[Reform Plan for Securities Firms②] "IMA, Once Ineffective... A New Revenue Source for Securities Firms"

No Securities Firms Entered IMA Market Since Introduction in 2017
Principal Payment Obligation Clarified, Flexible Maturity and Product Structure Allowed
"Related Products Expected to Launch Within One Year After Approval"

The Investment Management Account (IMA) system will also be reformed. Detailed regulations such as 'principal payment' and maturity settings will be specified. Since there were no detailed regulations for IMA, no securities firms had entered the market. With this system reform, new products can be created, and it is expected to emerge as a new growth opportunity for comprehensive financial investment business operators.

IMA is a business that invests customers' deposited funds in corporate finance and other assets to generate returns and then returns the funds. It is only allowed for comprehensive investment firms with a capital of over 8 trillion KRW. However, it has been largely regarded as ineffective. Although introduced in 2017, no securities firms participated due to the lack of specific regulations.

◆ Obligation of 'principal payment' clarified... System improvements on maturity, operation, and sales

The Financial Services Commission (FSC) has established detailed regulations to allow the design of freely operated corporate finance products focused on medium- to long-term investments with minimal regulation. First, it clarified that IMA is a product where the comprehensive investment firm pays the principal. However, if a maturity is set, the obligation to pay the principal arises only at maturity. In case of early termination, investors may incur losses depending on the operational performance.

The maturity structure can also be freely set. However, to differentiate from commercial paper and to serve as a smooth corporate finance supply method, products with a maturity of one year or more must constitute at least 70%. Additionally, products can be created as closed-end, open-end, unit type, or additional type like funds. Early termination can be based on net asset value (NAV) and termination fees may be charged.

Regarding operational regulations, at least 70% of assets must be invested in corporate finance-related assets, and no more than 10% in real estate-related assets. Furthermore, a venture capital supply obligation equivalent to 25% of total assets in IMA will be applied. The mandatory ratio will increase to 10% in 2026, 20% in 2027, and 25% in 2028.

Along with this, a 5% seeding investment will be mandated to enhance accountability. Proprietary trading and wash trading will be restricted to prevent conflicts of interest. Additionally, the product will be sold as an investment product and operational reports will be periodically provided.

Risk management will also be strengthened. Since both commercial paper and IMA require the comprehensive investment firm to bear the principal payment obligation, the combined limit for commercial paper and IMA will be set at 200% + 100% of capital (commercial paper limit is 200%).

Moreover, the loss reserve system will be reinforced. 5% of IMA operational assets will be preferentially reserved as loss reserves through proprietary capital. If valuation losses occur on IMA operational assets, additional reserves must be accumulated accordingly. When sufficient loss reserves are accumulated, only 50% of IMA operational assets will be reflected in the calculation of the net capital ratio (NCR) to secure operational capacity.

◆ Product launch expected within one year after IMA approval... "Medium- to long-term freely operated corporate finance products anticipated"

The FSC expects related products to be launched within one year after securities firms receive IMA approval. Currently, the securities industry is preparing to launch medium- to long-term (2?7 years), medium-return (3?8%) target IMA products with set maturities, principal payments, and potential for excess returns.

The FSC anticipates that depending on the target return level, these hybrid-type (deposit + asset management) products will be actively utilized for various corporate finance and venture capital supply such as corporate bonds, corporate loans, mezzanine investments, and venture investments, allowing investors to expect returns without concerns about losses.

An FSC official explained, "The difference from public funds is that the principal payment is guaranteed from the beginning until maturity," adding, "In terms of returns, it will be operated with slightly higher targets than commercial paper." He further stated, "We are trying to set a condition that the product must be launched within one year after designation."