Cases have been uncovered in which small asset management firms and similar entities solicit investment funds by offering to participate in public offering stock subscriptions on behalf of investors, only to misappropriate the funds. The Financial Supervisory Service has warned investors that it is illegal for a third party to participate in public offering stock subscriptions on someone else's behalf.
According to the Financial Supervisory Service on April 20, some underperforming small asset management and investment advisory firms have deceived investors by claiming that if they transfer investment funds to the company's account, the firm will participate in institutional demand forecasting for public offerings under its own name and then distribute the profits. These firms subsequently embezzled both the principal and the profits.
They attracted investment funds by promoting that, when subscribing under an institutional name, they would not be required to pay a deposit and could receive a larger allocation of public offering shares than ordinary individual investors. In particular, it was found that they would settle profits for the first investment to build trust, and then present falsified allocation statements and profit settlement records to induce reinvestment.
The Financial Supervisory Service has issued a consumer alert, noting that investors continue to trust financial companies and transfer funds without realizing that such proxy participation in public offering stock subscriptions is clearly illegal. An official from the Financial Supervisory Service stated, "If illegal proxy participation in public offering stock subscriptions by asset management or investment advisory firms is detected, we will immediately notify investigative authorities and impose strict sanctions."
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