[DigitalToday reporter Sangyeop Oh (오상엽)] South Korea's Financial Services Commission has selected the Korea Exchange (KRX)-Koscom consortium (KDX) and the NextTrade-Musicow consortium (NXT) as preliminary license candidates to open a pilot over-the-counter exchange for fractional investment (STO). It made a conditional approval decision for the NXT consortium over a controversy involving alleged technology theft.

The FSC said it held a regular meeting on Thursday and deliberated and approved an agenda item on a preliminary license for over-the-counter brokerage of trust beneficiary securities. It stressed that it comprehensively considered evaluation scores from an external assessment panel of the Financial Supervisory Service and whether statutory requirements were met in the screening.

In the evaluation, the NXT consortium led by NextTrade and Musicow received the highest score of 750 points, followed by the KDX consortium involving KRX and Koscom with 725 points. The Lucentblock consortium fell short with 653 points and was not selected.

A key point in the approval is the condition imposed on the NXT consortium.

The FSC attached a proviso that it would immediately suspend the full licensing review process if the Fair Trade Commission opens an administrative investigation into allegations of technology theft raised by Lucentblock.

An FSC official said of the technology theft controversy, "There appears to have been business cooperation," but added, "We accepted the external assessment panel's view that there is insufficient objective basis to reflect issues related to NextTrade's alleged technology theft in the evaluation factors."

Lucentblock, which was not selected, was reported to have received low evaluations on requirements including capital, its business plan and its conflict-of-interest prevention system.

The assessment panel pointed out that Lucentblock had insufficient capital compared with competitors and lacked a mid- to long-term strategy for operating an over-the-counter exchange.

The two consortia that obtained preliminary licenses must apply for full licenses after meeting approval conditions within the next 6 months. If they receive final approval through the full licensing process, they will begin official operations.

The FSC also plans to form a related consultative body within this month and overhaul the licensing framework for over-the-counter exchanges in line with the enforcement of the Token Securities Act that passed the National Assembly last month.

Existing fractional investment securities of Lucentblock, which did not obtain a license, will be managed by Hana Securities under investor protection measures. The underlying real estate assets will be managed by Hana Asset Trust and Korea Investment Real Estate Trust, respectively.