Concerns about fairness have emerged in the approval process for fractional investment exchanges, where a startup that pioneered the market was excluded in favor of a consortium dominated by established financial institutions. Questions were raised regarding the rationale behind limiting the number of approved entities to two and the influence of individuals from the financial sector. Additionally, there were criticisms regarding the delay in sanctions against private equity firm MBK Partners.
During a National Assembly audit of the Financial Services Commission (FSC) on October 8, Min Byung-deok, a lawmaker from the Democratic Party, questioned the appropriateness of the procedures and evaluation criteria under the Special Act on Financial Innovation Support related to the approval of fractional investment exchanges.
Min cited Lucent Block, which operates a real estate fractional investment platform called 'Soyo.' He noted that Lucent Block had successfully operated a financial regulatory sandbox for four years, serving 500,000 citizens without any incidents, yet was excluded from the approval process.
"It seems the young innovators are doing the experiments while the established interests reap the benefits," Min criticized, adding, "While the President speaks of a nation supporting youth entrepreneurship, the FSC is going in the opposite direction."
At the center of the controversy is the preliminary approval for fractional investment exchanges granted by the FSC in February. The FSC approved a consortium led by Next Trade and the Korea Exchange, while Lucent Block was not selected.
According to the results from an external evaluation committee, the Next Trade consortium scored 750 points, placing first, while KDX received 725 points. Lucent Block scored 653 points, 97 points lower than Next Trade and 72 points lower than KDX.
The FSC explained that Lucent Block received relatively lower scores in terms of its capital, business plan, and conflict of interest prevention systems. The commission stated that it considered the operational experience of existing sandbox operators and applied preferential measures in capital assessment.
However, doubts have been raised about the innovation support system's intent, as a consortium centered on established financial institutions received higher evaluations than a startup that has been operating actual services in the market.
Min specifically questioned the basis for limiting the number of approved entities to two. He inquired whether there is a legal provision restricting the number of approved operators or if it was merely a policy decision by the FSC.
In response, FSC Chairman Lee Ok-yeon explained that the policy to select a maximum of two entities was announced in advance. When Min pressed for clarification on whether this was a legal restriction or a policy judgment, Lee acknowledged it was a policy decision.
The operational experience and personnel composition of the approved entities were also scrutinized. Min argued that both KDX and the Next Trade consortium have no prior experience in operating fractional investment exchanges. He raised concerns about potential favoritism, noting that the leaders of both organizations previously held high-ranking positions in the Financial Supervisory Service and the FSC.
Moreover, Min pointed out that while the FSC is promoting a fractional investment exchange aimed at general investors, some approved entities initially focused their business plans on business-to-business (B2B) transactions. He questioned the appropriateness of awarding high evaluations to a consortium that submitted a plan centered on institutional transactions rather than business-to-consumer (B2C) transactions.
In response, Lee stated, "We believe the process was fair, and the approval methods were sufficiently communicated after gathering industry opinions." He acknowledged the frustration felt by innovative businesses regarding the evaluation results but maintained that the established approval procedures must be followed.
Min called for consideration of providing evaluation opportunities to existing innovative financial businesses, noting that the final approval process is still pending. He also requested that relevant evaluation materials be submitted by October 22, ahead of the comprehensive audit.
During the audit, the delay in sanctions against MBK Partners related to the Homeplus incident was also raised. Min pointed out that it has been 98 days since the Financial Supervisory Service concluded its review of sanctions against MBK Partners on July 2, and he questioned why the FSC has not yet made a decision.
The Financial Supervisory Service concluded its review of sanctions against MBK Partners on July 2, but the final sanction level is subject to subsequent procedures by the financial authorities.
Min emphasized that while the decision on sanctions is delayed, MBK Partners Vice Chairman Kim Kwang-il continues to be involved in management, urging for a swift resolution.
In response, Lee stated that the relevant details are currently under review by a subcommittee and assured that they would be handled strictly according to the law and principles.
* This article has been translated by AI.
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