FSS to Inspect Mirae Asset Flagship Branches, Focusing on SpaceX "Zero-Share" Controversy

Ad-hoc Inspection of Flagship Branch Sales Practices Next Month
Focus Likely on Recommending Professional Investor Registration

Financial authorities will launch a high-intensity inspection into Mirae Asset Securities’ flagship branches next month, focusing on potentially unsound business practices. This follows controversy during the SpaceX public offering process over "zero-share allocation," and the authorities are expected to investigate whether there were any illegal actions, such as recommending registration as professional investors.

According to the financial industry on August 30, the Financial Supervisory Service will conduct an ad-hoc inspection of Mirae Asset Securities’ flagship branches next month to verify their sales practices. These branches cater primarily to high-net-worth clients. The inspection is expected to focus on sales procedures for high-risk financial investment products and the adequacy of internal controls.

In particular, authorities seem set to concentrate their efforts on identifying problematic business practices during the SpaceX public offering subscription process in June. It has been reported that the size of the inspection team will be increased beyond the usual, with more personnel deployed.

Previously, Mirae Asset Securities selected a method of accepting subscriptions for SpaceX public offering shares only from professional investors, rather than from domestic retail (individual) investors. Many have speculated that this decision was due to practical constraints, such as the requirement for a listing candidate to submit a securities registration statement to the financial authorities.

However, the key question is whether flagship branches of Mirae Asset Securities may have encouraged general retail investors to register as professional investors during this process.

The private professional investor system was revised in 2019, relaxing registration requirements such as income, assets, and investment experience. The registration review agency was also changed from the Korea Financial Investment Association to financial investment firms with assets of more than 100 billion won. However, financial firms are restricted from proactively recommending professional investor registration. The procedure is supposed to be initiated only when a retail investor voluntarily expresses the intention to register as a professional investor and submits documentation to prove they meet the requirements.

Currently, financial authorities are monitoring the significant increase in professional investor registrations around the time of the SpaceX public offering subscription. As professional investors are exempt from the investor protection obligations stipulated in the Financial Consumer Protection Act, this situation poses limitations for consumer protection.

The results of this flagship branch inspection are expected to be a significant factor in determining the level of sanctions regarding the SpaceX public offering "zero-share allocation" incident. Previously, industry observers speculated that since there was no evidence of willful intent by Mirae Asset Securities and no direct investment losses occurred, sanctions would likely be limited to management advisories rather than stronger disciplinary measures.

However, if inappropriate business practices such as encouraging retail investors to register as professional investors through flagship branches are identified, it is likely that the level of sanctions could be raised.

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