[2020 Financial Services Commission Work Plan] 'Introduction of Foreign Currency MMF and SME Crowdfunding Allowed'... Capital Market Regulations Eased

[Asia Economy Reporter Park Jihwan] The financial authorities have decided to expand the scope of crowdfunding target companies from the current startups within 7 years of establishment and venture companies to all unlisted small and medium-sized enterprises (SMEs), enabling companies to raise funds from multiple investors from the startup stage. They also plan to satisfy the diverse investment demands of the general public by introducing foreign currency-denominated money market funds (MMF) and other measures.

According to the Financial Services Commission's business plan on the 19th, the financial authorities presented a customized funding supply plan for companies this year. First, at the startup stage, a specialized startup support space (Mapo Front1) will open in June to provide one-stop support including office space, consulting, and funding.

Additionally, the scope of crowdfunding target companies will be expanded from the current startups and venture companies within 7 years of establishment to all unlisted SMEs and KONEX companies (within 3 years of listing). In particular, funds invested by professional investors will be excluded from the limit (1.5 billion KRW) on the amount that can be raised through crowdfunding within one year. Regulations that prohibit advertising funding information except for the business owner, issuer name, and subscription period will also be relaxed.

At the growth stage, sufficient funding will be supported through expanding securities company loans to venture companies and activating individual investors' investments in unlisted companies. By introducing the Business Development Company (BDC) system specializing in unlisted company investments, it will open a path to raise funds from multiple investors, list on the exchange, and invest in unlisted companies. In particular, for securities companies, capital regulation rationalization such as reducing the deduction of net operating capital for private bonds issued by SMEs and venture companies or credit provision will be promoted to strengthen investment banking (IB) functions. Furthermore, by 2022, the growth support fund will be expanded and reorganized to create a 12 trillion KRW scale-up fund, focusing on nurturing companies in the growth stage.

At the maturity stage, listing requirements will be reorganized from a past performance-centered approach to a market evaluation-centered approach reflecting future growth potential, so that innovative companies can successfully list on KOSPI and KOSDAQ smoothly. To this end, the introduction of the cornerstone investor system, which can secure stable long-term investors and increase the success rate of initial public offerings (IPO), will be promoted. Cornerstone investors are large institutional investors who commit to purchasing public shares before the IPO. Compared to small-scale institutional investors who move according to short-term returns, these institutions invest with a long-term perspective on growth potential, making it easier to attract investment.

The Financial Services Commission also encourages large financial companies such as banks, insurance companies, and securities firms to expand investments through organic collaboration between bank holding companies and their subsidiaries to supply venture capital.

Moreover, conditions in the capital market will be prepared to satisfy the diverse investment demands of the general public by revitalizing public offering funds and improving restrictions on unlisted stock investments. New products that can meet various investment demands, such as foreign currency-denominated MMFs and equity active ETFs, will be introduced. Requirements for ETN underlying indices that track the returns of overseas blue-chip stocks will also be relaxed to accommodate overseas stock investment demand domestically.

This content was produced with the assistance of AI translation services.