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Thread: Property firm fined $74,000 over conflict of interest in en bloc deal

  1. #1
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    Default Property firm fined $74,000 over conflict of interest in en bloc deal

    http://www.straitstimes.com/business...n-en-bloc-deal

    Property firm fined $74,000 over conflict of interest in en bloc deal

    May 18, 2016

    Rennie Whang


    Property firm HSR International Realtors has been fined $74,000 over the behaviour of its sales investment team during the unsuccessful en bloc attempt of Thomson View Condominium.

    HSR has also been barred by the Council for Estate Agencies (CEA) from undertaking any collective sale work for a year from April 20.

    The firm had been appointed as marketing agent for the sale in September 2010.

    The condo's collective sales committee (CSC) awarded the tender that month to developer Wee Hur-Lucrum, which was prepared to pay $590 million for the condo.

    But the deal was challenged in the High Court by minority owners.

    It later emerged during the discovery process that HSR had offered incentive payments to four owners to sign the collective sale agreement.

    One was offered an additional 10 per cent of the purchase price of her shop unit in exchange for her signing the agreement for her 10 residential units, two were offered more money and a fourth was enticed by having his wife's business class return air ticket from Europe reimbursed.

    The High Court found in 2013 that HSR had breached its duty as an adviser to the CSC by offering the incentive payments.

    It said this created a conflict of interest on the part of HSR as the agency placed its own interest in collecting the sale commission and the interests of the four owners over the interests of the minority.

    The Court ruled that HSR had breached its duty of transparency by not disclosing the incentive payments to the CSC or the owners.

    The Court also halted the collective sale.

    Investigations by the CEA later revealed that the lead property agent in HSR's sales investment team had approval from the firm's management to offer the incentive payments. The intention was to fund the incentives through the commission from the collective sale.

    On April 20, the CEA's disciplinary committee found that HSR had committed two breaches of acting on behalf of a client without declaring in writing that there was a conflict of interest.

    HSR was ordered to pay a penalty of $37,000 for each count. Disciplinary action was also initiated against the lead property agent who offered the incentive payments but the agent died before disciplinary proceedings were completed.

    Dr Patrick Liew, HSR partner and the majority shareholder since last year, told The Straits Times yesterday that the company has reorganised to "keep only professional salespersons", has introduced a code of honour and now conducts training to ensure salespeople are competent.

  2. #2
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    Default HSR fined, barred from en bloc deals for a year

    http://www.businesstimes.com.sg/real...als-for-a-year

    HSR fined, barred from en bloc deals for a year

    Council for Estate Agencies finds HSR's management had approved lead agent's offer of incentive payments to 4 owners of Thomson View condo

    By Lee Meixian

    [email protected]

    @LeeMeixianBT

    May 18, 2016


    THE Council for Estate Agencies (CEA) has imposed a financial penalty of S$74,000 on real estate agency HSR International Realtors for two counts of acting for a client without declaring a conflict in interest.

    The disciplinary committee of CEA also imposed a condition disallowing HSR from undertaking any collective-sale work for one year from April 20, 2016.

    The subject incident has to do with the S$590 million en bloc attempt of Thomson View condominium, for which HSR was the marketing agent.

    This was the case where the High Court had in 2013 quashed the collective sale and said that HSR's offer of more than S$548,000 in incentive payments to four owners to get a requisite 80 per cent majority amounted to bad faith.

    This included offering a return business class air ticket from Europe to Singapore so that one owner's wife could sign the collective sales agreement.

    After the court's ruling that the four owners who received the payments could not be counted among the requisite 80 per cent majority, the sale was scuppered.

    Now, more than two and a half years later, CEA's investigations revealed that the lead property agent in HSR's sales investment team had approval from HSR's management to offer the incentive payments.

    HSR had intended to pay the incentives using the commission from the collective sale.

    HSR pleaded guilty to the disciplinary committee on April 12, 2016, to the two counts, and was then sentenced and ordered to pay a financial penalty of S$37,000 for each count.

    Disciplinary action was also initiated against the lead property agent who offered the incentive payments, but the agent died before the disciplinary proceedings could be completed.

    Asked why it had taken this long for action to be taken against the agency, CEA said two-plus years is a "typical" duration for the investigations, interviews and disciplinary committee hearing to be completed.

    When contacted, HSR majority shareholder Patrick Liew said: "The key executive officer and management had decided not to continue with the legal proceedings, and had pleaded guilty as they felt it was the most prudent thing to do.

    "The company now wants to move on from the incident and continue working to improve the business amid soft market conditions."

    Mr Liew added that the barring from en bloc deals will not affect the company, as HSR has not done any collective sales after the lead property agent resigned. HSR also does not intend to in the near future.

    "In any case, there will hardly be any en bloc deals in the next 12-24 months," he said.

    In September 2013, the court had found that HSR had breached its duty as an adviser to the collective sale committee by offering the incentive payments.

    These incentive payments brought about a conflict of interest, because the agency had placed its own interest (to collect the commission) and the interests of the four owners over the interests of other owners. One of the four owners owned 10 residential units in the 255-unit condominium.

    The court also ruled that HSR had breached its duty of transparency by not disclosing the incentive payments to the collective sale committee or the other owners.

    The interested buyer at the time was a joint venture between mainboard-listed developer Wee Hur Development and private equity investment firm Lucrum Capital.

    Last year, Mr Liew and his wife had bought the loss-making HSR from 3Cnergy (the renamed HSR Global) for a nominal S$1, after having sold their 66 per cent stake in HSR Global to the investment vehicle of Malaysian tycoon Tong Kooi Ong for S$13.7 million in 2013.

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