The Financial Supervisory Service noted that cases are occurring where high returns are promised through public offering subscription agency, attracting investment funds and committing fraud. They urged investors to be cautious, emphasizing that while some small asset management firms and investment advisory firms may promote this, acting as an agent for public offering (IPO) subscriptions with others' funds is illegal, and investors should be careful not to transfer money to company accounts.
The FSS announced on the 20th that a consumer alert warning has been issued due to the occurrence of fraudulent activities that use public offering allocation methods similar to those of institutional investors to lure investors.
According to the FSS, there has been a recent surge in complaints against some asset management firms and investment advisory firms. They induced investors to transfer funds to company accounts after participating in public offering demand forecasts in the name of an institution, promising to distribute the revenue, but they did not pay the profits and committed fraud by seizing the investment funds. This tactic relies on the fact that institutional investors have a larger allocation of public offerings and do not require subscription deposits, misleading investors and siphoning off their funds.
However, public offering subscription agency is classified as an illegal act since it is unlicensed investment brokerage. The FSS has issued a consumer alert as cases continue where people trust financial companies and transfer investment funds.
These companies induce transfers to company accounts while enticing investors with an investment preliminary contract that promises to distribute 50% of the sale profits from allocated public offerings. However, in reality, they either do not participate in public offering subscriptions or mislead investors into thinking they have received a large allocation when they have only received a small quantity. Initially, they gain trust by settling profits and then present falsified allocation tables and profit settlement details to induce reinvestment, resulting in increased victim losses.
The FSS urged investors to be cautious about this type of fraudulent scheme, stating that "public offering investment agency is illegal."
The FSS explained that while only institutions like pension funds can engage in investment discretionary contracts and participate in public offering demand forecasts, it is illegal for individual investors to participate in these forecasts under the names of asset management and investment advisory firms. It added that investment discretionary assets must be managed in accounts opened in the name of customers at financial institutions.
The FSS stated that if illegal public offering subscription agencies by asset management firms and investment advisory firms are detected, it will immediately notify law enforcement and impose strict sanctions. It also mentioned that it will cooperate with the Korea Financial Investment Association to implement measures that restrict unreliable participants in demand forecasting to prevent further damage.
The FSS stated, "We will provide information on illegal public offering subscription agency-related precautions through securities firms' public offering subscription websites," affirming, "We will take all measures to protect investors."