[Opinion] The Simple but Obvious Principle of Doing Business While Following the Law

Experts who originally have no vested interests tend to be reluctant to criticize businessmen who do have such interests. This is because they have nothing to gain from the process. However, after the Luna incident, I felt a sense of guilt. If I had more strongly criticized the clear Ponzi scheme in advance, could I have reduced the number of victims even by a few?

For this reason, today I want to strongly address an obvious issue. I hope that this article will help normalize the fractional investment industry even a little. Although it is obvious, I have no profit to gain from this article. This article is solely my opinion, and if you have objections, you are right. I just want to protect many people and families from the risk of ruin.

After Musicow’s announcement regarding securities classification, many fractional investment companies posted notices on their websites stating that their services are not financial products. While the reasons given were not entirely convincing, since these are promises made by companies to consumers and investors, I thought they must have some grounds.

However, recently one fractional investment company promoted that it had applied for the industry’s first innovative financial service license. This confused me. Just a month ago, the company publicly announced to its consumers and investors that it does not sell financial products, yet now it applies for an innovative financial service? Not financial, but innovative finance? Like saying I drank alcohol but did not drive drunk? Are they joking to give the public a big laugh? I seriously pondered this.

Looking only at this company’s actions, logically one of the following two must be true: either the notice was false and deceived consumers and investors, or they do not understand what finance is. Either way, it is a problem.

If they publicly issued a notice with errors to customers and investors, given the high uncertainty and risk and the importance of trust in innovative industries, this notice makes the company untrustworthy. If they do not understand finance, then this company should not provide financial services. We call this self-defeating and contradictory.

Business must be based on the trust of investors and consumers who have invested in the company. It is very unfortunate and painful to see abnormal behavior aimed at avoiding laws that should be naturally followed. This is not about feelings toward the company, but about the investors and consumers who trusted such a company.

So what should be done? It is simple. Comply with the Capital Markets Act. Then there will be no reason to publicly claim that clear financial products are not financial products. Also, there will be no contradictory behavior of applying for innovative financial services that enable services not allowed under current regulations for certain periods, even if not illegal. And there will be no reason to engage in showy acts like signing memorandums of understanding (MOUs) with securities firms to issue security-type tokens (STOs), which are currently impossible under the law.

Simply following the law removes all reasons to keep going around in circles and to be unfaithful to investors and consumers. Then companies can focus on their business for the sake of investors.

I hope the day will come when we do not have to write so much about doing something so common-sense and obvious.

Hong Ki-hoon, Professor, Department of Business Administration, Hongik University