As the real estate slump fuels concerns over private equity fund failures, a series of principal losses and dividend suspensions have occurred in real estate funds and privately placed bonds sold by IBK Securities. With affected investors filing complaints, the Financial Supervisory Service has launched a full fact-finding probe.
According to the securities industry on the 18th, six products sold by IBK Securities—real estate funds and privately placed bonds—have been named in complaints filed with the Financial Supervisory Service (FSS).
A representative product at the center of complaints is the Milestone General Real Estate Private Investment Trust No. 7, set up in 2019. Created to purchase the Homeplus Seongan branch in Cheongju, North Chungcheong, the fund saw rent reduced last year after Homeplus Co., a key tenant, filed for corporate rehabilitation proceedings, and dividends are currently not being paid smoothly.
The situation is more serious for privately placed bonds with a bridge-loan profile. The KW MH 7th Private Bond, which invested in an officetel development in Tanbang-dong, Daejeon, and the BK Seohyeon First 2nd Private Bond related to an office development in Seohyeon-dong, Bundang, have incurred—or are expected to incur—total losses of invested capital due to auction sales of the project sites.
In addition, complaints continue over unpaid rent and delayed sales at locations such as the Yeoju logistics center.
Investors who filed complaints are alleging the possibility of "inadequate sales" practices during the sales process. In particular, individual investors who signed up through bank–securities hybrid branches said, "We subscribed based on the credibility of Industrial Bank of Korea (IBK) and were told at the time that the products were as safe as bonds."
Corporate investors also raised strong objections to the securities firm's post-default response and called for a strict investigation by the Financial Supervisory Service (FSS).
IBK Securities maintains that there were no issues in the sales procedures. A representative of IBK Securities said, "Based on what we have identified so far, we have found no evidence of inadequate sales in the process of selling the products," adding, "However, we are fully cooperating with the Financial Supervisory Service (FSS) in its fact-finding."
The Financial Supervisory Service (FSS) plans to closely examine whether guidelines were followed at the time of sale in response to the complaints.