Abolition of Foreign Investment Registration System After Over 30 Years... Securities Tokens Also Accepted Within Regulatory Framework

Financial Services Commission Holds 6th Financial Regulation Innovation Meeting

[Asia Economy Reporter Minji Lee] The Financial Services Commission announced on the 19th that it will abolish the foreign investor registration system, which has been maintained for 30 years, to enhance foreign investors' access to the capital market. Additionally, it plans to institutionally allow distributed ledger technology and the issuance and distribution of token securities to establish a safe distribution system.

On the morning of the same day, Kim Joo-hyun, Chairman of the Financial Services Commission, held the 6th Financial Regulatory Innovation Meeting at the Korea Financial Investment Association in Yeouido, Seoul, attended by 15 private committee members including Park Byung-won, Chairman of the Financial Regulatory Innovation Meeting, and heads of major related organizations. At the meeting, measures to improve foreign investors' access to the capital market and the regulatory framework for the issuance and distribution of token securities were discussed. In his opening remarks, Chairman Kim said, "Last year, we made great efforts to enhance the rights and interests of general shareholders, but this year, we will focus on raising the international consistency of the capital market system and leading innovation in the real sector."

The foreign investor registration system has been in place for over 30 years since 1992, and the Financial Services Commission plans to abolish the registration system to improve foreign investors' access to the capital market. Instead, foreign investors will be able to freely invest in the capital market using internationally recognized personal passport numbers and corporate LEIs (standardized IDs assigned to corporations), and the scope of over-the-counter transactions will also be expanded.

Furthermore, regulations on the foreign integrated account, which has not been activated since its introduction in 2017, will be rationalized, and from next year, the phased expansion of English disclosures of important information for listed companies with assets exceeding 10 trillion won will be promoted. Park Byung-won, Chairman of the Financial Regulatory Innovation Meeting, said, "The foreign investor registration system is a regulation rarely found in advanced countries," adding, "Since it is the most dynamic field that can induce foreign investment and create new related industries and jobs, continuous regulatory innovation efforts are necessary."

In addition, the Financial Services Commission stated that it will institutionally embrace the demand by establishing a regulatory framework for the issuance and distribution of token securities. Currently, only physical securities and electronic securities are recognized for rights presumption and third-party opposition power, but in the future, through amendments to the Electronic Securities Act, token securities will also be legally and safely guaranteed. This aligns with the national agenda of building digital asset infrastructure and regulatory frameworks, and the Financial Services Commission explained that by proactively adopting future technological changes in the domestic capital market, it can promote economic innovation through the capital market by fostering new industries and market formation.

The Financial Services Commission plans to allow the digitization of securities using distributed ledger technology to legally and safely protect the property rights of token securities investors, and if certain conditions are met, allow securities to be issued without going through securities firms. Furthermore, it plans to institutionalize an over-the-counter distribution platform so that token securities can be traded safely in the over-the-counter market.

Finally, Chairman Kim Joo-hyun said, "Reforming a system maintained for over 30 years and numerous related practical practices to the level of abolition and establishing a new regulatory framework may cause some inconvenience and unexpected risks," adding, "We will faithfully reflect the discussed contents and actively communicate with market participants again during the detailed regulation amendment process." Measures to improve foreign investors' access to the capital market will be announced on the 25th, and the regulatory framework for the issuance and distribution of token securities will be announced in early next month.