The First Art Sculpture Investment Released... Kusama Yayoi's Iconic Work 'Pumpkin'

Representative work of Yayoi Kusama, "Pumpkin"
[Photo courtesy of Yeolmae Company]

The first case of fractional investment using investment contract securities has emerged.

According to the Financial Supervisory Service (FSS) on the 15th, the effectiveness of the investment contract securities registration statement submitted by Yeolmae Company on October 13th begins from this day.

Yeolmae Company completed the third amendment of the registration statement for public offering of 12,320 shares (face value 100,000 KRW each) of investment contract securities based on the 2001 Pumpkin series (Canvas No. 3), a representative work by Japanese artist Kusama Yayoi, the day before. Subscription will be held from the 18th to the 22nd, and the allocation announcement date is January 4th next year.

Earlier, after approving the business restructuring of five fractional investment companies in July, the FSS completely revised the format of investment contract securities in preparation for the submission of registration statements. Together Art was the first to submit a registration statement in August, but the FSS requested supplementation due to issues such as the valuation of underlying assets and conflict of interest risks. Together Art withdrew the registration statement to comply with the request.

Additionally, two fractional investment companies reviewing the submission of registration statements were found to have cases of inaccurate disclosures, including unclear sources of purchase for underlying assets, lack of objectivity in asset valuation, and insufficient expertise in external asset evaluation.

Accordingly, the FSS guided companies preparing to submit registration statements to prevent repeated cases of inaccurate disclosures. Furthermore, it requested companies to adjust subscription limits per person, change subscription methods, introduce suitability tests, and reform fees.

To prepare against embezzlement or loss of underlying assets, the FSS and the art community jointly discussed measures for investors to verify the physical underlying assets. Fractional investment companies discussed with the art community about asset valuation, physical storage, subscription and allocation methods, and added supplementary disclosures in the registration statements such as enhancing evaluation objectivity, reducing subscription limits, and implementing investment suitability tests.

The FSS urged investors to confirm the joint business details and risk factors stated in the securities before deciding on investment. Art investment contract securities have a long investment period of 3 to 5 years, low liquidity, and a structure where multiple investors jointly own the underlying assets, which poses risks in directly storing or disposing of the underlying assets.

An FSS official said, "This registration statement is the first case where a new service related to fractional investment in the capital market has been accepted within the regulatory framework," and added, "We will thoroughly review to ensure that fractional investment can be established within the system as investment contract securities."

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