[DigitalToday reporter Sangyeop Oh] South Korea's Financial Supervisory Service is expanding its inspection of Mirae Asset Securities related to the SpaceX IPO "zero-share allocation" incident. The review initially aimed to examine the professional investor registration process, but the focus is shifting to investor protection and internal control issues after the IPO allocation fell through.

Financial authorities said on June 16 the watchdog is checking the entire process of SpaceX IPO subscription and the failed allocation without setting a separate deadline for the inspection of Mirae Asset Securities.

The FSS began an on-site check of Mirae Asset Securities on June 5 and converted it into an inspection on June 9. The initial focus was the registration process for individual and corporate professional investors who were eligible to subscribe to the SpaceX IPO.

Under the Financial Consumer Protection Act, professional investors are subject to a narrower scope of investor protection obligations than general investors. The FSS is known to have launched the check to see whether Mirae Asset Securities sufficiently informed investors of such risks.

The scope of the inspection later broadened after the final allocation of SpaceX IPO shares was confirmed at zero. The FSS is also looking into how the allocation fell through, the investor notification process and the subscription solicitation process.

Within financial authorities, there is said to be a view that even if the actual number of IPO shares allocated to each underwriter is determined at the discretion of the lead manager, it is unusual for a domestic brokerage taking part as part of an underwriting group to receive not a single share it could sell.

The inspection could also cover the fact that Mirae Asset Securities actively sought investors and promoted the offering even though there was a possibility that the IPO allocation could change in the final allocation process.

Mirae Asset Group Chairman Hyun-joo Park (박현주) said in an interview with the media in April that he expected to receive a sizeable allocation of SpaceX IPO shares and that he would seek to give as many investors as possible an opportunity.

The FSS may also examine whether such management remarks and the subsequent company-wide subscription solicitation process were appropriate from the perspective of internal controls.

Complaints related to the failed allocation of SpaceX IPO shares are also known to be being filed with the FSS. Consumer dissatisfaction and protests are continuing not only toward Mirae Asset Securities but also toward related financial firms such as Korea Investment Trust Management, which said it would include SpaceX IPO shares in its exchange-traded funds (ETFs).

Korea Investment Trust Management's ACE US Space Tech Active ETF initially said it would include SpaceX IPO shares through Mirae Asset Securities, but it had no final allocation and instead added the stock through on-exchange purchases after the ETF's listing. As expectations for the inclusion of IPO shares fell through, the ETF plunged more than 10 percent the previous day.

The incident is expected to put financial sector promotional practices for overseas IPO investments and advertising practices for financial investment products back under scrutiny.

The FSS plans to discuss related issues in a task force on improving advertising rules for financial investment firms that was launched in April, and to prepare improvement measures during the third quarter.

The market sees the inspection as potentially going beyond the reasons for the failed allocation to include investor disclosure, sales procedures, internal controls and the appropriateness of marketing in the brokerage process for overseas IPO investments.