October 30, 2024

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Meritz Secutiries, one of South Korean investors of US commercial building Safeco Plaza, is facing penalties by Seoul’s financial watchdog, according to officials on May 29.

This came after another Korean investor involved -- Vestas Investment Management -- was slapped disciplinary measures on May 23.

The Financial Supervisory Service alleges that Meritz and Seoul-based asset manager Vestas Investment Management violated rules stipulated in Korea’s Financial Investment Services and Capital Markets Act.

“An irregularity was spotted in a transaction between Meritz Securities and Vestas Investment Management,” a high-ranking official in charge of asset management investigations told The Investor.

The FSS plans to launch an investigation into Meritz Securities and has notified the investment bank as such.

Courtesy of Cumulus Clouds

In 2016, Meritz Securities acquired shares of Safeco Plaza by investing in a fund run by Seoul-based Vestas Investment Management in a sell-down contract. This came after Munich-based GLL Real Estate Partners and Vestas Investment Management in 2016 bought the 70,048-square-meter office building in Seattle, Washington, for $387 million.

Due to the lackluster performance of Safeco Plaza, Meritz demanded a non-Korean investor to compensate for the losses and took corresponding legal action in March 2017 in accordance with the contract. Vestas, a third-party in the deal whose 15.2 percent stake is owned by Meritz, paid 400 million won ($334,700) on behalf of the non-Korean investor in May that year.

But the FSS said Meritz took “unjust profit” through the transaction, given its position as a major shareholder of Vestas. As a result, Vestas, along with a company executive and an employee, was issued a warning by the FSS on May 23. It was also slapped with a 40 million won fine.

Meritz might also be subject to penalties for the violation, according to FSS.

“We will take disciplinary action against Meritz after conducting a comprehensive probe to find any further irregularities,” another high-ranking FSS official handling financial investment investigations told The Investor.

Meritz Securities could not be reached for comment.

By Son Ji-hyoung (consnow@heraldcorp.com)