Financial Supervisory Service requests 3 confirmations before investment
500 billion multi-level illegal sales
“It is a recommendation of more than 50 people, but if there is no report, it is suspicious”
Verification of “imminent listing” based on the organizer and preliminary examination.”
The Financial Supervisory Service called for caution as a series of unlisted stock investment recommendations that attract investors by saying “Nasdaq listing is imminent” and “big profits are coming soon.” It is said that the company information, the substance of the seller, and the actual preparation for listing should be checked with objective data.
According to the Financial Supervisory Service on the 8th, unlisted stocks often have more restrictive disclosure obligations than listed stocks, making it difficult to check their financial status and business details, and the trading infrastructure and participants are also limited. If the distribution transaction volume is small, it is difficult to sell at the desired time, and if the listing is delayed or canceled, the investment may not be recovered for a long time or may suffer a large loss.
In fact, Group A, a multi-level stock sales organization, was caught selling about 500 billion won worth of unlisted stocks to ordinary investors for several years. They acquired new shares through a third-party allocation paid-in capital increase or acquired shares held by executives of unlisted companies at low prices and sold them to many investors at high prices through phone calls and KakaoTalk. However, it has never submitted a securities report that can confirm investment risk. The sales corporations were taken for violating the Capital Markets Act, and the group’s representatives were sentenced to imprisonment and fines, and a higher court is currently under way.
These companies used names that were easily mistaken for financial companies or professional investment institutions, such as “OO Partners,” “OO Investment,” and “OO Venture Investment,” and were in charge of finding and selling investment companies, but they were not actually authorized by financial authorities. The Financial Supervisory Service asked the Financial Consumer Information Portal (FINE) to check whether it is a financial company in the institutional sector if it received an investment recommendation from an unfamiliar company.
In some cases, the representative of unlisted pharmaceutical and bio companies sold about 5 billion won worth of holdings to general investors. He stressed that the product under development is about to be approved by the U.S. Food and Drug Administration (FDA) as an innovative anticancer drug and will soon be listed on KOSDAQ. However, under the Capital Markets Act, investment manuals were not used, and the company did not proceed with necessary procedures such as submitting securities reports. At that time, the company had a high risk of investment, including operating losses, but investors lost a lot of money by investing without being provided sufficiently with relevant information.
In particular, the Financial Supervisory Service stressed that illegal investment recommendations should be suspected if investment recommendations are being made for more than 50 people and DART does not confirm securities reports or small public offering disclosure documents. In DART, you can check the company’s sales, net income, business details, and shareholder status through business reports and audit reports. If even the audit report is not searched, it could be a small company that does not meet external audit standards, which could take a considerable period of time to be listed.
It should also be verified by the actual IPO process, not by words, whether it is “imminent to be listed.” If the appointment of a representative company or a transfer agency contract has not been signed, it is in the early stages of preparation for listing, and it is difficult to say that listing is imminent. The Securities Information Portal (SEIBro) of Korea Securities Depository can check whether the transfer agency and electronic stock certificates are used, and the KIND of Korea Exchange can check whether they apply for a preliminary listing examination. The Financial Supervisory Service asked for reporting to call centers 1332 or illegal financial reporting centers if it is suspected of soliciting unauthorized companies or a large number of investors without disclosure.
