Foreign Investor Registration System Disappearing After 30 Years

Approval of Amendment at Cabinet Meeting
Abolition in December After 6 Months
"Enhancing Accessibility to Korean Stock Market"

The foreign investor registration system, which has been maintained for over 30 years, is disappearing into history. This system required foreign investors to pre-register their personal information with the Financial Supervisory Service (FSS) in order to invest in domestic listed securities, but it has been cited as a major factor contributing to the Korea discount (undervaluation of the domestic stock market).

On the 5th, the Financial Services Commission (FSC) announced that at the Cabinet meeting held that day, a revision to the Enforcement Decree of the Capital Market Act, which abolishes the foreign investor registration system, was approved. The revised enforcement decree is scheduled to be promulgated on the 13th, and accordingly, the foreign investor registration system will be abolished from December 14, six months later.

Under the registration system introduced in 1992, foreign investors had to register their personal information with the FSS in advance to invest in domestic listed stocks, bonds, and other securities. Only after obtaining an investment registration number (foreign investor ID) could they open accounts at securities firms for trading. The registration process took time and required many documents, which was pointed out as a barrier to foreign investment in Korea.

Although the limit on foreign ownership of listed stocks was basically abolished in 1998, the registration system has remained in place until now. Currently, among about 2,500 listed companies, 33 are subject to overall foreign ownership limits, and among these, only 2 companies are subject to individual foreign investor limits.

With this revision to the enforcement decree abolishing the foreign investor registration system, corporations will be able to open accounts at securities firms using their LEI (Legal Entity Identifier), and individuals will use their passport numbers. Foreign investors who have already registered will be allowed to continue using their existing investment registration numbers to minimize inconvenience caused by the system change.

The FSC expressed expectations that "abolishing the foreign investor registration system in line with global standards will enhance foreign investors' accessibility to the Korean stock market, laying an important foundation for expanding foreign investment." The FSC, FSS, Korea Financial Investment Association, and other related agencies plan to prepare to ensure the smooth implementation of the abolition of the foreign investor registration system, including providing practical guidelines.

In addition, financial authorities plan to soon finalize other regulatory amendments to improve capital market accessibility, such as expanding the scope of post-reporting for over-the-counter transactions and enhancing the utilization of integrated accounts (which consolidate trading activities of multiple investors into a single account).