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May 30, 2023
- Authorities Plan to Overhaul Rules on CFD Trades while Restricting New Transactions for Three Months
- The Financial Services Commission held a meeting with the Financial Supervisory Service, the Korea Exchange and the Korea Financial Investment Association on May 26 and held discussions to finalize a set of measures intended to strengthen regulations on trading of contracts for difference (CFDs). The measures include (a) enhancing transparency in the provision of information on the actual type of CFD investors and investment balances by item, (b) closing loopholes to prevent regulatory arbitrage by including the amount of CFDs provided in the securities firms maximum credit extension limit, (c) requiring individual investors applying for the qualified professional investor status to go through an in-person (including video call) verification process, and (d) establishing a new investment requirement for over-the-counter (OTC) derivatives transactions such as trading of CFDs. Enhancing transparency in provision of relevant investment information To help investors make more rational decisions about their CFD investments, authorities will improve the system to ensure the provision of more appropriate investment information. Even though those making investments in CFDs are mostly individual retail investors (making up about 96.5 percent), currently, when securities firms submit stock transaction orders following retail investors CFD trading, the investor type is currently marked as institutional investor when orders are submitted by a domestic securities firm or as foreign investor when orders are submitted by a foreign securities firm. This has created the problem of misrepresenting the flow of investment funds into particular investment items by institutional and foreign investors. In order to prevent this sort of misunderstanding by market participants, for stock transactions resulting from CFD trading, actual investor type (e.g., individual investor) will be recorded. In addition, as in the case of credit loans, the total and item-by-item CFD balances will be disclo
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May 08, 2023
- FSC Introduces Measures to Facilitate Corporate Merger and Acquisition Activities
- The FSC announced a set of measures aimed at facilitating corporate merger and acquisition activities on May 8. In the second half of this year, the FSC also plans to announce additional policy agenda items for facilitating corporate MA activities through coordination with the Ministry of Justice. Corporate MAs are an important mechanism to boost management efficiency and reorganize the structure of an enterprise. They also help to increase the overall productivity of an economy as well as its recovery from a downturn. However, the corporate MA market saw a significant decline recently due mainly to the worsening of macroeconomic conditions. Against this backdrop, the FSC prepared plans to (a) seek regulatory improvements on corporate MAs, (b) strengthen support for corporate restructuring through MAs, (c) support strategic MA activities in line with industrial restructuring demand, and (d) make domestic rules on corporate MAs more congruent with global standards. Key Details Seek regulatory improvements on corporate MAs to propel growth momentum Authorities plan to make improvements to some of the regulations that have been identified as unreasonable including those on public tender offer, corporate mergers and credit offering by investment banks. First, when making a public takeover bid, the burden of securing funds beforehand will be eased. A loan commitment from a trustworthy acquiring financial institution or an investment agreement from a limited partner will be recognized as an admissible document showing financial capability of a tender offeror. Second, in a spin-off or a post-spin-off merger, the process of converting CBs (convertible bonds) and BWs (bonds with warrants) will be streamlined as the electronic securities depository (Korea Securities Depository) will be allowed to get investor information directly from securities firms and process conversion of CBs and BWs electronically. Third, investment banks will be able to more actively offer credit to bu
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Apr 26, 2023
- Revised Rule to Require IPO Bookrunners to Check Payment Capability of Institutional Investors
- The FSC approved a revision bill of the regulation on financial investment businesses at its 8th regular meeting held on April 26. This revision bill is a follow-up to the measures to improve the soundness of the initial public offering (IPO) market announced in December last year and contains a measure to facilitate carbon emissions trading by securities companies along with other regulatory overhaul items. Requirement for IPO bookrunners First, when managing IPOs, the IPO bookrunner will be responsible for verifying institutional investors ability to pay for stocks before the allotment of shares takes place. In an IPO, the bookrunner performs a book building to check demands from institutional investors in order to determine an appropriate IPO price. The public offering price decided is then used to get subscription from retail investors. However, for certain high-demand items, the issue of fictitious subscription by institutional investors in excess of their payment capabilities and that of over-competition have been problematic. It has been pointed out that this practice of fictitious subscription has been hindering the price discovery function of the book building process, causing distortions in the IPO market. Thus, this revision is aimed at preventing the practice of fictitious subscription and strengthening the responsibility of IPO bookrunners throughout the book building process by introducing sanctions such as imposition of an administrative fine for unfair transaction activity when bookrunners fail to check institutional investors stock payment capabilities prior to allotting shares. This requirement will take effect from the securities registration reports for IPOs filed after July, after relevant rules change is completed by the industry association. With this revision bill, apart from the measures for allowing bookrunners to preliminarily review institutional investors demands and introducing the cornerstone investing system, all other follow-up items
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Apr 03, 2023
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Jan 31, 2023
- Authorities Plan to Improve Rules Regarding Dividend in Line with Global Standards
- The FSC and the Ministry of Justice announced measures to improve rules regarding dividend to make companies procedures for distributing dividends more consistent with international standards. First, by issuing an authoritative interpretation on the Commercial Act and revising the Financial Investment Services and Capital Markets Act (FSCMA), authorities will make improvements to the current procedure for distributing dividends to enable investors to invest after checking dividend amounts to receive. Second, authorities will pursue diverse measures to induce voluntary and active adoption of the improved dividend distribution procedure from companies by revising and notifying the model articles of incorporation for listed companies, requiring companies to disclose whether they have adopted the improved dividend distribution procedure on their corporate governance reports, etc. Authorities expect that these measures will help to alleviate factors contributing to the so-called Korea discount, promote dividend investing and bolster companies dividend payout ratios, and create an environment where more investors are encouraged to turn to long-term dividend investing for regular dividend income which will help to ease volatility in stock markets. Background Most companies in Korea designate shareholders who will receive dividends at the end of each year prior to determining dividend amounts at general shareholders meetings held in the following spring. As a result, investors invest in companies without knowing how much they will receive in dividends, and they have no choice but to accept the decision on dividends that will be made a few months later. These rules and practices, which discourage dividend investing of earning regular dividend income, remain inconsistent with global standardsand have been pointed out as a factor contributing to the so-called Korea discount, an undervaluation of the Korean stock market by foreign observers. Therefore, dividend investing in Kor
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Jan 30, 2023
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Jan 25, 2023
- FSC Announces Measures to Improve Foreign Investors' Access to Korean Capital Markets
- The FSC announced on January 25 a set of measures intended to improve foreign investors access to Korean capital markets by seeking bold improvements of the regulations that have been impediments to global investors investments in Korean markets. The measures include (a) abolishing the foreign investor registration requirement, (b) facilitating the use of omnibus account for foreign investors, (c) enabling more convenient OTC transactions by foreign investors and (d) expanding English disclosures in phases. Authorities expect that these measures will enhance the investment environment for foreigners on a par with international standards, which will provide important grounds to boost foreign investment in Korean markets. Background The foreign investor registration system and the constraints on foreign investors OTC (over-the-counter) transactions were introduced in 1992 when authorities began to allow foreign investors to invest in locally-listed stocks. While permitting foreigners to invest in locally-listed stocks, authorities established the total foreign investment cap and individual foreign investor cap of 10 percent and 3 percent, respectively, for each investment item, and began to require prior registration for foreign investors as well as to restrict their OTC transactions to monitor their observance. With the abolishment of foreign investors stock holding limit for ordinary companies in 1998, there currently exist foreign investors stock holding limits placed on only 33 items in key industries among 2,500 listed companies. However, the foreign investor registration system has continued to exist for the past three decades without a significant change. In addition, authorities introduced omnibus account for foreign investors in 2017 to provide a convenient way to invest in Korean markets, but it has not been utilized ever since its inception. The availability of English disclosures, which serve as essential information for foreign investors decisions on inve
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Jan 19, 2023
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Jan 11, 2023
- Government Prepares KRW80 Trillion Financial Support Programs to Help SMEs Overcome Crisis
- The FSC and the Ministry of SMEs and Startups (MSS) held talks with policy financial institutions, the Korea Federation of Banks and major industry groups representing SMEson January 11 and announced their joint plans to provide financial support for SMEs to help them overcome the complex crisis situation they face currently. A total of KRW80 trillion of policy financial supports (KRW50 trillion from the FSC and KRW30 trillion from the MSS) will be newly supplied. This KRW80 trillion financial supports are designed to help them overcome the current triple-highs (interest rate, inflation and USD to KRW exchange rate) risky situation, to support growth of innovative businesses and to assist the recovery or re-start of vulnerable firms. After the announcement, the FSC and the MSS listened to complaints and suggestions from field industry groups for SMEs. Financial Support for SMEs (KRW80 Trillion) I. Background High interest rates and concerns about a global recession rapidly increase managerial burdens on SMEs, and this condition is expected to continue for some time in the near future. With the increase in loan balances, SMEs face added burdens for interest expenses due to rate hikes, and there are more SMEs struggling with increased production costs following rising in raw materials prices and global supply chain reshuffles. To improve the potential growth in our economy, SMEs need to get into the new growth sectors and secure their own competitiveness through business conversion. However, with the challenging economic situation recently, it is necessary to support the growth of innovative businesses and the resurgence or re-start efforts of vulnerable SMEs through policy finance. II. Overall Direction The government will supply a total of KRW80 trillion via policy funds (KRW50 trillion from the FSC and KRW30 trillion from the MSS) and seek system improvements in diverse areas to bolster the crisis-response capacity and growth potential of SMEs, and to expedite norm
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Dec 26, 2022
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Dec 26, 2022
- FSC Plans to Bolster Support to Promote Sustained Growth of Fintech Businesses
- The FSC announced a set of measures to strengthen support for fintech businesses, which is confirmed after discussion and deliberation at the 5th financial regulatory innovation committee meeting held on December 20. Against the backdrop of the current industrial situation where fintech businesses face funding shortages amid interest rate hikes, waning impetus of industrial growth and difficulties in expanding their business into overseas markets, these measures will expectedly boost multiple facets of fintech business supports, such as funding or promotion of startups. Key Measures I. Strengthen Support through Investment and Policy Funds a) (Increasing the Size of Fintech Innovation Fund) The size of the fintech innovation fund, initially planned as KRW500 billion for four years (2020-2023), will be increased to KRW1 trillion by adding KRW500 billion for another four years (2024-2027). Authorities will improve operation methods by (a) ensuring continuous operation of the early-stage fintech investment fund, which has been operated intermittently, and (b) newly creating a commercialization fund intended to make investment in those who seriously prepare business expansion at the commercialization stage. b) (Increasing Support through Policy Financial Institutions) Tailored support for fintech businesses will be made in the form of loans and guarantees from policy financial institutions in the amount of at least KRW200 billion a year. c) (Establishing Comprehensive Fintech Support System) Authorities will set up and operate Fintech Support Council, consisting of representatives form 14 institutionsthat currently operate their own fintech support programs, to make their support programs more systematic and effective. The participating institutions will establish a common databaseto monitor the growth history as well as the record of support provided for each fintech business. A fintech focused investor relations (IR) event will be held at least once every half a year.
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Dec 19, 2022
- Authorities Meet with Banks to Discuss Resumption of Bank Bond Issuance
- The FSC held a meeting with the related authoritiesand the banking sector on December 19 to examine the banking sectors lending and borrowing situation and discuss resumption of bank bond issuance. At the meeting, participants shared a common assessment that financial markets such as the bond market and foreign exchange market are gradually returning back to stabilityas a result of expectations for a slower pace of monetary tightening at home and abroad, as well as the government and financial institutions initiative to stabilize the market. However, as there still exist uncertainties in financial markets concerning price levels, trends of economic slowdown and the pace of monetary tightening in major advanced economies, participants reached to the same view that it is still vital to maintain a state of vigilance in responding to market situations. Financial authorities expressed appreciation for the active market stabilization efforts the banking sector showedand said that authorities will continue to make available policy-based support programs (bond market stabilization fund, corporate bond and CP purchase program, etc.) to ensure market stability. At todays meeting, participants discussed how to restart bank bond issuance, which has been refrained so far for the goal of maintaining stability in the bond market. The banking sector raised the issue that there currently exist diverse types of demands for issuing bank bonds, for instance, to deal with their outstanding bonds coming to maturity soon, to respond to the outflow of consumer deposits, and to expand corporate loans, etc. In particular, considering the recent signs toward stabilization in the bond market and the year-end lending and borrowing needs of banks, the banking sector suggested the gradual restart of bank bond issuance at least for the purpose of refinancing bonds that are about to mature. Taking into account the latest supply and demand situation of bond markets as well as expert opinions, partic
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Dec 01, 2022
- Authorities Plan to Disclose Identity of Entities Committing Unfair Trading Practices
- As a way to bolster prevention of unfair trading practices in capital markets, the FSC plans to disclose the identity (corporate name, etc.) of those who violate capital market regulations such as restriction of short sales and prohibition of market disturbances and receive a disposition of a penalty surcharge or an administrative fine for that violation. This measure shall apply to the violators receiving sanctions at the 22nd regular meeting of the Securities and Futures Commission (SFC) scheduled to be held in December 2022. Their identities will be announced through the FSC website in February 2023. Background The FSC has gradually extended the scope and detailsstock items, dates and penaltiesof disclosure of the SFC resolutions on sanctions that are made available for unfair trading practices in capital markets. However, the identity of violators is not being disclosed currently due to the potential misuse of their corporate or individual financial transaction information by a third party. Nonetheless, there is a growing need to secure effectiveness of sanctions measures imposed on unfair trading activities in capital markets such as illegal short sales. Therefore, after a careful consideration, the FSC decided to expand the scope and details of disclosure of sanctions by unveiling the identity of violators. Disclosure of Identity of Entities Violating Capital Market Regulations If an investigation led by financial authorities ends up with sanctionsof imposing a penalty surcharge or an administrative fine, the identity (corporate name, etc.) of the violator will be unveiled. Although the violators that become subject to sanctions are mostly corporate entities, in some cases, individuals also become subject to sanctions when they commit unfair trading practices such as activities of disturbing market order. If unfair trading activities in capital markets under the investigation led by financial authorities are subject to criminal punishment,in consideration of t
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Nov 28, 2022
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Nov 09, 2022
- FSC Chairman Meets with Heads of Banks and Discusses Market Stabilization Measures
- FSC Chairman Kim Joo-hyun met with the heads of Korea Federation of Banks and twenty major banks on November 9 and held talks on financial market stabilization efforts. At the meeting, participants shared their outlook and views on financial market conditions and discussed (a) the banking sectors constructive role and action plan for market stabilization and (b) current difficulties in banks financing and operation of funds as well as ways to resolve them. Summary of Remarks by FSC Chairman Rapid increases in interest rates are continuing to put stress on our economic situation. However, unlike in the previous crisis situations such as thefinancial crisis in 2008 and the COVID-19 pandemic in 2020, it is now difficult to handle this situation by lowering interest rates or expanding fiscal spending. Now is the time for the financial industry and the government to come together and respond to difficulties by effectively making use of all available capacities in our economy. Under these circumstances, the banking sector has thus far provided a steady reinforcement to support vulnerable groups and supply liquidity in response to the recent turmoil in money market and bond market. The five major financial holding companies are making efforts to stabilize markets through their support plan announced on November 1. To sustain stability in financial markets, it is necessary to look closely at both the trees and the forest as stated earlier by former Fed chair Ben Bernanke. In this regard, the banking sector, as the core of our financial system, should provide a leading role to stabilize market for the whole financial system over the banking sector. First, aside from abrupt rate hikes, there are concerns about credit crunch that may result from the collapse of market confidence. In this regard, the combined effects of the governments market stabilization measures and the banking sectors efforts to stimulate the flow of funds will significantly help businesses and micro-enterp
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Aug 18, 2022
- KoFIU Cautions Virtual Asset Users against Unregistered Virtual Asset Service Providers
- The Korea Financial Intelligence Unit (KoFIU) announced on August 18 that it has notified illegal business activities of 16 unregistered Virtual Asset Service Providers (VASPs) to the investigative authority. The KOFIU urged virtual asset users to practice extra caution in order to avoid incurring damages that may result from their transactions with unregistered VASPs. I. Unregistered Operation of Foreign-based VASPs in Domestic Market The KoFIU has notified the investigative authority about the violation of unregistered business activities of 16 foreign-based VASPs* carrying out business activities intended for domestic consumers pursuant to the Act on Reporting and Using Specified Financial Transaction Information (the Act hereinafter). * KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, Pionex The 16 foreign-based VASPs were found to have been engaged in business activities targeting domestic consumers by offering Korean-language websites, having promotional events targeting Korean consumers and providing a payment option that supportsthe purchase of virtual assets using credit cards. On July 22, 2021, the KoFIU notified foreign-based VASPs that have business operations targeting Koreans about their obligation to registertheir business with the authority pursuant to the Act. However, the 16 aforementioned entities were found to have business operations targeting Koreans without obtaining a registration and thus the authorities plan to take necessary measures. II. Actions Taken on Unregistered VASPs a) The KoFIU has notified the investigative authority about the violation of registration duties (under the Act) of 16 unregistered VASPs, and plans to inform FIUs in their respective countries about their violation. For illegal business activities of unregistered entities, maximum 5 years of imprisonment or up to KRW50 million of fine can be imposed with a restrictionfor registering as a VASP in dome
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Aug 08, 2022
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Jul 28, 2022
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Jun 20, 2022
- 2022 Korea Fintech Week to be Held in September
- The FSC announced that the 2022 Korea Fintech Week, a global fintech exhibition, will be held from September 28 to 30 this year in cooperation with relevant institutions. With the availability of both offline and online participation, the Korea Fintech Week will help accelerate innovation in the fintech industry. (Offline) Three days of fintech IR events, investor consultation, job mentoring, fintech-themed seminars will help with investment promotion and employment opportunities. (Online) Exhibition halls, learning programs, experience programs and seminars will be operated online through metaverse. For participation in exhibition halls, idea contest, IR competition and investment consultation, please see detailed information below. Overview of 2022 Korea Fintech Week (Theme) Fintech, Tearing Down Barriers in Finance The 2022 Korea Fintech Week will be operated so as to help expand and replicate the innovation and growth of the fintech industry in close cooperation with relevant institutions. (Program) Offline and online events will be held simultaneously. a) (Offline) The 2022 Korea Fintech Week will provide a variety of venues for fintech firms, investors, relevant institutions and the public to come together through seminars, consultations, exhibitions and other standing programs. - (Opening Ceremony) Sharing outcomes of the fintech policy and presenting policy direction for innovation. - (Seminar) Seminars organized around specific fintech areas such as blockchain, data, etc. - (Investment) Providing opportunities for fintechs to attract investment through fintech IR, investment consultation, etc. - (Exhibition Halls) Introducing fintech services launched by fintech businesses and financial institutions. - (Programs for Participation) Providing an opportunity for prospective entrepreneurs to pitch ideas about fintech business models through idea contest and mentoring and giving fintech jobseekers a chance to have consultation. b) (Online) Various online program
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Jun 09, 2022
