Lee Chanjin: "PEFs Must Move Beyond Short-Term Gains to Play a Productive Financial Role"

FSS Holds Roundtable with PEF Management Company CEOs

Lee Chanjin, Governor of the Financial Supervisory Service, met directly with CEOs from the institutional private equity fund (PEF) sector and emphasized the importance of restoring trust and strengthening the role of productive finance.

Yonhap News Agency

On January 20, the Financial Supervisory Service announced that Governor Lee Chanjin hosted a roundtable with CEOs from 12 institutional private equity fund management companies. During the meeting, participants discussed topics such as the social responsibility of PEFs, strengthening internal controls, and measures to revitalize the supply of venture capital.

In his opening remarks, Governor Lee assessed that the PEF industry has established itself as a key pillar of the domestic capital market over the past 20 years by facilitating corporate restructuring and discovering growth companies. He further explained that the accumulated investment experience, management innovation capabilities, and global networks have made significant contributions to enhancing the competitiveness of domestic companies.

However, he stressed, "Due to recent illegal and improper actions by some management companies, market order has been disrupted and investor interests have been harmed, resulting in a significant loss of public trust in the overall PEF industry." He emphasized, "Acts that undermine market fairness and trust will be dealt with strictly in accordance with the law and established principles."

Regarding the supervisory approach, he expressed his intention to maintain a balanced stance through targeted inspections. He stated, "We will minimize the burden on the market by focusing inspections on areas with concentrated risks," while also explaining, "At the same time, we will work to enhance the self-regulatory capabilities and internal controls of management companies through compliance support and consulting."

Governor Lee also specifically outlined the roles that the PEF industry should play as the financial sector transitions toward productive finance. He said, "Rather than excessive borrowing or complex deal structures, the industry should focus on identifying companies with high growth potential and fostering a culture of investment that increases corporate value through management innovation." He urged, "Please ensure that the PEF industry plays a key role in leading the transition to productive finance by establishing investment practices based on soundness and transparency."

He continued by stressing the importance of internal controls and social responsibility. He noted, "Market trust cannot be achieved solely through institutional reforms; it is only complete when supported by the voluntary ethical awareness of all members." He called for special attention from CEOs, and further emphasized, "As core stakeholders in the capital market, please establish investment practices that fulfill social responsibilities such as employment stability and sustainable corporate growth."

Additionally, he delivered a message urging the industry to move beyond short-term profit-oriented investments and strengthen its role as a provider of venture capital. He stated, "I hope the industry will evolve into a provider of venture capital that offers large-scale capital and management expertise, building on the capabilities accumulated so far," and added, "Please take an active role in enhancing the mid- to long-term competitiveness of companies and discovering promising businesses."

The PEF management company CEOs who attended the meeting evaluated the roundtable as a meaningful opportunity for the supervisory authorities and the industry to jointly discuss the role and future direction of PEFs. They expressed agreement on the need to transition toward productive finance and stated their intention to actively cooperate in fostering key national industries through initiatives such as the National Growth Fund. However, they also pointed out the need for a fair regulatory framework to ensure that domestic management companies are not subject to unfavorable regulations compared to foreign PEFs engaging in similar investments.

The Financial Supervisory Service plans to faithfully reflect the diverse opinions raised by the industry at the roundtable in future supervisory and inspection directions, as well as in institutional improvements. Governor Lee emphasized, "Please make investor protection and social responsibility core values throughout all investment and management activities," and added, "The Financial Supervisory Service will spare no effort in providing institutional and policy support to ensure that the restoration of market trust and industry growth can be achieved in harmony."