No. 28 / 2010
Monday 10 May 2010
Bangkok, May 10, 2010 – The SEC has ordered ING Funds (Thailand) Company Limited (ING Funds) and Siam City Bank Public Company Limited (SCIB), the fund supervisor of T.U. Dome Residential Complex Property Fund (TU-PF) under ING Funds management, to rectify deficiencies in their internal control immediately. SCIB is also ordered to file a claim against ING Funds for compensation for the benefit of TU-PF unitholders.
The SEC’s additional investigation into ING Funds’ operation in response to complaints on non-transparency of TU-PF management, construction of the serviced apartment building and delayed renovation of the plaza area at TU-PF property has revealed the following deficiencies in ING Funds’ operation:
1. ING Funds failed to comply with the TU-PF fund scheme by revising the blueprint of the serviced apartment building to reduce the number of apartment rooms and expand the plaza area without obtaining unitholders’ authorization and consenting to contract revision whereby TU-PF shall accept transfer of the rented assets under-construction (unfinished) and absorb the remaining construction expenses;
2. ING Funds failed to show evidence justifying the selection of potential sub-lessee who, in exchange for lease rights, agreed to absorb the 318 million baht cost of renovating the plaza area and the serviced apartment building. It is noted that the sub-lessee has been established only recently with paid up capital of 1 million baht and has had business connection with ING Funds executives. The company had not yet completed the plaza area renovation as scheduled;
3. ING Funds authorized TU-PF to pay an advance of 10 million baht to the renovator of the plaza area even though TU-PF had no contractual obligation to do so;
4. ING Funds accepted the delivery of dormitories even though the amount of furniture received was less than the amount specified in relevant documents and there was no evidence in support of such acceptance. Therefore, there may be disputes at the end of the 30-year lease term regarding the amount of furniture to be transferred by TU-PF to the lessor;
5. ING Funds and the aforementioned potential sub-lessee jointly took the deposit money for plaza rental even though the sub-lessee had not yet been entitled to the lease right and it was later found that such deposit had not been transferred into the TU-PF’s account;
6. The renovation of the plaza and the serviced apartment building was not completed when TU-PF accepted the buildings in December 2009, resulting in TU-PF’s inability to generate full benefits from such properties. ING Funds, however, had not disclosed this material information to the unitholders until the SEC ordered it to do so.
The SEC findings revealed ING Funds’ deficiencies in two major areas, as follows:
1. ING Funds’ deficiencies in operating processes and internal control are deemed a contravention of the securities law due to (1) failure to review employees’ actions and (2) failure to include review of property fund management in ING Funds’ audit plan between 2007 and 2009;
2. SCIB’s deficient processes regarding (1) supervision of ING Funds to ensure compliance with the TU-PF fund scheme and (2) control of fund asset acquisition and disposal to prevent damage to the fund.
The SEC thus ordered ING Funds and SCIB to correct their internal control systems immediately and, by virtue of Section 127(5) of the Securities and Exchange Act of 1992, instructed SCIB to claim for compensation from ING Funds for the benefit of the unitholders. Further SEC inspection is underway to ensure appropriate actions will be taken against any associated wrongdoings.
Earlier, the SEC imposed probation and fine on Maris Tarab, managing director of ING Funds and fund manager of TU-PF, and fined ING Funds for failing to comply with the TU-PF fund scheme. SCIB was also fined for failing to perform its duty as fund supervisor to ensure ING Funds’ compliance with the fund scheme.
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