Financial Supervisory Service issues consumer advisory for fragmentation investment
▲ Financial Services Commission
News 1
As financial authorities judge the products of ‘Music Cow’, a music copyright investment platform, as securities, other sculpture investment markets such as art and real estate are also expected to be affected. The financial authorities decided to include Music Cow as a subject of regulation under the Capital Market Act, but decided to postpone the sanctions procedure for the time being as a condition of providing investor protection.
On the 20th, the Securities and Futures Commission under the Financial Services Commission judged Music Cow’s ‘right to participate in music copyright fees’ as investment contract securities, one of the securities under the Capital Market Act. I thought that receiving investment from a large number of investors and distributing profits according to the right to claim copyright fees is similar to the nature of securities.
Music Cow is a platform that buys and sells rights to receive revenue from music copyrights. It is a method of dividing the rights received through the transfer of rights to participate in copyright fees and selling the shares to investors in small units. Investors will receive monthly copyright income according to their stake.
Music Cow, which started its service in July 2017, has gained popularity centered on the MZ generation because it allows small investments, and has become a platform with 1 million cumulative members and a cumulative transaction amount of 340 billion won.
However, in November of last year, as complaints such as “Music Cow’s business activities fall under quasi-finance” and “it is difficult to transparently check whether investor rights and payments are safely stored, managed, and settled” were received by the Financial Supervisory Service, the financial authorities I started looking into Cow’s business structure.
This time, as the financial authorities concluded that Music Cow’s product was an investment contract security, Music Cow, which has not submitted a securities declaration form and small public offering disclosure documents, is subject to sanctions such as restrictions on issuance of securities and imposition of fines and penalties for violating disclosure regulations under the Capital Market Act. becomes this
However, as the first application of investment contract securities, the financial authorities did not have a high awareness of the illegality, and considering investors’ expectations for business continuity following operations over the past five years, the sanction procedure is subject to investor protection measures and business restructuring. decided to put on hold. Investor protection measures include protecting investor rights and property from the risk of insolvency of business operators, depositing separate deposits in an external financial institution investor’s account, explanatory materials for claim structure, etc., and preparing terms and conditions.
Music Cow must strengthen investor protection by reorganizing its current business structure by October 19, and report the results to the Financial Supervisory Service. If the Financial Supervisory Service confirms the legitimacy of business restructuring, etc. and the SSC approves it, sanctions are exempted.
The financial authorities said, “The issuance of new claims is prohibited until Music Cow fulfills conditions such as investor protection measures, but already issued claims can be traded through the platform. An investigation by the Financial Supervisory Service is initiated,” he explained.
Meanwhile, the Financial Supervisory Service issued a consumer alert level for fragmented investment on the same day, saying, “In many cases, investors do not own the relevant assets or cannot exercise their rights, so special attention is required.”
Sculpture investment refers to purchasing high-priced assets such as copyrights, art and antiques, and real estate like Music Cow to generate profits, dividing the profits and selling them to a large number of investors through a platform.
The Financial Supervisory Service recommends careful examination of insufficient investment information, false or exaggerated information, and the presence or absence of responsible assets of business operators when making piecemeal investments. In addition, “art, antique, copyright, etc. are difficult to evaluate and price volatility may be large due to low transaction volume.” “Possibility of exposure to price manipulation, etc. should also be taken into account,” he said.
The financial authorities are expected to announce guidelines for new securities businesses, such as piece investment, in the near future.
By Hong In-ki
