South Korea’s Financial Services Commission (FSC) said it plans to issue new licenses for platforms that trade fractional investment securities, establishing a legal framework for services that until now operated under a regulatory sandbox.
Fractional investment services allow multiple investors to buy shares in ownership rights to assets such as real estate or music copyrights.
The government has been working to revise the Financial Investment Services and Capital Markets Act (FSCMA) and related rules to bring the activity under formal regulation.
The FSC said amendments are expected to be completed by the end of September.
The move follows a rule change in June authorising the issuance of fractional investment securities in the primary market.
By late September, regulators expect to complete rules for secondary market trading, allowing fractional securities to be listed on licensed platforms where investors can buy and sell them.
The regulator said up to two licenses will be granted in the first round, citing the need to concentrate liquidity in order to protect investors and enable more efficient price discovery in the early stages of market development.
“Concentration of liquidity will help with more efficient formation of market prices and facilitate investors to more conveniently compare and make investment in multiple products,” the FSC said in a statement.
Applications will be screened en bloc if multiple candidates apply, similar to the process used for internet-only banks in 2017 and 2021 and real estate investment trusts in 2019.
An external expert review committee will score applicants based on qualification criteria, with the Securities and Futures Commission and FSC making the final decisions.
Applicants must meet requirements under the FSCMA, but additional credit will be given to consortium applicants, SME-focused securities firms, and those capable of quickly launching services, the regulator said.
Once the new rules take effect, expected from Sept. 25, the FSC will open a one-month application period for preliminary licenses.
