Securities companies buy 5-20 billion won each, and then incorporate them into personal trust and corporate accounts
Some securities companies may have sold incompletely to individual customers.
It was confirmed on the 6th that the Financial Supervisory Service (FSS) has started to identify risks related to the Funding of the Legoland Real Estate Project (PF) Asset Backed Securities (ABCP) in Gangwon Province targeting securities companies.
Securities firms have been known to buy the ABCP in large numbers and incorporate it into personal trust accounts and corporate accounts, or sell some directly to individual customers, raising concerns about loss to individual investors.
According to the financial investment industry, securities companies recently reported to the Financial Supervisory Service the status of risk exposure (exposure) caused by ABCP worth 250 billion won, which became a problem because Gangwon-do did not fulfill its debt guarantee promises .
To finance the construction of Legoland in 2020, GJC established Ione First Car, a special purpose company, and issued ABCP worth 25 billion won.
This amount was guaranteed by Gangwon-do, and BNK Investment & Securities, in charge of the arranger, took over the entire amount and sold it to securities companies in the market.
Most of the major domestic securities companies, such as Mirae Asset, Korea Investment, NH Investment, Samsung, KB, Shinhan Investment, and Daishin, are known to have bought this amount for between 5 and 20 billion won , respectively.
There is a possibility that these quantities have flowed into customer accounts as individuals.
In the industry, securities companies are known to manage Legoland-related ABCP by incorporating them into trust accounts or corporate customer accounts that manage funds entrusted to individual customers.
A securities company official said, “Most securities companies are known to operate in private trusts.”
An official from Securities Company B said, “We also receive about 20 billion won in volume, but we know that it is not in our personal account, but is incorporated to corporations.”
Of the total 250 billion won, 190 billion to 200 billion won is said to have been invested by less than 10 securities companies through accounts such as trusts.
A trust account in a securities company is a money-carrying product entrusted to corporations or individuals with large sums of money.
Some even say that one of these brokerage firms made direct retail sales to individual investors.
An official from Securities Company C said, “It is impossible to disclose whether or how much the product was sold to individual customers without the customer’s consent.” he said.
From an individual investor’s point of view, it is very likely that they agreed or bought the trust account because of the high rate of return without sufficiently recognizing the complex structure and risks of ABCP products.
It can be debatable whether securities firms have breached the management guidelines if they incorporated assets without the customer’s consent when they managed them through a customer trust account.
In addition, should retail sales be made to individual customers, the possibility of incomplete sales without adequate explanation is carefully raised.
As a result, due to the ABCP incident involving Legoland, individual investors who invested in products through securities companies rather than securities companies themselves are more likely to be hit directly.
However, an official from Securities Company D said, “If the creditors file a lawsuit against Gangwon-do, it is very likely to win, so it is not a situation to be very worried about.”
However, if Gangwon-do goes through the rehabilitation procedure for GJC as planned, it seems that investor losses will be inevitable.
When the court decides to start the rehabilitation procedure, restructuring procedures such as the sale of assets will proceed.
Additionally, if the sale operation is protracted, creditors may find it difficult to recover funds from a significant number of organizations, which may lead to litigation beforehand.
The creditors decided to hold a meeting of creditors as early as next week to prepare countermeasures such as legal proceedings.
A BNK Investment and Securities official said, “We are coordinating views with creditors, and we intend to hold a general meeting next week at the latest.”
/happy news
