An arbitration panel of financial authorities has advised NH Investment and Securities to pay full compensation to some investors over a hedge fund scandal involving the now-defunct Optimus Asset Management.

The Financial Supervisory Service(FSS) said on Tuesday that the panel decided the previous day to annul two contracts and recommended that NH return the principal to those investors, citing that it promoted the Optimus fund without properly explaining its risks.

This is the second time such a legal principle has been applied in a financial investment product dispute, following another that involved the Lime Asset Management scandal.

The Optimus scandal centers on allegations that the company caused hundreds of billions of won in losses after investing in risky assets, instead of relatively safer public institutions as it promoted when soliciting one-point-two trillion won from investors.

Brokerage firm NH has been recommended to return the principal to investors for falsely promoting the fund after withdrawals were frozen due to liquidity problems.

If NH Investment accepts the panel's advice, about 300 billion won will be returned to investors.