FSS Begins Inspection of Bond Sales Practices at DB, Hanwha Investment & Securities, and Eugene Securities

Understanding the Actual Conditions of Subscription Solicitation Before Acceptance of Securities Registration Statement

The Financial Supervisory Service (FSS) is examining the bond sales practices targeting individual investors. This comes from the judgment that management and supervision need to be strengthened as securities firms expand their bond sales and marketing from institutions to individual investors.

According to financial authorities and the financial investment industry on the 25th, the FSS will begin on-site inspections of retail bond sales and the overall sales process at DB Financial Investment, Korea Investment & Securities, and Eugene Investment & Securities on the 26th. The inspection will continue for about two weeks.

The FSS is known to have prioritized these securities firms for inspection based on individual bond sales volume and market trend information. At the end of last year, the FSS also sent guidance letters to securities firms regarding insufficient information provision and investment risk disclosure related to bond sales targeting individual investors.

This on-site inspection is expected to focus particularly on practices such as encouraging subscriptions before the approval of the securities registration statement. Some securities firms habitually identify individual investors' demand for public corporate bonds in advance and conduct sales before the securities registration statement is approved.

According to Article 124, Paragraph 2 of the Capital Markets Act, when making a securities offering subscription, the issuer must submit the securities registration statement to the financial authorities, and only after it is approved and the registration becomes effective can investment prospectuses and related documents be used.

The FSS plans to expand the inspection if cases violating market order arise during the bond sales and marketing process.