Securities Firms Strengthen Mandatory Separate Deposits for Dollar and Yen Investors' Deposits

The obligation for securities firms to separately deposit foreign currency investor deposits will be strengthened.

Yonhap News

The Financial Services Commission announced on the 11th, at a regular meeting, that it has approved an amendment to the "Financial Investment Business Regulations" to enhance the protection of foreign currency investor deposits. The amendment will take effect from the 19th.

Currently, under the Capital Markets Act, investor deposits entrusted to securities firms are separately deposited with the Korea Securities Finance Corporation to protect investor assets and to support securities firms' liquidity in times of crisis.

For Korean won, 100% is separately deposited with the Korea Securities Finance Corporation, but for foreign currencies, only 70% of US dollar deposits are required to be separately deposited.

According to the amendment, the separate deposit obligation for US dollar investor deposits will be expanded from 70% to 80%, and a new 50% separate deposit obligation will be established for Japanese yen investor deposits.

The Financial Services Commission expects that "this will further strengthen the protection of foreign currency investor deposits and expand the capacity to support foreign currency liquidity for securities firms in times of crisis."

The amendment also improves the remittance procedure for foreign currency investor deposits separately deposited with the Korea Securities Finance Corporation. Currently, funds must be transferred from the Korea Securities Finance Corporation's deposit account to the securities firm's foreign exchange bank account and then remitted to other institutions. In the future, the Korea Securities Finance Corporation will be able to remit directly to other institutions, shortening the procedure.