Hua Nan Investment Trust Co (華南永昌投信), the asset management arm of Hua Nan Financial Holdings Co (華南金控), has written off deferred tax assets linked to its exposure to the long-running Private Equity Management Group (PEM) fraud case, citing little chance of recovery.
The move pushed the unit’s accumulated losses to NT$156 million (US$5.13 million) as of Aug. 31, exceeding half of its paid-in capital, Hua Nan Financial said earlier this week.
Local financial regulations stipulate that the breach disqualifies the company from issuing new funds unless it receives a fresh capital injection.
Photo: Chen Mei-ying, Taipei Times
The losses stem from Hua Nan Investment Trust’s earlier involvement in the PEM investment scandal, in which Taiwanese investors lost hundreds of millions of New Taiwan dollars.
The case, dubbed “Taiwan’s Madoff scandal,” dates to 2006 and 2007, when Taiwanese-American financier Danny Pang (彭日成) marketed structured notes in Taiwan, promising principal protection and annual returns of 6 to 8 percent.
The products were distributed through several local and foreign financial institutions, including Hua Nan Commercial Bank (華南銀行), Standard Chartered Bank, Taichung Commercial Bank Co (台中商銀), Bank SinoPac (永豐銀行) and Hua Nan Investment Trust.
To address the erosion of capital, Hua Nan Financial said that it plans to carry out a capital reduction followed by a capital injection to boost the subsidiary’s net asset value.
The process is expected to be completed by the end of this year, it said.
The recapitalization would ensure the trust’s net worth returns to NT$10 per share, the parent company said, adding that the one-off losses would not affect the subsidiary’s operations or its business development.
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