The financial authorities have decided to file criminal charges against a company and its management who attracted domestic investors' funds by distributing false and exaggerated press releases in an attempt to list on the U.S. NASDAQ market.
The Financial Services Commission's Securities and Futures Commission (SFC) held its 18th meeting on the 6th and resolved to file criminal charges and impose fines on Company A and its largest shareholder and CEO for unfair trading practices and violations of securities registration submission requirements.
Company A distributed press releases to the media containing false information that a major domestic securities firm was planning to invest in the NASDAQ public offering, and inflated corporate value and expected sales figures without objective evidence. It also promoted the paid-in capital increase as if institutional investors were making large-scale investments normally.
It was also discovered that Company A falsely stated in the U.S. SEC disclosure documents, including the registration statement, that most of the public offering funds would be used for the company's main business. In reality, the funds were used to repay existing debts or return investments to some investors.
Although solicitation activities are prohibited without submitting a securities registration statement to the Financial Services Commission, Company A held investor briefings and roadshows targeting domestic investors to solicit subscriptions for Company A's shares in order to attract investments.
The SFC advised, "Investors should be cautious that shares acquired through over-the-counter transactions before NASDAQ listing may not be easily traded on the exchange immediately after listing," and added, "It is also important to note that the NASDAQ market operates with three tiers by differentiating listing standards."
The NASDAQ market consists of three tiers: the Global Select Market, the Global Market, and the Capital Market. The Capital Market is a market where relatively smaller companies list to raise capital, allowing companies with low equity or net income to be listed.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
