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| Financial Services Commission Chairman Choi Jong-ku, right, unveils plans to ease rules for investment companies for startups at a meeting in Gimpo, Gyeonggi Province, Monday. Yonhap |
By Park Hyong-ki
The financial regulator will move to lower entry barriers for professionals and investors seeking to set up brokerages or investment management companies to mainly invest in small- and medium-sized enterprises (SME) and tech startups.
In a meeting with AHA information & Communication, an electronic board maker, in Gimpo, Gyeonggi Province, Monday, Financial Services Commission (FSC) Chairman Choi Jong-ku said small tech companies find it extremely hard to raise funds from investors in the capital market.
Big brokerages and investment companies are not particularly interested in investing in startups, given there are only 16 securities branches inside 1,196 business centers and zones for SMEs and startups here.
To this end, the regulator will make it easier for anyone with an extensive background in finance and law to establish investment companies for startups and SMEs.
"We will revise relevant laws to reduce barriers, enabling them to enter the capital market beginning in the second half of this year," Choi said at the meeting in Gimpo.
It will seek to allow investment companies to be set up with 500 million won in equity capital, the industry's lowest, he added.
Also, more than two professionals who decide to team up can establish their companies, launch funds and invest in SMEs and startups.
Those two can be lawyers, accountants and auditors with a background in finance.
There are around 390,000 who have licenses to practice law, accounting, bookkeeping and auditing.
The regulator seeks to use this human resource pool to develop an investment ecosystem for SMEs and startups.
There had been only about 2,600 firms that invested in and managed assets for SMEs and startups.
"These new investment companies will be able to work with angel investors and venture capital funds in developing innovative companies," the FSC chairman said.
"At the same time, we will make sure to increase protection for investors as the regulator eases rules."
Industry sources say this has been long overdue to create a new industry ecosystem.
"Restricting such professionals to provide only consulting to startups needed an overhaul in the digital age," said a source in professional services.
The follow-up measure to last year's aimed at further advancing the capital market comes as the regulator seeks to divert investors and funds from real estate assets to small innovative companies.
SMEs seeking to raise capital worth between 3 billion won and 10 billion won will not have to face the hassle of paperwork or meet regulatory preconditions.
Previously, such an exemption was limited to small companies looking to raise less than 1 billion won via public offerings in the stock market.
Companies have mostly relied on bank loans to finance their research and commercialization, given that the capital market has been too centered on big listed companies.
This resulted in a few investors eyeing smaller companies with high potential, according to the FSC.
