South Korea’s financial watchdog has informed top executives at three securities firms of its plan to impose disciplinary action over the misselling scandal involving Lime Asset Management, according to Financial Supervisory Service officials and industry sources Wednesday.

The FSS gave prior notice to Shinhan Investment, KB Securities and Daishin Securities on Tuesday that they will be reprimanded for misleading consumers by providing them with inaccurate information about Lime’s products.

The disciplinary action, if imposed, would ban the three CEOs from seeking another term and prevent them from getting new jobs in the nation’s finance industry for up to five years, they said. A separate disciplinary action will be taken against the companies, they added.

The market regulator will hold a sanctions review committee on Oct. 29, industry officials said, without providing further details.

Officials at the three firms, however, denied reports of FSS giving them advance notice.

The fiasco surrounding Lime Asset escalated earlier this year. The hedge fund manager has been accused of either falsely or insufficiently stating key information about its three funds -- Tethys II, Pluto FI D-1 and Pluto TF-1.

In October last year, the company froze withdrawals worth 1.66 trillion won ($1.43 billion), citing liquidity shortage. Six months after, Lime ex-CIO Lee Jong-pil and one of the fund backers, Kim Bong-hyun, who allegedly executed corporate raids while misappropriating Lime’s funds, were nabbed by prosecutors.

A meeting of the FSS sanctions committee on the matter of taking disciplinary action against Lime is reportedly scheduled on Oct. 20. After slapping punitive measures on the hedge fund firm and the three brokerages, the FSS is likely to impose disciplinary actions against lenders also linked to the scandal, according to market observers.

By Jie Ye-eun (yeeun@heraldcorp.com)