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FSC eases requirements for individual investors to be registered as professional investors

According to Yonhap News,

(SEOUL=Yonhap News) The requirements to be registered as professional investors, who are allowed to make riskier investment than general investors. It aims to encourage professional investors to play an active role in funding innovative startups and SMEs.

The Financial Services Commission (FSC) announced that amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) were approved at a cabinet meeting on August 13.

To be registered as professional investors, investors are required to maintain a financial investment account with a "minimum balance of KRW 50 million except for ultra-low risk products" from a previously minimum balance of KRW 500 million. Ultra-low risk products refer to national bonds and Repurchase Agreement (RP).

For income threshold, which currently requires a minimum annual income of KRW 100 million, it will be eased to KRW 150 million in case of combined income of couples is added. The current requirement of asset value of KRW 1 billion will be eased to "a minimum net asset value of KRW 500 million excluding a house he/she is currently occupying".

In addition, those who have financial expertise are only required to meet the minimum balance of KRW 50 million.

Investors with financial expertise include public certificate holders (e.g. accountant, lawyer, patent attorney), financial investment business professionals and professional financial service certificate holders (e.g. investment advisory service, investment management).

FSC expects the number of professional investors to increase from 1,950 as of end-2018 to 370,000-390,000.

The registration procedures for professional investors will become easier.

They no longer have to go through the registration procedure with the Korea Financial Investment Association as they previously did. Financial investment companies are allowed to decide whether their customers qualify for professional investors upon their application.

However, inappropriate screening by financial investment companies will be punished as unfair business practices.

The amendments to the Enforcement Decree also include opening of a new trading venue, called "K-OTC Pro," exclusive to professional investors to trade unlisted equity securities.

It aims to stimulate trade of unlisted equity securities by professional investors. The equity securities available will be expanded to that of PEF, startup investment association, venture investment association, and new technology business investment association.

The amended rules will go into force on the day of proclamation. However, rules regarding individual professional investors will be implemented in three months since the date of proclamation after completing establishment of necessary electronic system.

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Source Text

Source: Yonhap News (August 13, 2019)

** This article was translated from Korean.

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