intent the parties creating and investing in the fund. The court of appeal ruled that:
 
It cannot be deemed that the counterparty to the OTC derivatives transaction with respect to the fund was "confirmed" to be BNP Paribas, and the amendment to the prospectus does not require a resolution adopted at the beneficiaries' meeting or the consent of investors under the old Indirect Investment Asset Management Business Act. Therefore Woori Asset Management did not violate the duty of care of a prudent manager by changing the counterparty.
The investors tried to appeal to the judgment, but the appeal was rejected by the Supreme Court.
 

This case has drawn wide attention in the asset management industry. The court affirmed that not everything in the prospectus has binding force and that asset managers have some discretion to manage the fund differently from what is stated in the prospectus. This judgment will greatly affect similar cases instituted by other investors in the fund.