Asset managers can jointly operate with venture firms... Robo-advisor performance advertising also permitted

Financial Services Commission Approves Amendment to Financial Investment Business Regulations

The Financial Services Commission announced on the 7th that it has approved the amendment to the "Financial Investment Business Regulations," which includes revisions to private equity fund regulations and rationalization of robo-advisor regulations.

On the 9th, officials were busy moving in the corridor of the Financial Services Commission at the Government Seoul Office in Jongno-gu, Seoul, where financial authorities decided to include mortgage loans (Judaemdae) in the 'debt refinancing' infrastructure scheduled to launch in May by the end of the year. Financial authorities explained that they aim to reduce the interest burden on mortgage loans by establishing a debt refinancing platform that allows users to compare loan interest rates across the financial sector at a glance and switch loans easily. Photo by Yoon Dongju doso7@

Going forward, asset management companies will be able to perform co-management (co-GP) duties of venture investment associations under the Venture Investment Act as concurrent businesses. Until now, there were no explicit regulations regarding wash trades involving collective investment assets between different funds managed simultaneously under the Capital Markets Act, so co-management of venture investment associations as concurrent businesses was not permitted from the perspective of investor protection. However, with the establishment of provisions against unfair business practices, asset management companies can now explicitly perform co-management of venture investment associations as concurrent businesses and report to the Financial Supervisory Service afterward. The Financial Services Commission stated, “This will help promote venture investment through the formation of venture investment associations amid the current contraction of venture investment.”

Regulations on advertising and sales of robo-advisor products will also be rationalized. In the future, discretionary robo-advisors that have passed the Koscom testbed will be able to use the returns of robo-advisors disclosed on the Koscom website for advertising purposes. This aims to broaden the range of information consumers can use for investment decisions. However, only returns disclosed on the Koscom website can be used, not arbitrarily calculated returns.

Regulations on robo-advisors capable of concluding non-face-to-face discretionary contracts will also be eased. Until now, robo-advisors that passed the testbed had to disclose returns on the Koscom website for 1 year and 6 months before non-face-to-face discretionary contracts could be concluded, but this period will be shortened to 1 year going forward. The Financial Services Commission said, “Products equipped with operation strategies reflecting short-term market conditions will be able to be launched quickly,” and added, “For investor protection, even algorithms that have already passed must undergo quarterly inspections according to post-monitoring procedures.”

Finally, foreign currency-denominated MMFs are planned to be launched as early as this month or next month. The scope of overseas debt securities eligible for inclusion in foreign currency-denominated MMFs will be based on provisions that entrust the Financial Supervisory Service Commissioner with establishing criteria for converting overseas credit ratings into domestic credit ratings. If foreign currency-denominated MMFs are launched, they are expected to be offered as products that export companies, which frequently have surplus foreign currency funds, can use to manage their foreign currency assets.