Brokerages must disclose risks: FSS
Brokerage companies must inform investors of the risks associated with buying newly issued shares in companies involved in fraud cases when they recommend buying the shares before they are issued, according to the Financial Supervisory Service.Until now, a brokerage firm hired by a listed company to issue new shares has divulged risks due to financial soundness in documents submitted to financial authorities. But it has not been required to warn investors directly.
The change is part of efforts to make brokerages more responsible for protecting investors when the watchdog makes public offerings the main way to increase capital, the FSS said in a release yesterday.
“As we expect most listed companies to increase capital using public offerings soon, the role of brokerages issuing new securities will be strengthened,” the watchdog said.
Apart from public offerings, listed companies have also increased capital by third-party allotment, in which they allot new shares to an investment partnership or company insiders. That method, however, was often used to make unfair stock trades, the watchdog said.
By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]
with the Korea JoongAng Daily
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