Financial authorities will expand the scope of small public offerings to 3 billion won from the current 1 billion won to ease disclosure burdens on small and venture companies. In addition, they will ease related regulations by including venture capital (VC) funds in the category of institutional investors excluded from the headcount for solicitation of subscriptions.
The Financial Services Commission said on the 6th that it will proceed with a legislative notice and a rules change notice from the 7th to on the 18th of next month, centered on these measures.
First, the threshold for small public offerings will be raised to less than 3 billion won from less than 1 billion won. Since it was set at 1 billion won in 2009, the standard has remained unchanged, but there has been an assessment that expanding the scope of small public offerings is necessary in light of the recent growth of the public offering market and the size of paid-in capital increases per deal.
The Financial Services Commission (FSC) revealed its plan to raise the small public offering threshold in a work report in Dec. last year and has since moved to amend the Enforcement Decree of the Financial Investment Services and Capital Markets Act. For small public offerings, the volume of disclosure documents is about half that of a securities registration statement and no acceptance process by financial authorities is required, so the burden is lighter for corporations.
The Financial Services Commission (FSC) also plans to revise the small public offering disclosure form so that investment risk information is fully reflected, to protect investors and maintain market order.
However, for fractional investment securities (non-monetary trust beneficiary securities) that were institutionalized after a sandbox, issuers must disclose a securities registration statement even when the offering is less than 3 billion won. This imposes the same conditions as during the sandbox operation, taking into account that fractional investment securities are in an early stage and have nonstandard characteristics due to the diversity of underlying assets. The policy is to induce more transparent disclosure of fairness in valuation of underlying assets, operating methods, revenue structure, and investment risks.
Regulations on public offerings for venture investment partnerships will also be eased. Under the current system, when solicitation of subscriptions is made to 50 or more retail investors, it is deemed a "public offering," imposing obligations such as filing a securities registration statement. In this process, banks, insurers, securities firms, and collective investment schemes are classified as professional investors and excluded from the headcount.
However, VC funds such as venture investment partnerships and new technology business investment partnerships have been classified as retail investors despite being similar in nature to collective investment schemes. Due to the characteristics of partnerships, each partner had to be counted as an investor, leading to numerous cases in which corporations unintentionally violated public offering regulations.
The Financial Services Commission (FSC) explained that for VC funds such as venture investment partnerships and new technology business investment partnerships, the general partner (GP) has sufficient expertise, so they will be excluded from the investor headcount for public offering regulations. This is expected to reduce the possibility of violating public offering regulations and ease VC regulatory burdens.
An official at the Financial Services Commission (FSC) said, "After a notice period through May 18, we plan to complete the revisions within the first half of the year."