As concerns grow over private equity fund risks amid a real estate slump, a string of principal losses and dividend suspensions has emerged across real estate funds and privately placed bonds sold by IBK Securities. With affected investors filing complaints, the Financial Supervisory Service has launched a full-fledged fact-finding probe.
According to the securities industry on the 18th, six IBK Securities products subject to complaints filed with the Financial Supervisory Service (FSS) include real estate funds and privately placed bonds.
A representative product under complaint is the Milestone General Real Estate Private Investment Trust No. 7, launched in 2019. Created to acquire the Homeplus Seongan branch in Cheongju, North Chungcheong Province, the fund saw rents cut last year after major tenant Homeplus Co. applied for corporate rehabilitation proceedings, and dividends are currently not being paid smoothly.
Privately placed bonds with bridge loan characteristics face even more serious conditions. The KWMH 7th privately placed bond, which invested in an officetel development in Tanbang-dong, Daejeon, and the BK Seohyeon Jeil 2nd privately placed bond related to an office development in Seohyeon-dong, Bundang, have suffered, or are expected to suffer, total losses of principal due to auction awards of the project sites.
In addition, complaints continue over unpaid rents and delayed sales involving funds tied to the Yeoju logistics center and the Yongsan automotive complex.
Investors who filed complaints are raising the possibility of "inadequate sales" during the selling process. In particular, individual investors who subscribed through combined bank-securities branches said, "We subscribed trusting the credibility of Industrial Bank of Korea (IBK), and we were told at the time that the products were as safe as bonds."
Institutional investors also lodged strong objections to the securities firm's post-crisis response and called for a rigorous probe by the Financial Supervisory Service (FSS).
IBK Securities said there were no issues in the sales procedures. A representative at IBK Securities said, "So far, we have not identified any inadequate sales in the course of selling the products," adding, "We are, however, faithfully cooperating with the Financial Supervisory Service (FSS) fact-finding investigation."
The Financial Supervisory Service (FSS) plans to closely review whether guidelines were followed at the time of sale in response to the complaints.