Session 2 FISCMA_MOFE_2007.ppt
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Transcript of Session 2 FISCMA_MOFE_2007.ppt
Legislation of the
March 29, 2007March 29, 2007
MINISTRY OF FINANCE AND ECONOMYREPUBLIC OF KOREA
■ Current status
■ Measures to Upgrade capital market
■ Basic framework
■ Shift to functional regulation ■ Introduce a comprehensive system■ Expand business scope■ Upgrade investor protection mechanism
I. B ackground for le g is la tion
II. M a jor change s
III. E xpe cte d e ffe cts
IV. T ime line
MINISTRY OF FINANCE AND ECONOMY
4
I. – Ba ckground for le gis la tion Curre nt s ta tus MINISTRY OF FINANCE AND ECONOMY
■ Curre nt s ta tus of capita l marke t
▶ Corpora te fina ncing through capita l ma rke t continue s to s hrink
Financing through e quitie s
▶ Ca pita l m arke t fa ils to grow com m e ns ura te with re a l e conom ic growth
8778
6250 48
2001 2002 2003 2004 2005
1412
911
87
2000 2001 2002 2003 2004 2005
( )Trillion won( )Trillion won53.9 54.0
52.3
52.451.6
52.2
1999 2000 2001 2002 2003 2004
(%, )Financing balance
87.3105.3 106.4
131.8145.6
Korea Japan U.S U.K. Taiwan
Equity marke t by country( / )Marke t capita liza tion GDP
83.5 87106.5
163.2189.4
Korea Germany France U.S Japan
Bond marke t by country( / )Bond re s e rve s GDP
Fina ncing thro ugh corpo ra te bonds
(%, 2005) (%, 2003)
Ratio of capita l marke t to financia l marke t
Capita l marke t & its re la te d financia l s e rvice s are ye t to be fully de ve lope d Capita l marke t & its re la te d financia l s e rvice s are ye t to be fully de ve lope d
1 . Curre nt Sta tus1 . Curre nt Sta tus
5
■ Curre nt s ta tus of ca pita l m a rke t re la te d fina ncia l s e rvice s ▶ Lagging be hind comme rcia l banks , in te rms of re s tructuring bus ine s s s ize and profitability
▶ Subs tantia lly we ak compe titive ne s s Subs tantia lly we ak compe titive ne s s in qua lity and quantity compare d to the 3top
inte rna tiona l inve s tme nt banks
* 1 , 2 , 3 4 4 ( )and are the major dome s tic companie s ne t worth bas is* : * : * : G Goldman Sachs Me Me rrill Lynch Mo Morgan Stanle y
Re s tructuring by s e ctor[ ]Numbe r of ma rke t pla ye rs
31 38
4433
1923
1999 2005
Commmercial
bank
Asset management company 0.4
0.4
1.54.0
1999 2005
Commercial
bank
Securities
company
5.57.1
14.5
5.4
12.8
19.6
2001 2005.1/2
Commercial
bank
Securities
company
Asset
m,anagement
comapny
Bus ine s s s ize by s e ctor [ ]Ave rage ne t worth
Profitability by s e ctor[ ]Re turn on e quity(%)
- Broke ra ge o rie nte d bus ine s s mo de l ( , 2 0 0 4 )Ne t re ve nue
Small bus ine s s s ize [ ]Ne t worth
Low profitability [ ]Re turn on e quity
0.9 1.9
-11.7
4.6
19.515.0 16.9
1 2 3 4 G Me Mo
(%, 2004)
1.8 1.7 1.3 1.2
25.131.4
28.2
1 2 3 4 G Me Mo
<4 major domestic >securities companies
<3 >global IBs
Others Others
Principalinvestment
Principa linvestment I B
I B
Assetmanagement
Assetmanagement
Securitiesservices
Securitiesservices
( , 2005)Trillion won Mar
I. – Ba ckground for le gis la tion Curre nt s ta tus MINISTRY OF FINANCE AND ECONOMY
Securities company
6
iiii To enhance capital market transparency
To expand demand basis of Marketii
To set up the advanced legal framework of capital marketiviv
iiiiii To improve capital market efficiency
I. - Ba ckground for le gis la tion Me a s ure s MINISTRY OF FINANCE AND ECONOMY
■ , to s tre ngthe n the ro le s of Ins titutiona l Inve s tor including, PEF
, pe ns ion funds and le ad to long te rm inve s tme nt
■ - , to improve inte rna l de c is ion making proce s s to s tre ngthe n ’ s hare holde rs rights and to cre ate marke ts for corpora te
control
■ (2 0 0 5 )cons olida te d the thre e e xchange s into KRX ■ to introduce e le ctronic s e curitie s s ys te m
■ to e nact Financia l Inve s tme nt Se rvice s and Capita l Marke tsAct
2 . Ke y Me as ure s to upgrade Capita l Marke t2 . Ke y Me as ure s to upgrade Capita l Marke t
7
I. – Ba ckground for le gis la tion Ba s ic fra me work MINISTRY OF FINANCE AND ECONOMY
Shift to functional regulationShift to functional regulation
○ - ,Re clas s ify fina ncia l inve s tme nt s e rvice s
fina ncia l inve s tme nt products and inve s tors
( )according to the ir e conomic s ubs tance nature
* Financial function = Services + Products + Investors
○ Fina ncia l function of the s ame na ture s ha ll be
gove rne d
, by the s a me re gula tion re gardle s s o f the fina ncia l
ins titutions e ngage d in the tra ns action
Introduce comprehensive systemIntroduce comprehensive system
○ - Us e a broa d bas e d de finition of “fina ncia l inve s tme nt products ”
, to e mbrace the m all into the ne w re gime s o as to ke e p pa ce
with
rapidly de ve loping financia l inve s tme nt products
* Expand the scope of permissible products for financial investment companies and the coverage of investor protection regulations
Expand business scopeExpand business scope
○ Allow inte gration of a ll fina ncia l inve s tme nt s e rvice s → , , , De aling arranging as s e t ma na ge me nt - dis cre tionary & non dis cre tionary inve s tme nt , advis ory s e rvice s as s e t cus todia n mana ge me nt
○ Allow a ll acce s s ory s e rvice s ○ - Adopt an introducing broke r s ys te m ○ Allow fore x s e rvice s in conne ction with financia l
inve s tme nt s e rvice s
Upgrade investor protection mechanismUpgrade investor protection mechanism
○ Put in pla ce adva nce d inve s tor prote c tion me chanis m
* Ma nda te product guide line s to inve s tors
* Introduce the principle of s uitability
○ Es ta blis h a s ys te m to pre ve nt conflic t of inte re s ts
○ Expand the s cope of s e curitie s s ubje ct to re gis tra tion
/ , s ta te me nt re gula tion including indire c t inve s tme nt
s e curitie s a nd be ne fic ia ry ce rtifica te s
Consolidate capital market laws into a single law
Create a financial big bang in capital marketCreate a financial big bang in capital market- Promote financial innovation and competition through advanced Promote financial innovation and competition through advanced
regulatory reform and stronger investor protection regulatory reform and stronger investor protection
9
1 . Shift to functiona l re gula tory re gime1 . Shift to functiona l re gula tory re gime
II. – Ma jor cha nge s Shift to functiona l re gula tion MINISTRY OF FINANCE AND ECONOMY
■ Shift from curre nt ins titutiona l re gula tion to functiona l re gula tion
Curre nt Propos e d Diffe re nt re gula tions are applie d to the s ame fina ncia l
function if it is carrie d out by diffe re nt type s of fina ncia l
ins titutions
The s ame re gula tion will be a pplie d to the s ame fina ncia l function re gardle s s o f the type s of fina ncia l
ins titutions providing the s e rvice
Re gulate d by the
Se curitie s & Exchange
Act
Re gulate d by the
As s e tMa nage me nt
Act
Re gulate d by the
Future s Trading Act
Re gulate d by the Re alEs ta te
Inve s tme ntCo mpany
Act
Re gulate d by the
ShipInve s tme nt
Manage me ntCompany
Act
Re gulate d by the
Trus t Act
Se curitie scompany
As s e tmanage me nt
company
Future scompany
Re al e s ta teinve s tme nt
co mpany
Shipinve s tme nt
manage me ntco mpany
Trus tcompany
De aling ArrangingDe a ls
Colle ctiveInve s tme nt
Trus tSe rvice
Dis cre tionary inve s tme nt
advis ory s e rvice s
De aling ArrangingDe als
Colle ctiveInve s tme nt
Dis cre tionaryinve s tme nt
advis orys e rvice s
-Nondis cre tio nary
inve s tme ntadvis orys e rvice s
Trus tSe rvice
Single cons olidate d law
Re gulatingde aling
Re gulatingArranging
de als
Re gulatingColle ctive
Inve s tme nt
Re gulatingdis cre tionary
inve s tme nta dvis orys e rvice s
Re gulating-non
dis cre tionaryinve s tme nt
advis orys e rvice s
Re gulating Trus t s e rvice
, Re s pe ctive re gulations for e ntry s oundne s s & bus ine s s activitie s , for e ntry s oundne s s & bus ine s s activitie s , for e ntry s oundne s s & bus ine s s activitie s
1 0
II. – Ma jor cha nge s Shift to functiona l re gula tion MINISTRY OF FINANCE AND ECONOMY
■ 6 cate gorie s of financia l inve s tme nt s e rvice s
▶ , , , - De aling a rranging as s e t m anage me nt dis cre tionary & non dis cre tiona ry inve s tme nt a dvis ory
, s e rvice s a nd trus t s e rvice s: Curre nt Each law e nume rate s financia l s e rvice s pe rmis s ible for e ach financia l company Re vis e d: 6 s tre am line d ca te gorie s by e conomic s ubs tance
Cus to-dian
Cus to- dian
- Cus todian
Cus to- dianTrus
– te e
Trus t
Dis cre tionary
Inve s tm e nt
a dvis ory
Bus ine s s ofpartne r
As s e tmana ge me nt
As s e tmanage me nt
As s e tmanag
e me nt
As s e tmanage me nt
Arranging
Broke rag, e
, arrangea ge ncy
Future s tra ding
Indire c t
inve s t me nt
s e curit ie s
s a le s
De a lingUnde rw
ritingDis coun
ting
De a lingUnde rwri
tingSale s
Pe rm itte d
Financia l
s e rvice s
Corpo ra te re s tructuring ve hic le
Inve s tme nt
co rporatio n
As s e t-cus to
dian
Shipinve s t
me ntmngm
As s e t-cus to
dian
As s e tmngm
As s e t-cus
todian
As s e t
mngmt
Cus to- ,dia n
trus t.co
-No n-dis cre
tionary .inv
-advi
s ory
-Dis cre
tiona ry
advis ory,co
As s e t
m ng m.co
Trus t-Me r
chantbank
-Se curi
tie s
.co
Future s.co
Com
- panytype
Indus try De ve lopm e nt Act
Spe c ia l Act on Ve nture Sta rtups
Support for SME Es ta blis hme nt Act
Ship Inve s tm e nt Ma nage me nt
Act
Re a l Es ta te Inve s tme nt
Act
Corpora teRe s tructu
- ring Ve hic le Act
As s e t Manage me nt Act Trus tAct
Me r- chant
Ba nkAct
Se curi- t ie s
Tra dingAct
Future s Tra ding
ActLaw
Trus t s e rvice
- Non dis cre tionary inve s tme nt a dvis ory
s e rvice s
Dis cre tiona ry inve s tme nt a dvis ory
s e rvice s
Colle ctive Inve s tme nt
Arranging De a ls
De a ling
Financia l
s e rvice s
Financia l inve s tme nt
company ( )“FIC”
Com pa nytype
Financia l Inve s tme nt Se rvice s &
Capita l Marke t ActLaw
[1 ] Clas s ify FINANCIAL INVESTMENT SERVICES FINANCIAL INVESTMENT SERVICES 6 into ca te gorie s by e conomic nature
1 1
II. – Ma jor cha nge s Shift to functiona l re gula tion MINISTRY OF FINANCE AND ECONOMY
[2 ] Stre a m line prude ntia l re gula tions
■ The s ame financia l function will be s ubje ct to the s ame prude ntia l re gula tion
■ The s a me re gula tions gove rn bus ine s s a ctivitie s o f the s am e financ ia l function ( Unive rs a l re gula tions for a ll financia l inve s tme nt s e rvice s + individual re gula tions for e ach financia l
)inve s tme nt s e rvice Unive rs a l re gulations on
a ll financia l bus ine s s activitie s
Duty of good fa ith
Prohibition of los s compe ns ation
- - Know your cus tome r rule
Prohibition of unwante d s olic ita tion
Suitability principle
Duty of lawful product guidance
+ Individual re gulations on
e ach financia l inve s tme nt s e rvice(e xample s )
-Prohibition of s e lf contra ctingDe a ling
Arbitrary de a ling prohibite d Arra nging De a ls
Re gula tions on manage me nt of
CIS a s s e t
Colle ctive
Inve s tme nt
Loans prohibite d Dis cre tionary
inve s tme nt advis ory s e rvice
’ ’ FICs own as s e t & clie nts a s s e tin
cus todian cle arly s e pa rate d Trus t s e rvice
[3 ] Re vis e re gula tion on bus ine s s a ctivitie s
■ : Followings are the prude ntia l re gula tion me chanis ms applie d to a ll FICs
▶ ( Capita l ade qua cy ra tio to e ns ure ade qua te e quity ca pita l a ga ins t the unde rlying
)ris k ▶ Re s tric tion on trans actions with m ajor s ha re ho lde rs
▶ Dis c los ure of financ ia l a nd ma na ge me nt s ta tus
1 2
II. – Ma jor cha nge s Introduce a com pre he ns ive s ys te m MINISTRY OF FINANCE AND ECONOMY
■ Pe rm is s ible s e curitie s and de riva tive s for tra ns a ction are s pe c ifie d by la w
FICs m a y de a l with financia l inve s tm e nt products s pe cifie d ,by la w
a nd only to which inve s tor prote ction is applie d
2 . Introduce a compre he ns ive2 . Introduce a compre he ns ives ys te ms ys te m
■ - Introduce a broa d ba s e d de finition to e ncom pa s s a ll fina ncia linve s tme nt products with inve s tm e nt va lue
Allow FICs to s tructure and de a l with a ll fina ncia l inve s tm e nt products
a nd a pply re gula tions on inve s tor prote ction to a ll o f the s eproducts
All financia lproducts
De pos itsIns urancecontracts
,Se curitie sDe riva tive s
Ne w financia lproducts
De pos its Ins urancecontracts Financia l inve s tme nt
products
All financia l products
1 3
II. – Ma jor cha nge s Shift to functiona l re gula tory re gim e MINISTRY OF FINANCE AND ECONOMY
■ The pos s ibility of los s on the principa l diffe re ntia te s financia l inve s tme nt - , products from non financia l products s uch as de pos its
Financia lproduct
Financ ia l inve s tm e nt product
- Non fina nc ia l inve s tme nt product
Ye s
No Pos s ibility of los s on principa l
Se curitie s
De riva tive s
Ye s
No Pos s ibility of los s e xce e ding principa l
- Exchange trade dde rivative s
OTC de riva tive s
Ye s
No Tra de d on the e xcha nge hous e
■ : The de gre e of unde rlying ris ks divide s financia l inve s tme nt products into two ( ) ( )s e curitie s ge ne ra l financia l products and de rivative s ris ky financia l products
▶ - De rivative s are s ubdivide d into e xchange trade d and OTC de rivative s by trading channe l
1 4
II. – Ma jor cha nge s Introduce com pre he ns ive s ys te m MINISTRY OF FINANCE AND ECONOMY
■ - 3 Introduce a broad bas e d de finition for e ach of the cate gorie s of financia l - , - inve s tme nt products s e curitie s OTC de rivative s & e xchange trade dde rivative s
Se curitie s
OTC de rivative s - , , Introduce a broad ba s e d de finition for forwa rd s wa p a nd option
- Exchange trade dde riva tive s
De rivative s tra de d in e xcha nge s
■ Ma ximize the s cope of unde rlying a s s e ts of s e curitize d de riva tive s andde riva tive s
, , - ELS ELW FX linke d, , .s e curitie s re ve rs e FRN e tc
Rights unde r contract for the purpos e of ga ining profits or avoiding los s e s linke d to
fluc tuations of unde rlying as s e t price s Se curitize d de riva tive s
, Indire ct inve s tme nt s e curitie s unre gula te d indire ct
, , inve s tme nt s e curitie s s tocks , .contribution quota e tc
- Inve s tme nts ma de in a common public bus ine s s
with e xpe cta tion of profits- 3Compe ns ations de pe nd upon a rd ’ party s e fforts
Inve s tm e nt co ntra ct
, , KDR GDR ADR Se curitie s of is s ue rs tha t ha ve re ce ive d the de pos it of e quity s e curitie s
De po s ito ry Re ce ipt
( )DR
, Trus t be ne fic iary ce rtifica te s inve s tme nt trus t be ne fic iary, .ce rtifica te s e tc
Re pre s e nting be ne fic ia l inte re s ts Be ne fic ia ryce rtifica te
, , Stocks s ubs cription right , s ubs cription ce rtifica te , .contribution quota e tc
Re pre s e nting e quity contribution s hare Equitys e curitie s
, Gove rnme nt bond municipa l, , bond corpora te bond
, .comme rcia l pape r e tc Re pre s e nting de bt liability De bt
s e curitie s
-Co n
ve ntio na l
s e curitie
s
Exa m pleDe finitionType
, , Se curitie s Curre ncie s, Commoditie s and Cre dit ris k
Curre nt
, , Financia l inve s tme nt products Curre ncie s, , , Commoditie s Cre dit ris k and othe r natura l
e nvironme nta l and e conomic ris ks
Propos e d
1 5
II. – Ma jor cha nge s Expa nd bus ine s s s cope MINISTRY OF FINANCE AND ECONOMY
■ , , Curre ntly fina nc ia l inve s tme nt s e rvice s are com pris e d of s e curitie s s e rvice s , , , - future s s e rvice s as s e t m anage me nt trus t and dis cre tionary & non dis cre tiona ry
inve s tm e nt . .a dvis ory s e rvice s The ir bus ine s s te rritorie s are s tric tly s e pa rate d 6 Allow FICs to conduct bus ine s s e s e ncom pa s s ing fina nc ia l inve s tm e nt s e rvice s
( , , , - de a lng a rra nging de a ls co lle c tive inve s tme nt dis cre tiona ry & non dis cre tiona ry , ) inve s tm e nt advis ory s e rvice s trus t s e rvice
■ Es tablis h a Chine s e Wall to pre ve nt the conflic t o f inte re s ts caus e d by re nde ring multiple s e rvice s
Se curitie scom
Future scom
As s e tmngmcom
Non dis cre tionary
inve s tme nt advis ory
s e rvice s
Trus tcom
Se curitie sbroke ra ge
Princ ipa l inve s tme ntUnde rwriting
Future sbroke ra ge As s e t manage me nt As s e t manage me nt
: Curre nt m ultiple s e rvice s re s tric te d
FICs
De a ling
Arra n ging
de a ls
Colle c tive
Inve s tme nt
Dis cre ti onary-inve s t me nt
advis orys e rvice s
-Non-dis cre tionary
-inve s t me nt
advis orys e rvice s
Trus ts e rvice s
Inve s tme nt banking Principa l inve s tme nt
( )Se curitie s s e rvice s broke rage As s e t manage me nt
: Propos e d Chine s e Wa ll to be e s ta blis he d
-Dis cre tionary
-inve s t me nt a dvis ory
s e rvice s
3 . Expa nd bus ine s s s cope3 . Expa nd bus ine s s s cope
[1 ] Re move the boundarie s a mong diffe re nt fina ncia l Inve s tme nt s e rvice s
1 6
[ 1 ] Re fe re nce Se le c tive Exam ple s of Authoriza tion a nd Re gis tra tion MINISTRY OF FINANCE AND ECONOMY
Applica tion for Authoriza tion &Re gis tra tion
Indire c t inve s tme nts e curitie s - Exchange tra de d de rivative s
S tocks
OTC de rivative s
- Non profe s s iona l inve s tor Se curitie s Dis cre tionary inve s tme nt
advis ory s e rvice s □ Profe s s iona l inve s tor Bonds
OTC de rivative s
- Non profe s s iona l inve s tor Se curitie s As s e t mana ge me nt
Profe s s iona l inve s tor □ Re al e s ta te
□ Spe cia l As s e ts
□ Mixe d As s e ts
□ Mone y ma rke t products
- Exchange tra de d de rivative s
□ Indire ct inve s tme nt s e curitie s □ Stocks
Profe s s iona l inve s tor Bonds
- Non profe s s iona l inve s tor □ Se curitie s Arra nging de a ls
□ OTC de rivative s □ - Exchange tra de d de rivative s □ Indire ct inve s tme nt s e curitie s Stocks
□ Profe s s iona l inve s tor □ Bonds Unde rwriting
- Non profe s s iona l inve s tor □ Se curitie s □ De aling
Inve s tors Fina ncia l products Fina ncia l s e rvice s
1 7
II. – Ma jor cha nge s Expa nd bus ine s s s cope MINISTRY OF FINANCE AND ECONOMY
■ , , * Shift to a s ys te m that pe rmits in principle a ll inc ide nta l s e rvice s withs ome e xce ptions* Non-financial services incidental to financial investment services
Curre nt Propos e d
[ In cas e of s e curitie s ] company
2 2 s e rvice s including ,s e curitie s e va luation
M&A/ /broke rage arrange me nt
,age ncy s e rvice s
cons ulting s e rvice on corporate manage me nt and
, re s tructuring s e curitie s, .s a fe guarding e tc
Se rvice s s cope
- Pos itive lis t s ys te mMe thod
( )Principle
- Allow all non financia l
inc ide nta l s e rvice s
( )Exce ptions
Se rvice s tha t may have
ne ga tive e ffe ct on the
s oundne s s of FICs or
inve s tor prote ction
Se rvice ss cope
Compre he ns ives ys te m
Me thod
[2 ] Allow inc ide nta l s e rvice s
1 8
II. – Ma jor cha nge s Expa nd bus ine s s s cope MINISTRY OF FINANCE AND ECONOMY
■ - Apply introducing broke r s ys te m to offe r various channe ls of acce s s to financia l inve s tme nt products to inve s tors
■ Make inve s tor prote ction me chanis m
▶ ‘ ’ Employ the s a me inve s tme nt s o lic ita tion re gula tion a pplie d to FICs in orde r to pre ve nt
s a le s
, of ris ky products by de ce iving mis le ading or not fully e xpla ining the e xte nt o f
unde rlying ris ks▶ -Curre ntly cons ide r re que s ting a re le va nt ce rtifica te to gua ra nte e the introducing
’broke r s bas ic qua lifica tions s uch a s s e curitie s inve s tm e nt cons ultant lice ns e ▶ - FICs to ta ke re s pons ibility for re g is te ring introducing broke rs with the FSC
a nd s upe rvis ing the m - FICs s ha ll be lia ble for a ny los s e s of inve s tors incurre d by ille ga l a ctivitie s o f - introducing broke rs e ntrus te d by the m
■ Inve s tors ha ve to vis it branche s in pe rs on to purchas e financia l
, inve s tme nt products ca us ing
inconve nie nce
Curre nt■ - Apply introducing broke r s ys te m to a llow broke rs to s e ll financia l inve s tme nt products e ntrus te d byFICs
▶ The broke r will s o lic it inve s tme nt and conne ct inve s tors with FICs
Propos e dPropos e d
[3 ] - Expa nd s a le s ne twork through introducing broke r s ys te m
1 9
II. – Ma jor cha nge s Expa nd bus ine s s s cope MINISTRY OF FINANCE AND ECONOMY
■ Expand CIS ve hicle s to the e xte nt pe rmis s ible unde r the Kore an Civil or Comme rcia l Code s
. ( )A Expand ve hicle s for co lle ctive inve s tme nt s che me CIS
■ - Re de fine CIS manage d as s e ts in a compre he ns ive manne r and thus e xpand the - s cope of CIS manage d as s e ts tha t are curre ntly e nume rate d for pe rmis s ion
. - B Expand the s cope of CIS manage d as s e ts
- , Inve s tme nt trus t com pa ny lim ite d
( & lim ite d pa rtne rs hip priva te)offe ring
Curre nt - , Inve s tm e nt trus t company limite d ( & lim ite d pa rtne rs hip priva te
)offe ring- , Lim ite d lia bility com pa ny ( ), limite d partne rs hip public offe ring , a nonym ous pa rtne rs hip ge ne ra l pa rtne rs hip
Propos e d
, , , Se curitie s future s re a l e s ta tetangible
, , , prope rty CP ins ura nce c la im s
, .fis hing & m ining rights e tc
Curre nt As s e ts with any form of inve s tme nt
va lue , s uch a s inte lle c tua l prope rty rights
.e tc
Propos e d
[4 ] Expand the s cope of a s s e t m a nage m e nt s e rvice s
2 0
II. – Ma jor cha nge s Expa nd bus ine s s s cope MINISTRY OF FINANCE AND ECONOMY
■ / Re m ove re s tric tions on the s cope type of as s e ts to be ma nage d by funds to e nha nce a utonom y of the as s e t m anage me nt indus try a nd s a tis fy dive rs e de ma nds of inve s tors
[5 ] Allow “Mixe d As s e t Funds ”
○××××××Spe c ia l
a s s e ts
×××○×××Tang ibl
e
a s s e ts
××××○××Re a l
e s ta te
○○×○○○○-De rivative s
○○○○○○○-Se cu
ritie s
Spe c ia l
as s e tsfunds
Fund of
fundsMMF
Tang ible
as s e tsfund
Re a l
Es ta tefund
-De riva
tive sfund
-Se cu
ritie sfund
■ As s e ts for inve s tme nt de te rminethe ’ s cope of e ach fund s ope ra tion
▶ , , Se curitie s fund de riva tive s fund , re a l e s ta te fund tangible a s s e t
,fund , , MMF fund of funds s pe c ia l as s e tfund
■ Funds a re cla s s ifie d ba s e d on the inve s tme nt as s e ts
Curre nt
○○×○○○Spe cia l
a s s e ts
○○×○○○Tang ible
as s e ts
○○×○○○Re a l
e s ta te
○○×○○○-De riva
tive s
○○○○○○-Se curitie s
Mixe dMixe d
as s e t fund as s e t fundMMF
Spe c ia l
a s s e ts
Re a l
e s ta te
-Se cu
ritie s
Cla s s ifi
-ca tion
■ Es ta blis h “m ixe d a s s e t funds ” which ca n be ope rate d fre e ly without be ing limite d to s pe c ific a s s e ts
■ - Re cla s s ify the curre nt fund ca te gorie s
, into four bas e d on inve s tm e nt a s s e ts while lifting re s tric tions on the ir ope ra tion
Propos e d
2 1
II. – Major change s Upgrade inve s tor prote ction me chanis m MINISTRY OF FINANCE AND ECONOMY
■ ‘ En bloc applica tion of re gula tions for inve s tor prote ction in the Financia lSe rvice s ’ , , and Capita l Marke t Act s ha ll be made cove ring a ll including OTC de rivative s .trading curre ntly in abs e nce of inve s tor prote ction me chanis m
Eliminate loophole s in inve s tor prote ction
4 . Upgrade inve s tor prote ction4 . Upgrade inve s tor prote ctionme chanis mme chanis m
[1 ] Re move loophole s in inve s tor prote ction
■ Obliga te FICs to provide inve s tors with de ta ile d e xpla na tion on the conte nts and unde rlying ris ks of the products whe n s olic iting
inve s tme nt
. A Introduce the duty of product guidance in full s ca le
■ Expa nd s pe cia l lia bility rule to a ll financia l products unde r which FICs a re he ld lia ble ’ for los s e s and dama ge s incurre d to inve s tors from FICs incomple te product guida nce
▶ Unde r re vie w is a pla n to e nhance inve s tor prote ction by e s tima ting the los s on princ ipa l
a s the am ount of dam age in cas e of any los s on princ ipa l
[2 ] Introduce re gula tion on inve s tm e nt s o lic ita tion - Ins titutiona lize inve s tor prote ction m e cha nis m in line with globa l s ta nda rds
2 2
II. – Major change s Upgrade inve s tor prote ction me chanis m MINISTRY OF FINANCE AND ECONOMY
■ The principle of s uitability s ha ll be introduce d for inve s tme nt s olic ita tion
ta ilore d to inve s tor profile s
. : - C Adopt the principle of s uitability Applicable to non profe s s iona l inve s tors
■ , , Prior to s olic ita tion gras p inve s tor profile s s uch as we a lth s ta tus
inve s tme nt
, , ., purpos e e xpe rie nce e tc through inte rvie ws with pote ntia l inve s tors
? Applicable only to non-professional investors who are relatively weak in risk taking and hedging
■ Uns olic ite d ca lls via unwante d phone ca lls and othe r me thods may infringe
on privacy and pe ace ful life of pote ntia l inve s tors
. D Make a ne w re gula tion on uns olic ite d ca lls
▶ , - The re fore inve s tme nt s olic ita tion through re a l time me thods
’ like vis iting and ca lling s ha ll be pe rmitte d only a t the inve s tor s
invita tion
. - - B Introduce the know your cus tome r rule
2 3
II. – Major change s Upgrade inve s tor prote ction me chanis m MINISTRY OF FINANCE AND ECONOMY
■ De finition of conflic t of inte re s ts ▶ Act of purs uing the inte re s ts of FICs or othe r inve s tors a t the e xpe ns e of the inte re s t o f ce rta in inve s tors
■ Me a s ure s to pre ve nt conflic t of inte re s ts ① Prohibit conflic t of inte re s ts by law and e nforce it with s anctions
② Oblige FICs to s e t up an inte rna l contro l s ys te m
③ Make FICs dis c los e any conflic t o f inte re s ts to inve s tors
④ / Make orga niza tiona l s e para tion and or prohibition of e m ploye e s ho lding more tha n one pos ition m a ndatory if s e rious conflic t of inte re s ts is de e m e d to e xis t
[3 ] Es ta blis h a s ys te m to pre ve nt conflic t of inte re s ts
■ Se e k ways to apply the curre nt dis clos ure and re gis tra tion re quire me nts ( ) re gis tra tion s ta te me nt to a ll s e curitie s that ne e d inve s tor prote ction
▶ Propos e d re gula tion confine s e xe mption from re gis tra tion obliga tion only to bondsis s ue d - by gove rnm e nt a nd quas i gove rnme nt e ntitie s■ (Se e k ways to lowe r e xpe ns e ratio on s e curitie s is s uance 1 .8 , s tock at bp bond a t5 ~ 9 bp ) a t pre s e nt in orde r to pre ve nt a s ha rp ris e in is s ua nce cos t from the e xpande d a pplica tion . of dis c los ure and re gis tra tion re quire me nts
[4 ] Expa nd the s cope of dis c los ure a nd re gis tra tion re quire m e nts
2 4
II. – Major change s Upgrade inve s tor prote ction me chanis m MINISTRY OF FINANCE AND ECONOMY
’ Comparis on with othe r countrie s le gis la tions ’ Comparis on with othe r countrie s le gis la tions
■ Regulations of the Korean FISCMA are comparable to the those of advanced markets’ laws such as England, USA, Australia, etc., and somewhat excel Japan’s recent legislation
▶ Based on the England’s FSA 1986/FSMA 2000 and Australia's FSRA 2001, and ▶ also referred to the USA’s Securities Regulations
1) Comprehensive system : referred to the Financial products’ definitions of England, Australia, USA, Singapore, etc., and introduced comprehensive system of securities and depravities => advanced than the new legislation of Japan
2) Functional regulation : Comparable to England, Australia, USA, Singapore, etc.
3) level of Investor protection : Comparable to England, Australia, USA, Japan, etc.
4) Scope of businesses of financial institutions : Same with England, Australia, USA, Japan, etc.
comprehensivePositive list systemcomprehensivecomprehensivecomprehensivecomprehensive
Korea (FISCMA)
JapanSingaporeUSAAustrailiaEngland
Korea (FISCMA)JapanSingaporeUSAAustrailiaEngland
Functional regulation
(no reserve)
Cross sectional regulation
(where special articles exist)
Functional regulation
(no reserve)
Functional regulation
(no reserve)
Functional regulation
(no reserve)
Functional regulation
(no reserve)
Korea (FISCMA)JapanSingaporeUSAAustrailiaEngland
All financial Investment
Services allowed
All financial Investment
Services allowed
All financial Investment
Services allowed
All financial Investment
Services allowed
All financial Investment
Services allowed
All financial Investment
Services allowed
2 6
III. Expe cte d e ffe cts MINISTRY OF FINANCE AND ECONOMY
■ : Bus ine s s s cope The s a me bus ine s s s cope a s that of a dvance d IBs will be re a lize d
[1 ] Se t up a bus ine s s m ode l in line with a dva nce d IBs
Princ ipa linve s tm e nt
< >IB
Corporatefina nc ing
Se curitie ss e rvice s As s e t ma na ge m e nt
Se curitie scom
Future scom
As s e tMana ge m e nt
com
- Non dis cre tionaryinve s tme nt
Advis ory com
Dis cre tiona ry Inve s tme nt
advis ory com Trus t com
De aling
FICs
Arra nging As s e tm ana ge m e nt
- Non dis cre tionary inve s tme nt
advis ory s e rvice s
Dis cre tionary inve s tme nt
advis ory s e rvice s
As s e tcus todian
manage me nt
( ) Em e rge nce of a dva nce d inve s tm e nt ba nks IBs with globa l ( ) Em e rge nce of a dva nce d inve s tm e nt ba nks IBs with globa l
com pe titive ne s scom pe titive ne s s is e xpe cte d through conve rge nce a nd cons olida tion in the financia l is e xpe cte d through conve rge nce a nd cons olida tion in the financia l
indus tryindus try
Princ ipa linve s tme nt
Corporatefinanc ing
Se curitie ss e rvice s As s e t ma na ge me nt
Advance d IBs
Curre nt
Afte r cons olida tion
2 7
III. Expe cte d e ffe cts MINISTRY OF FINANCE AND ECONOMY
■ Financia l inve s tme nt products
) e x Mixe d a s s e ts funds tha t ca n change inve s tme nt ve hic le s fre e ly , , ,am ong s tocks bonds re a l e s ta te , .curre nc ie s e tc
Es ta blis h funds not re s tric te d by the ta rge t inve s tme nt a s s e t
) e x Public ly offe re d indire ct inve s tme nt s e curitie s us ing jo int s tock com pa ny , unde r the Com me rc ia l La wa nonym ous , .pa rtne rs hip type d funds e tc
Structure co lle c tive inve s tme nt s che me by us ing va rious CIS ve hic le s
) e x Inve rs e floa te r ( , .)Dual inde xe d note s CMT e tc Range a ccrua l note s CPPI bas e d note s Digita l option e mbe dde d note s - Cre dit linke d note s - Fund linke d note s CAT bonds
De s ign s e curitie s tha t a dopt a ll kinds of de riva tive te chnique s ( )Se curitize d de riva tive s
Se curitie s
) e x De riva tive s whos e unde rlying as s e tsa re , , ca tas trophe crim e ra te we a the r
s uch as , , , .pre c ipita tion s nowfa ll s unlight e tc
Structure de riva tive s ba s e d on dive rs e ris ks me a s urable
OTCde riva tive s
) e x Future s a nd options re la te d to
( e nvironme nt a nd e ne rgy carbon
, )e m is s ion cre dits e le c tric powe r
Any de riva tive s ca n be tra de d on the e xcha nge hous e if prope rlys truc ture d
-Excha nge tra de d
de riva tive s
2 8
III. Expe cte d e ffe cts MINISTRY OF FINANCE AND ECONOMY
De a ling
Principa linve s tme nt
Ne w type ofde rivative s
Ne w type ofs e curitie s
Exis tingde riva tive s
Exis tings e curitie s
Trus t As s e tm anaging
-Nondis cre tionary
-Dis cre tio
nary ArrangingAdvis or-Unde r
writingInve s ting
As s e t manage me nt Se curitie s
s e rvice Corporate
fina ncing
Se le ct a bus ine s s m ode l in line with a dvance d IBs
De a ling
Principa linve s tme nt
Ne w type ofde riva tive s
Ne w type ofs e curitie s
Exis tingde rivative s
Exis tings e curitie s
Trus t As s e tm anaging
-Non dis cre tionary
-Dis cre
t ionary ArrangingAdvis ory-Unde r
writingInve s ting
As s e t manage me nt Se curitie s
s e rvice Corporate
fina ncing
.Se curitie s co .Future s co
Me rcha nt ba nk As s e t .manage me nt co
Trust
.Co
FICs
Cha nge s in the bus ine s s mode l o f FICs a fte r the e na ctme nt o f the ne w Act
2 9
III. Expe cte d e ffe cts MINISTRY OF FINANCE AND ECONOMY
■ Cre ate s yne rgy e ffe ct by e nabling a s ingle FIC to conduct a ll IB bus ine s s e s
[2 ] Cre a te s yne rgy e ffe ct from s e rvice inte gra tion
① Syne rgy e ffe ct from s e curitie s and future s bus ine s s e s combine d
Provide com pre he ns ive s e rvice s to inve s tors as the FIC ca n trade and
a rra nge a ll fina nc ia l inve s tme nt products
② , Syne rgy e ffe ct from corpora te financing as s e t manage me nt
and principa l inve s tme nt combine d
Corporate financ ing bus ine s s s uch a s M&A arra nge me nt will re quire le s s cos t a nd
’ tim e for the de a l a nd ge ne ra te highe r profits through dire ct inve s tme nt o f FIC s
own a s s e ts from s a le s of fina nc ia l products a nd funds ra is e d from as s e t
ma nage m e nt
③ Syne rgy e ffe ct from inte gration of various as s e t manage me nt
bus ine s s e s - Full s ca le a s s e t m anage me nt s e rvice will be ava ilable by dire ctly s tructuring and
offe ring a varie ty of fina nc ia l inve s tme nt products s uch a s s truc ture d s e curitie s
( . ., ), , , i e s e curitize d de riva tive s a ll kinds of indire ct inve s tme nt products wrap a ccounts
a nd s pe cia lize d trus t products
3 0
III. Expe cte d e ffe cts MINISTRY OF FINANCE AND ECONOMY
■ Compe titive ne s s of the FICs will be ra is e d on the back of the ir ability to s tructure
, and manage a ll financia l inve s tme nt products s uch as corpora te financing principa l
, . inve s tme nt and as s e t manage me nt as and whe n de e me d ne ce s s ary
[3 ] Stre ngthe n com pe titive ne s s by s tructuring and offe ring a m ultitude
of
ne w fina ncia l products
① ’ IB s Corpora te Financing bus ine s s
Expande d bus ine s s s cope a llows IBs to s upport the s tructuring of and unde rwrite
, ne w s e curitie s on top of the conve ntiona l s tocks a nd bonds boos ting fundra is ing
.ca pa c ity o f corpora tions
② As s e t Manage me nt bus ine s s
- It will be pos s ible to s tructure and offe r a varie ty o f cus tom ma de s e curitize d
, .de riva tive s indire ct inve s tme nt products a nd de riva tive s
3 1
III. Expe cte d e ffe cts MINISTRY OF FINANCE AND ECONOMY
■ Compe titive ne s s of inve s tme nt banks is e xpe cte d to s tre ngthe n on the back of
the re a liza tion of e conomy of s ca le as a re s ult of e xpande d bus ine s s s cope .as large as comme rcia l banks or ins urance companie s
[4 ] Achie ve e conom y of s ca le a fte r cons olida tion
Comme rcia l Bank
▶ ’ , Se cure FICs own a s s e ts ne e de d for princ ipa l inve s tm e nt e s s e ntia l to inve s tm e nt ba nking s e rvice s
▶ Expa nd bus ine s s opportunitie s by s ha ring cus tome r inform ation from e ach re s pe ctive bus ine s s a re a s uch as as s e t ma nage me nt a nd s e curitie s s e rvice s
Me rchant ba nk
.Se curitie s co
Future s.co
As s e t mngm
.co Trus t
.co
.Ins urance co .Cre dit finance co
Financ ia l
ins titution
for com m ons
Fina ncia l Se rvice
Comme rcia l bank .Ins urance co .Cre dit Fina nce co
Financia l ins titution
for com m ons
FICs( )Inve s tme nt Bank
▶ Re duce cos ts borne from as s e t m ana ge me nt fo llowing the e nla rge me nt o f ma na ge d a s s e tpoo l▶ Improve ma nage me nt e ffica cy through s haring e le c tronic e quipm e nts and back office s
Structura l cha nge in the financ ia l indus try fo llowing the e na ctme nt o f ne w Act
Fina ncia l Se rvice
3 2
III. Expe cte d e ffe cts MINISTRY OF FINANCE AND ECONOMY
■ 4 0 % 1 0 0 About of re gula tions conce rning ca pita l m a rke t to be s cra ppe d or m itiga te d
1 0
Ne wlye s ta blis h
1 00
Curre nt Unde r re form
7 054 0
Afte r re form Eas eScrap
■ :Major re gula tions to be s cra ppe d a re on the fo llowing
▶ , Prohibition of concurre nt e ngage me nt in s e curitie s future s and as s e t manage me nt s e rvice s
▶ Re s triction on financia l inve s tme nt products
▶ Re s triction on type s of ve hicle s for colle ctive inve s tme nt s che me and cla s s e s of indire ct inve s tme nt s e curitie s
▶ Re s triction on manage me nt of proprie tary as s e ts owne d by as s e t , manage me nt company trus t company and me rchant bank
▶ Obliga tory re gis tra tion with the Financia l Supe rvis ory Commis s ion by s e curitie s is s ue rs
[5 ] Bring re gula tory re form
3 3
III. Expe cte d e ffe cts MINISTRY OF FINANCE AND ECONOMY
[6 ] Tra ns pare ncy in pe na ltie s
■ Spe cifica tion of re gula tions for the bas is of pe na ltie s
▶ * Pre vious la ws conta ine d c la us e s that did not c le a rly s ta te the e xact vio la tion for which
s pe c ific
, pe na ltie s we re give n but ra the r lis te d the type s of pos s ible pe na ltie s re s ulting from
vio la tions
* “ , , Where any officer of a financial institution intentionally violates this Act or any regulations orders
or instructions under this Act ~” ( ) ( ) The re as ons for pe na lty vio la tion a nd the type of pe na lty s a nction a re lis te d in
de ta il
thus le a ding to trans pa re ncy & e na bling a dva nce knowle dge of the e xa ct pe na lty
re s ulting
from a s pe c ific vio la tion
3 5( ~ 2007.6)
Promulgation/Promulgation/Preparation of sublawsPreparation of sublaws
IV. Tim e line MINISTRY OF FINANCE AND ECONOMY
[1 ] Expe cte d Tim e line
Trans fe r to the
Gove rnme nt
National AssemblyNational Assembly
■ Sta nding Committe e
▶ -De bate a t Sub committe e
▶ Public he aring
▶ Sugge s tions by the Standing Committe e
■ Le gis la tion & Judicia ry Committe e
▶ - - Artic le by article e xamination
■ Re s olution at the ple nary s e s s ion
1 year later(~ 2008.6)
Declaration ofDeclaration ofbusiness activitybusiness activity
EnforcementEnforcement
6 months later(~2008.12)
Submis s ion to the Nationa l As s e mbly(2 0 06 .1 2 )
3 6
IV. Tim e line MINISTRY OF FINANCE AND ECONOMY
■ - Propos e d le gis la tion s ubm itte d to the Na tiona l As s e m bly ye a r e nd of2 0 0 6
▶ : Fe b Announce me nt of plan for propos e d bill on FISCMA
▶ ~ : 7 - 4 Mar May Financia l s e ctor le ve l Information Se s s ions and Publiche arings
▶ : Jun / Cons ulta tion with othe r conce rne d minis trie s Public Notice conce rningle gis la tion
▶ ~ : Aug De c Scre e ning by Re gula tory Re form Committe e a nd the Minis try ofLe gis la tion
▶ : De c , Afte r de libe ration by the Sta te council bill s ubmitte d to the Na tiona lAs s e mbly
[2 ] Pre vious De ve lopm e nts
[3 ] Future De ve lopm e nts
■ 2 0 0 7Efforts will be ma de to re ce ive a pprova l within the firs t ha lf of
▶ Extraordinary s e s s ions of the Nationa l As s e mbly are planne d for April and June during the firs t ha lf of this ye ar
▶ , Afte r public he aring re vie w by the Standing committe e and the Le gis la tion & , Judic iary Committe e the bill will re ce ive a re s olution a t the ple nary s e s s ion
▶ Be ing the product of the conve rge nce of nume rous opinions co lle cte d on thepropos e d
, e na ctme nt utmos t e fforts will be made to pas s the law within the firs t ha lf of thisye a r
3 7
IV. Tim e line MINISTRY OF FINANCE AND ECONOMY
■ 1 8 A gra ce pe riod of m onths until e nforce me nt fo llowingprom ulgation
of the ne w la w
▶ Suffic ie nt grace pe riod will be grante d until e nforce me nt da te to a llow marke t partic ipants and the s upe rvis ory authoritie s to make pre para tions
▶ , For a s mooth imple me ntation of the ne w re gime de claration of bus ine s sactivitie s
of the e xis ting financia l inve s tme nt s e rvice s companie s will be re quire d 6 - during a month pe riod prior to e nforce me nt
■ , Following e nactm e nt s ubla ws will a ls o be cons olida te d
▶ , , , Enforce me nt de cre e s minis te ria l ordinance s announce me nts s upe rvis ory re gula tions and othe r laws will be cons olida te d into s ublaws by functions
▶ The curre nt financia l s upe rvis ion s ys te m divide d by indus try type will a ls o be change d into a functiona l re gula tory s ys te m
[4 ] Propos e d da te of e nforce m e nt
MINISTRY OF FINANCE AND ECONOMY
MINISTRY OF FINANCE AND ECONOMY
http://english.mofe.go.kr