The Financial Supervisory Service urged investors in unlisted stocks to verify company information and the identity of those soliciting investments before investing. Interest in Korea's stock market has been rising recently, boosting demand for unlisted shares in hopes of high revenue before listing, but the agency said investors are suffering losses due to solicitations touting false or exaggerated listing plans.
On the 7th, the Financial Supervisory Service stressed that investors in unlisted stocks need to check information on ▲the company ▲the solicitor of unlisted stock investments ▲the listing stage.
The Financial Supervisory Service (FSS) first recommended checking information on the Daesang company of investment via the Financial Supervisory Service's electronic disclosure system (DART). It said investors should be cautious if there are no materials such as business reports or audit reports that allow them to verify the company's financial condition and business details, or if investment solicitations are underway but a securities registration statement or small public offering disclosure documents cannot be found.
It also emphasized that investors should not assume a firm is a financial company or a professional investment institution based only on the name of the soliciting entity. Even if names such as "Partners," "Venture Investment," "Investment," or "PE" are used, the firm may not be authorized or registered with the financial authorities, so investors should directly verify whether it is a regulated financial company through channels such as the Financial Consumer Information Portal FINE.
The Financial Supervisory Service (FSS) also presented actual enforcement cases. A multilevel stock sales organization secured shares of an unlisted company and sold them at high prices to retail investors via phone and KakaoTalk without filing a securities registration statement. The entities used names such as "Partners," "Investment," and "Venture Investment," which were found to be easily mistaken for financial companies.
In another case, the CEO of an unlisted pharmaceutical and biotech company sold held shares to retail investors while emphasizing "FDA approval pending" and "KOSDAQ listing planned," but it turned out the company had not properly followed procedures to provide necessary information to investors. The company was in a high-risk situation, recording operating losses, but investors were not sufficiently provided with related information.
It also said investors should not take the phrase "listing imminent" at face value. For an unlisted company to actually pursue a listing, it must go through several steps, including selecting a lead manager, an external audit by a designated auditor, electronic registration of shares, and a preliminary listing review by the exchange. The Financial Supervisory Service (FSS) explained that if a lead manager has not been appointed or a share transfer agency agreement has not been executed, it may indicate an early stage of listing preparations.
The Financial Supervisory Service (FSS) urged investors to check with the Korea Exchange (KRX) whether a preliminary listing review has been filed and to cross-check whether a lead manager has been appointed through the relevant securities firm.