FSS to Convene Securities CEOs on 28th... Urges "CFD Risk Management"

Meeting Chaired by Deputy Director Ham Yong-il on the 28th

The Financial Supervisory Service (FSS) recently plans to convene chief executive officers (CEOs) of securities firms to urge risk management regarding controversial issues in the stock market such as opposite trades in Contracts for Difference (CFD) and leveraged investing (debt-financed investment).

According to the FSS on the 27th, the FSS will hold a meeting on the morning of the 28th, chaired by Deputy Governor Ham Yong-il, gathering CEOs of securities companies. An FSS official explained, "The meeting is to request risk management concerning credit provision to individual investors and CFDs," adding, "We will emphasize that credit management is increasingly important and will also communicate about the soundness of real estate project financing (PF)."

The FSS has decided to conduct a focused investigation into unfair trading suspicions regarding so-called "nominal secondary battery stocks" that have boosted their stock prices by adding secondary batteries as a new business despite having no relation to their actual business or performance. On this day, the FSS stated, "During periods when theme stocks related to specific businesses are trending, there is a high possibility that unfair trading groups exploiting the theme stock fever will become rampant, so it is necessary to strengthen disclosure reviews and investigations from the perspective of investor protection." Accordingly, newly added businesses in the articles of incorporation must mandatorily disclose progress (including plans and reasons for non-progression) in subsequent regular reports, and business areas requiring investment caution such as secondary batteries will be separately selected for focused inspection of disclosure items.

Among stocks that have added new businesses unrelated to their existing core businesses as business purposes, the FSS will analyze abnormal stock price surges, sales of shares by major shareholders, and actual business progress. They plan to promptly initiate investigations into stocks suspected of unfair trading.

The FSS urged, "Adding a new business purpose in the articles of incorporation does not guarantee the actual promotion or revenue generation of the new business, so general investors should carefully consider the connection with existing core businesses and whether a concrete business plan has been established when deciding on investments." They added, "If a listed company deceives investors by pretending to enter a new business without the intention or ability to promote it and uses this for trading financial investment products, it may constitute unfair trading under the Capital Markets Act. Therefore, listed companies intending to pursue new businesses should exercise caution in disclosures and media promotions related to business progress."

Reflecting the high investment enthusiasm for future growth new business-related stocks, 105 listed companies added secondary battery, artificial intelligence, and robotics-related businesses to their business purposes in the past year (2022 to March 2023). There were 59 companies that changed their articles of incorporation in 2022 and 46 companies from January to March 2023. Among these, 91 companies are listed on KOSDAQ, and 54 companies added secondary battery-related businesses by sector.

Meanwhile, on the 25th, FSS Governor Lee Bok-hyun emphasized at an executive meeting, "Since the beginning of this year, the stock market has been abnormally overheated, especially on KOSDAQ, with a surge in credit transactions due to the investment frenzy in future growth new business theme stocks such as secondary batteries," urging, "Please ensure thorough investor protection by promptly investigating and strictly punishing stocks suspected of unfair trading."

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