Financial Services Commission Allows Securities Firms to Provide Venture Loans... Activating Venture Capital Supply

[Asia Economy Reporter Park Jihwan] Financial authorities will allow securities companies to provide venture loans to supply funds to small and medium-sized enterprises (SMEs) and innovative companies. Additionally, the range of companies eligible to raise funds through securities-type crowdfunding will be expanded to include KOSDAQ companies listed within 3 years.

On the 4th, the Financial Services Commission announced the 2020 'Capital Market Policy Tasks for Activating Innovative Finance' containing these details.

First, the Financial Services Commission will add venture loans to securities companies' business scope and exclude venture loans from the deduction of operating net capital when calculating the Net Capital Ratio (NCR). Currently, securities companies can only provide venture loans within their own capital, but due to regulations such as NCR, the actual loanable amount is often less than half of their capital.

The Financial Services Commission will also expand the range of companies eligible to raise funds through securities-type crowdfunding from 'startups and venture companies within 7 years of establishment' to 'all SMEs.' Starting next month, this will be implemented first for KOSDAQ companies listed within 3 years. For unlisted SMEs, it will be implemented once the amendment to the Capital Markets Act passes the National Assembly.

Furthermore, to increase the success rate of initial public offerings (IPOs), a 'Cornerstone Investor' system will be introduced. A Cornerstone Investor is an institution that pre-commits to purchasing a portion of the public offering shares at a later determined public offering price before the IPO.

The Financial Services Commission plans to raise the ownership limit of IPO target companies by securities companies from 5% to 10% for SMEs only. Along with this, guidelines on fair value evaluation methods for unlisted stocks will be prepared, and disclosure systems for innovative companies will also be improved.

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