The liquidation of DLS, a trade finance fund worth 100 billion won, sold by KB Securities is delayed. There are more than 200 investors in the financial product. They have not returned the principal, let alone the proceeds, for the ninth month since the redemption was stopped in April of last year.
Trust and invest in safe trade finance funds
Repurchase stopped in April last year due to corona crisis
Liquidation procedure aesthetic, money tied for 9 months
Investor “I believed in 4% annual profit”
According to KB Securities on the 11th,’KB Able DLS Trust (TA Insured Trade Finance)’ has expired in April of last year. However, the money entrusted by investors could not be returned. On June 15 last year, the liquidation process was initiated.
Trade Finance Fund DLS. Graphic = Reporter Kim Kyung-jin [email protected]
The structure of the financial product is rather complicated. First of all, TransAsia (TA), an asset management company in Hong Kong, created a trade finance fund that invests in trade receivables of import and export companies. NH Investment & Securities issued a securities called DLS using this fund as an underlying asset. KB Securities sold this to investors in 2019. If the trade transaction was carried out normally, the annual yield could be expected to be around 4%.
However, due to the novel coronavirus infection (Corona 19), the recovery of funds has been braked. When companies that lent money from the fund fell into a liquidity crisis, the manager eventually decided to liquidate the fund. This is a procedure in which the asset value of the fund is evaluated through due diligence by an accounting firm (Hong Kong Bakery), and then the assets contained in the fund are sold and organized. Only when the results of the accounting firm’s due diligence come out, it is possible to know how much the investors are losing.
Looking at the data that the JoongAng Ilbo received from KB Securities customers, the’liquidation procedure schedule’, TA was planning to complete the due diligence by early September of last year. Following legal review, he promised to end the liquidation process on October 12 last year. However, the fund was not liquidated as planned.
TA put forward that it is a product in which insurance companies with an international credit rating of A- or higher invest (loan) only on assets that have guaranteed principal. As the situation broke out, the insurance function did not work properly. Insurance companies were reluctant to pay insurance money because Corona 19 was a natural disaster. Eventually, legal disputes over insurance payments became inevitable. NH Investment & Securities, which issued DLS on the basis of this fund, was also a result of not accurately verifying the details of insurance.
A private banker (PB) of a financial company who requested anonymity said, “Because of the nature of a private equity fund, we do not disclose whether or not the fund is properly insured. You have to trust the manager entirely.” He pointed out that “the problem is that products with high investment risk are sold to consumers without thorough verification.”
About half of the financial product investors are known to be bank customers with stable investment tendencies. This is because banks and securities companies have attracted customers through KB Financial Group’s complex stores with one roof.
An official at KB Securities said, “This product (trade finance fund DLS) was rumored to be a product that could safely generate 4% profits, and competition for attracting was fierce at the beginning.” He estimated that more than half of the customers who were introduced by bank PBs signed up through employees of securities companies in the same complex.
The financial sector believes that the reason why bank employees introduced customers to affiliated securities company employees to induce product subscriptions was to receive additional points from the key performance indicators (KPIs) for each branch. KB Finance increased the number of complex stores from 14 in 2015 to 81 at the end of September last year.
Mr. K (65), who invested 300 million won in the financial product in 2019, said, “I signed up because I said that I can safely get 4% profits even if I leave it for just one year.” He said, “It’s a retirement fund invested secretly by my wife, and it burns day by day. I want to get the principal back as soon as possible.” An official from NH Investment & Securities said, “We are considering various measures such as litigation review because the (fund’s) liquidation procedure did not go as planned.”
Reporter Yeom Ji-hyun [email protected]