SEOUL, Sept. 26 (Xinhua) -- South Korea planned to launch a crowdfunding system as early as next year to help venture companies finance their seed money from a wide pool of small investors with fewer restrictions, the country's financial regulator said Thursday.
Crowdfunding, which began to gain attention after the United States legalized the system in April 2012 via the Jumpstart Our Business Startups (JOBS) Act, refers to the financing of a company by selling a small amount of equities to a wide pool of investors in cyberspace.
"Entrepreneurs with creative ideas can post their business plans on the Internet or social network service (SNS) through online funding brokers. A number of small investors who sympathize with the ideas can invest money into the businessmen. That is a new type of funding called crowdfunding," Suh Tae-jong, director- general of the Financial Services Commission (FSC)'s capital market bureau, told a press briefing.
The FSC said that it will drastically lower entry barriers to the crowdfunding for easier access of emerging growth companies to the capital-raising market, while strengthening investor protection by restricting reckless investment.
Minimum equity capital requirements for online funding brokers would be placed at 500 million won (465,000 U.S. dollars), equivalent to other general securities brokerage.
Companies, which raise equity capital of less than 700 million won a year through crowdfunding, would not be obliged to submit any registration report to the regulator. It would lead to exemptions from the obligations to submit audit and accounting reports.
To protect small investors, the investment ceiling would be set at 2 million won per year for one company. Plural investments to several companies would not be regulated.
The FSC said that the crowdfunding system could be introduced as early as next year if the bill on the system is passed through the National Assembly at the regular parliamentary session slated for next month.