The Financial Supervisory Service is launching a high-intensity inspection into Mirae Asset Securities over improper sales practices at its flagship branches. It is expected to focus on whether there were inappropriate sales activities, such as urging high-net-worth individuals to register as professional investors during the SpaceX offering process.
According to the financial investment industry on the 30th, the Financial Supervisory Service will conduct an ad hoc inspection next month targeting Mirae Asset Securities' flagship branches. These branches are where the firm's ultra-high-net-worth clients are concentrated.
Financial authorities are said to be closely examining the sales procedures for high-risk financial investment products and the adequacy of internal controls. In particular, they are expected to focus on whether there were problems in sales conduct during the SpaceX public offering subscription process in Jun.
At the time, Mirae Asset Securities accepted IPO subscriptions from individual and corporate professional investors. While a general public offering for ordinary retail investors had initially been expected, most observers said the firm opted for a professional-investor offering in light of practical constraints such as the listing candidate's filing of a securities registration statement.
The issue is the possibility that, in this process, Mirae Asset Securities' flagship branches encouraged ordinary retail investors to register as professional investors. Registration as an individual professional investor was significantly eased in 2019 through a system overhaul, loosening requirements for income, assets, and investment experience. The reviewing body was also changed at the time from the Korea Financial Investment Association to financial investment businesses with assets of at least 100 billion won.
However, under current law, financial companies cannot proactively solicit general investors to register as professional investors. Accordingly, investors must submit documents proving they meet the professional-investor requirements on their own. Financial authorities are also said to be paying attention to the increase in professional-investor registrations during the period when Mirae Asset Securities conducted the SpaceX IPO subscription.
The results of this flagship-branch inspection are expected to affect the level of sanctions related to the SpaceX offering "zero-share allocation" incident. If inappropriate sales practices are confirmed—centered on the flagship branches—such as encouraging general investors to register as professional investors, the severity of related sanctions could increase.