For public funds applicable to ordinary investors, the Amendment aims to build investor trust by improving the system to enhance profitability and reduce costs. For private funds applicable to professional investors, the Amendment aims to further increase autonomy and promote competition by reducing unnecessary regulations.
The Amendment also aims to make pragmatic improvements to the system by streamlining regulations concerning investment advisory and discretionary investment business entities, and addresses and improves upon a number of weaknesses that have emerged from the operation of the current system.
A. Expand the scope of financial investment instruments eligible for investment advice (Article 2-9, paragraph 4)
Allow even investment advisory business entities that can be registered with the lowest equity capital to provide investment advice on derivatives-linked bonds.
B. Relax equity capital requirements for foreign exchange business registration (Article 2-11, paragraph 1, subparagraph 1, item (a))
In accordance with the relaxation of the minimum equity capital requirement for hedge fund investment business entities from 2 billion won (current) to 1 billion won, relax the minimum equity capital requirement for financial investment business entities that may register as foreign exchange businesses under the Foreign Exchange Act from 2 billion won (current) to 1 billion won.
C. Tighten sales regulations for funds of affiliated companies (Article 4-20, paragraph 1, subparagraph 10, item (e); Addenda Article 2)
Reduce the share of affiliated funds in the annual sales of collective investment securities by investment traders and brokers from 50 percent (current) to 25 percent. To consider the burden on markets, etc., reduce it gradually by 5 percent per year.
D. Strengthen the convenience and effectiveness of monthly trading statements (Article 4-37, paragraph 2)
Require investment traders and brokers to provide investors with information on such matters as the actual return on collective investment securities and expected amount of redemption on a monthly basis.
E. Requirements for discretionary investment business entities that may be entrusted with voting rights (Article 4-75-2)
Prescribe that only those discretionary investment business entities that have made an official announcement, as specified by the Korea Financial Investment Association, on such matters as basic principles, specific criteria, organization in charge and organizational system, policies to prevent conflict of interest, etc., with respect to the exercise of voting rights of stocks belonging to discretionary investment property may exercise voting rights entrusted by a pension fund or mutual aid fund, etc.
F. Allow non-face-to-face discretionary investment contracts (Article 4-77, subparagraph 18, items (c) and (d))
Allow discretionary investment contracts to be entered into on a non-face-to-face basis where a discretionary investment business entity fulfills its duty of explanation by video call. Where a discretionary investment business entity with an equity capital requirement of not less than 4 billion won utilizes an electronic investment advice system through which important and essential information for investors has been published on the Koscom website on a daily basis for at least the past 2 years, allow discretionary investment contracts to be entered into on a non-face-to-face basis even if the duty of explanation is not fulfilled by video call.