The Financial Supervisory Service advised consumers that when recommended to invest in an unlisted company, they must verify the company's identity through DART (Financial Supervisory Service Electronic Disclosure System). It warned against assuming a company such as 'XX Investment' is a professional financial investor based solely on its name and emphasized the need to confirm whether it has received approval from financial authorities.
On the 7th, the Financial Supervisory Service announced this guidance while outlining 'Three Things That Must Be Verified Before Investing in Unlisted Stocks.' According to the Financial Supervisory Service, as interest grows in investing in unlisted stocks that promise high returns before listing, investor losses due to false or exaggerated advertising are increasing.
Unlisted stocks carry higher investment risks compared to listed stocks because company information is limited and trading activity is less active. For listed companies, business reports and financial status can be easily verified through various public disclosures, but unlisted companies have limited disclosure obligations, making it difficult to objectively verify their content. Additionally, due to limited infrastructure for trading and a small number of participants, investors may find it difficult to recover their investment funds at the desired time even after investing.
According to the Financial Supervisory Service, the CEO and largest shareholder of unlisted company A, which operates in the pharmaceutical and biotechnology sector, sold a significant amount of shares worth approximately 5 billion won to numerous investors. The representative of Company A stated, "The product currently under development is an innovative anticancer drug scheduled for FDA (U.S. Food and Drug Administration) approval, and we plan to list our company on the KOSDAQ market soon," but did not provide a prospectus as required by the Capital Markets Act.
Company A reported operating losses, and investors suffered significant investment losses due to insufficient information provided about Company A.
A Financial Supervisory Service official stated, "If investment recommendations are made to 50 or more individuals and no securities registration statement can be found in DART, you should double-check before investing." The official further explained, "Under the Capital Markets Act, when an unlisted company's shareholder recommends purchases to 50 or more investors, the company must inform them of this fact and provide necessary information through a securities registration statement and small-scale public offering disclosure documents." Violating these requirements constitutes illegal investment solicitation.
Verification is also necessary for companies recommending investments in unlisted stocks. Group B, a multi-level stock sales organization, sold unlisted company shares worth approximately 500 billion won to general investors over several years. The group acquired new shares through third-party allocations (rights offering) or purchased existing shares held by executives of unlisted companies at low prices, then resold them at high prices to numerous investors via phone and KakaoTalk.
However, no securities registration statement was ever submitted, and Group B faced measures for violating the Capital Markets Act. A Financial Supervisory Service official explained, "The sales company used names such as 'XX Partners,' 'XX Investment,' and 'XX Venture Investment,' which are easily mistaken for financial companies or professional investors." The official added, "However, these were unlicensed entities that had not received approval from financial authorities."
If you receive investment recommendations from an unfamiliar corporate entity, first check whether the financial institution is licensed or registered via FINE (Financial Consumer Information Portal). You can also find a list of member companies on the website of the Korea Venture Capital Association.
If an unlisted company promotes itself as 'imminent listing,' it should be verified through various methods. A Financial Supervisory Service official stated, "If no lead underwriter (i.e., securities firm) has been appointed or a transfer agent contract has not been signed, it is difficult to consider the listing process as being in its final stages." The official advised, "It is best to directly verify whether an unlisted Jang Hoe-sa-e (CEO) lead underwriter has been appointed and cross-check with the relevant institutional investor."
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