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Newsletter | May 2014, Issue 2 |
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SECURITIES |
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Proposal for Amending Presidential Decree of Financial Investment Services and Capital Markets Act and Financial Investment Business Regulations |
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The Financial Services Commission (“FSC”) plans to amend the Presidential Decree of the Financial Investment Services and Capital Markets Act (“FSCMA PD”) and the Financial Investment Business Regulations (“FIBR”) in order to reflect various policy measures announced earlier by the government and bolster its existing regulatory system. The FSC has also introduced a new measure for ensuring the stability of the derivatives market as a way to prevent the recurrence of a recent accident caused by a mistaken order made by Hanmag Securities for the trading of listed index options. |
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Strengthened Public Disclosure Requirement for Transactions between Affiliates, Involving a Financial Investment Company: A financial investment company will be required to disclose publicly in its business report and its annual, semi-annual and quarterly reports of its activities relating to securities issued by its affiliates, such as their subscription, underwriting, purchases, sales or injection into trusts or collective investment vehicles. This disclosure requirement aims to foster transparency in such inter-affiliate transactions. |
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Strengthened Regulation of the Sale of Subordinated Bonds Issued by a Financial Investment Company or Its Affiliate: A financial investment company will be prohibited from soliciting general investors to purchase subordinated bonds issued by the financial investment company itself or its affiliate or injecting them into any fund, trust or discretionary asset pool managed by the financial investment company. |
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Active Upper and Lower Price Limits for Trading of Listed Derivatives: There already exist simple upper and lower price limits and a circuit breaker for the trading of derivatives during regular trading hours. However, as they are inadequate to control sudden drastic price changes, actively applied upper and lower price limits will be newly introduced. Based on this new system, the execution of a given derivatives transaction will be possible only within a certain range above or below the price executed immediately prior. |
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Korea Exchange Authorized to Cancel an Error Trading Executed: Currently, only the parties to a given error trading can adjust its price through mutual agreement if they already executed the error trading. Going forward, the Korea Exchange will be empowered to cancel such error trading at its own authority without consent from the relevant parties, if necessary to ensure the market stability in a situation similar to the recent Hanmag Securities error trading accident. In connection with the cancellation, the Korea Exchange will be allowed to impose monetary penalties on the party that made a trading error. |
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