[Practical Finance] Simplifying Over-the-Counter Stock Investment... Beware of Illegal Private Markets

Easy Trading Using Existing Securities Accounts or Bank Accounts
Beware of Private Site 'Broker'... Risk of Scam Also Present

[Asia Economy Reporter Minwoo Lee] As investor interest in over-the-counter (OTC) stocks grows, trading platforms have diversified and accessibility has improved, but illegal private markets are also rampant, requiring investors to exercise caution.

The most representative OTC stock trading platform is the Korea OTC Market (K-OTC). The unlisted stock OTC trading market "Freeboard," operated by the Korea Financial Investment Association, has been expanded and reorganized. There is no need to install a separate application (app); trading can be done through the home trading system (HTS) or mobile trading system (MTS) of existing securities firms where you have an account. Although there is no deposit requirement, the margin rate is 100%, meaning you need 10 million KRW in cash to trade 10 million KRW worth of stocks.

Unlike the previous one-on-one trading format for OTC stocks, trading now occurs in a many-to-many format, where transactions happen only when buy and sell orders match. Since the counterparty cannot be specified, from the investor's perspective, it is not much different from trading listed stocks. There are a total of 136 tradable stocks. There is a restriction that they must be standardized certificates recognized by the Korea Securities Depository. These stocks meet requirements such as annual sales of over 500 million KRW in the most recent fiscal year, an auditor's opinion of unqualified, and no full capital erosion. The biggest advantage is the low transaction tax. At 0.25%, it is about half the 0.45% transaction tax of other platforms. Capital gains tax is exempt only for small investors in small and medium-sized enterprises (SMEs) and mid-sized companies. The small investor criteria are a shareholding ratio under 4% and investment under 1 billion KRW. For non-small investors, capital gains tax is 10% for SMEs and 20% for mid-sized and large companies. Trading commissions are the same as the individual securities firm's brokerage fees.

Launched in November last year, Securities Plus Unlisted is an OTC trading platform linked with Samsung Securities. Trading is possible if you have a Samsung Securities account. Through its own app, "Securities Plus Unlisted," users find counterparties for one-on-one trades. As of the 6th, 4,852 stocks issuing standardized certificates are being traded. In the future, blockchain technology will be introduced to verify shareholder registers, allowing trading of unlisted companies that do not issue standardized certificates. A Dunamu representative explained, "Unlike K-OTC, stocks can be traded without other restrictions, but since transactions are verified through Samsung Securities escrow to confirm that the counterparty actually holds the stocks and the transaction funds exist, trading can be done with confidence," adding, "In fact, almost all unlisted company stocks can be traded."

In addition to stock information organized by its own corporate information discovery team, the platform collaborates with NICE D&B, DeepSearch, and others to provide a "stock analysis report" service at the level of securities firm reports. Tax rates apply the OTC market standards: transaction tax is 0.45%, capital gains tax is 10% for SMEs and 20% for mid-sized and large companies. Trading commissions are about 1% each for buying and selling.

BeMyPlus Unicorn is a blockchain-based unlisted stock trading platform. It was launched in April through collaboration between Koscom, KEB Hana Bank, Hana Financial Investment, and legal tech startup Amicus Rex. Trading is possible through Hana Bank escrow even without a securities account, differentiating it from other platforms that require securities firms for trading.

By applying blockchain to shareholder register management, companies that do not issue standardized certificates can also be traded. When buyers and sellers conclude stock transfer contracts online, the updated shareholder register is recorded semi-permanently on the blockchain ledger. Currently, 20 stocks are tradable, but since it is a kind of secondhand marketplace, the number of tradable stocks can increase indefinitely. The transaction tax is 0.45%.

Various other OTC stock platforms are also emerging. Although various safety measures are in place, there are still concerns that investors need to be more cautious than when trading listed stocks. In the case of private sites, individuals bear all responsibility for transactions. Since many trades occur through intermediaries or "brokers," illegal activities such as unauthorized investment advisory services sometimes occur during this process. Because it is peer-to-peer trading, in the worst case, investors may suffer so-called "eat-and-run" fraud. An industry insider said, "Since small-scale investment is practically difficult, investment decisions should be made more carefully," adding, "In the case of unverified private sites, information disclosure may not be transparent, so extra caution is necessary."

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