[Person人] Na Jae-cheol, Chairman of the Korea Financial Investment Association, Commutes to the National Assembly Despite COVID-19 and Heavy Rain... Fully Committed to Passing Dormant Financial Investment Bills

Private Equity Crisis... Restoring Trust is Top Priority
Financial Tax System Reform Proposal, Fruit of Industry Efforts
Continued Efforts for Complete Abolition of Securities Transaction Tax

[Asia Economy Reporter Oh Ju-yeon] Na Jae-cheol, chairman of the Korea Financial Investment Association (KOFIA), known in the securities industry as the "salesman's legend," is now demonstrating his "sales instinct" in the National Assembly. As the head of the financial investment industry representing 312 regular members, 103 associate members, and 25 special members, his shoulders are heavy due to successive private fund scandals, but his steps toward revitalizing the domestic capital market remain light. "Representative ㅇㅇㅇ is now in the chamber." Once a report comes in, he heads straight to the National Assembly. This is to awaken and bring to light the financial investment-related bills that have been dormant in the legislature. So far, neither the novel coronavirus disease (COVID-19) nor the prolonged monsoon rains have been able to stop him.

Chairman Na joined Daishin Securities in 1985 and worked exclusively at sales branches until he became an executive. In 1997, he was appointed head of the Gangnam branch and grew it into the top branch nationwide. After becoming an executive, he gained experience in retail business, wholesale business, and corporate finance. In 2012, he became president of Daishin Securities and served for seven years. He emphasizes 'trust' as the secret to his success as a salesman. He explains that he treated customers with sincerity, instilling trust that "even if customers sometimes incur losses, they believe 'you can recover those losses'." Last December 20, he was elected chairman of KOFIA with an overwhelming 76.3% support.

Immediately after taking office, Chairman Na presented four major tasks for the financial investment industry: discovering and providing diverse financial investment products, raising venture capital, developing new businesses, and transforming the financial investment industry globally. However, he believes that 'trust' must first be the foundation for these goals.

The financial investment industry has been plagued by various adverse events since last year. Following the overseas interest rate-linked derivative-linked securities (DLS) incident, the suspension of fund redemptions by Lime Asset Management, and the fraud at Optimus Asset Management, the professional private equity funds, known as "Korean-style hedge funds," have been pushed into crisis. At a press conference held last month, Chairman Na stated, "Restoring trust in the capital market will be our top priority," and presented various supplementary measures to resolve the private fund controversy and prevent recurrence. To promote the soundness of the private fund market, manuals and checklists for internal control of professional private fund managers will be produced and distributed, and KOFIA's self-regulation on private funds will be strengthened. Since private funds pursue profits by emphasizing originality and autonomy, the approach is to introduce reasonable internal control measures while encouraging the financial investment industry to critically evaluate itself for greater advancement. KOFIA, as a general association representing the industry, also holds investigative authority over its members. While it has conducted self-regulation mainly through non-face-to-face (untact) methods, it plans to increase on-site inspections starting next month.

After gaining such trust, one of Chairman Na's goals during his term is to focus on revitalizing public funds so that individual investors' demand can shift to the fund market. According to KOFIA, while the size of domestic private funds has increased by more than 40% over the past three years, the size of public funds has only grown by 11%. Public funds have lower minimum subscription requirements and higher accessibility through sales channels, making them widely used by individuals for asset growth, but they have been criticized for lower investment attractiveness in terms of returns and policy support. KOFIA plans to actively support government policies on public funds by researching and reviewing alternatives to meet direct overseas stock purchase demand and enhancing the functions of advisory and sales channels in cooperation with financial authorities.

The recent financial tax reform plan announced by the Ministry of Economy and Finance is evaluated as an important step in this context. The initially announced reform plan imposed capital gains tax from 2023 with a basic exemption amount of only KRW 20 million on stock capital gains, excluding profits from public equity funds, sparking controversy over discrimination against fund products. The securities transaction tax abolition, which KOFIA has persistently demanded, was only partially addressed with a 0.02 percentage point reduction in 2022 and an additional 0.08 percentage point reduction in 2023, leaving some disappointment.

However, during the roughly one month before the final plan was announced, the financial investment industry's demands were sincerely conveyed, resulting in the basic exemption amount for stock capital gains increasing to KRW 50 million and including public equity funds in the exemption. The securities transaction tax reduction was advanced by one year compared to the initial plan, and the loss carryforward deduction period was extended from three to five years, outcomes welcomed by the industry as exceeding expectations. This was also a moment when the efforts of past KOFIA chairmen bore fruit. Chairman Na intends to continue voicing for the complete abolition of the securities transaction tax.

Chairman Na is also continuing consultations with the National Assembly and financial authorities to re-promote the introduction of default options and fund-type systems related to retirement pension system innovation. Since the opening of the 21st National Assembly last June, he has been attending the National Assembly every day without fail, sometimes visiting twice a day. He visits lawmakers one by one to explain and persuade them for legislative enactment of advanced retirement pension systems and unification of private fund systems. His schedule is so packed with lunch, dinner, and even tea time appointments through October.

"This is not simply to represent industry interests but to improve the investment return structure for investors compared to now." The reason 'trust' is particularly felt in Chairman Na's words is likely due to his 'passion' in visiting the National Assembly even amid heavy rain today.