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[Asia Economy Reporter Ji Yeon-jin] Following Musicow, other fractional investment platforms are also set to be subject to financial regulations, making investor confusion inevitable for the time being. The financial authorities have interpreted that businesses selling divided claims rather than ownership fall under ‘securities’ and must comply with the Capital Markets Act, thereby incorporating fractional investment into the regulatory framework to protect investors. However, from the perspective of investors already using these services, there is a risk that operations could be suspended in the worst-case scenario.

According to the ‘Guidelines for New Securities Businesses such as Fractional Investment’ announced by the Financial Services Commission on the 29th, fractional investments that hold claims proportional to the profits generated from assets are subject to the Capital Markets Act. When dividing ownership of apartments or land, individual co-owners’ shares are registered, and civil and commercial laws apply. However, in cases like Musicow, where claims rather than ownership are divided and sold, these are considered securities and subject to Capital Markets Act sanctions. The Financial Services Commission recommends that businesses restructure their models or apply for innovative financial services (regulatory sandbox) to operate legally under these regulations.

However, the commission has not issued individual authoritative interpretations on whether currently operating fractional investment products qualify as securities. Instead, fractional investment operators are expected to determine the securities nature and legality of their products and take appropriate actions based on the guidelines. The six-month grace period applied to Musicow does not apply here.

If currently offered fractional investment products are deemed securities, they must comply with disclosure regulations such as submitting securities registration statements, and depending on the business content, licenses such as investment brokerage registration may be required. Above all, measures such as segregating investor funds, operating investor-named virtual accounts through external financial institutions, maintaining human and physical facilities to prevent information leaks and system failures, preparing product explanation materials and advertising standards, prohibiting simultaneous operation of claim issuance and trading markets, and establishing reasonable compensation systems for damages caused by operator negligence must be implemented.

Since most fractional investment platforms are still at the startup stage, securing funds necessary to establish such systems may be difficult, potentially leading to service discontinuation and raising concerns about so-called ‘meoktwi’?operators absconding with investors’ funds.

The industry shows starkly contrasting views. While some emphasize the significance of fractional investment being officially recognized and legitimized as a financial product in a previously barren field, others perceive the expanded regulatory scope as a crisis. A representative of a tangible asset fractional investment startup said, "It is encouraging that fractional investment, which was a new industry and a regulatory gray area, has been officially recognized by financial authorities. Startups that have prepared and invested in applying for innovative financial services and customer protection will have a good opportunity to advance their businesses and exclude similar companies."