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Newsletter | December 2014, Issue 4
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SECURITIES
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Proposed Amendments to Financial Investment Business Regulations, Etc.
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The Financial Services Commission (the “FSC”) recently amended the Financial Investment Business Regulations and the Regulations on Issuance of Securities and Public Disclosure. The amendments reflect in the regulations various measures announced by the FSC last July, as well as certain changes of the financial regulatory regime.
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Major points of the amendments, as proposed, are the followings:
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Changes to the Applicability Scope of Rules Governing Sound Foreign Exchange Management
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Under the amendment, a Korea branch of a foreign financial investment company is exempt from the requirement to comply with mandatory foreign currency liquidity ratios to the extent that the Korea branch has a commitment from its head office to provide sufficient liquidity support. The exemption, however, does not cover the requirement to comply with foreign exchange position limits. Separately, assets held by a financial investment business company in the form of trust is exempt from the rules established for sound foreign exchange management, such as foreign currency liquidity ratios and foreign exchange position limits.
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Relaxing the Certain Accounting Filing Obligation of a Financial Investment Business Company
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Previously, all financial investment business companies were required to submit an audited or reviewed report to financial regulators on a quarterly basis. Based on the amendment, a financial investment business company is permitted to submit such audited or reviewed report on a bi-annual basis if the amount of its assets is less than KRW 100 billion or if it does not engage in any investment dealing business covering securities or over-the-counter derivatives.
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Permitting Offshore Outsourcing of IT Facilities by a Korean Subsidiary of a Foreign Financial Investment Business Company
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Unlike a Korea branch, a Korean subsidiary of a foreign financial investment business company has not been able to outsource its IT facilities for over-the counter derivatives business to an offshore service provider due to the absence of applicable regulations. The amendment provides a legal ground for even Korean subsidiaries of foreign financial investment business companies to utilize the offshore outsourcing of such IT facilities.
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Adding a New Exception to the Requirement to Postpone the Effective Date of a Securities Registration Statement
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Previously, if the actual issue price of bonds was different from the planned issue price specified in the securities registration statement filed for the issuance of the bonds, the effective date of the securities registration statement must be postponed by three business days. Under the amendment, the effective date of the securities registration statement can remain the same without any postponement in case the actual issue price of the bonds comes within twenty (20) percent of the planned issue price.
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Providing a Legal Basis to Refuse or Cancel Foreign Investor Registration if the Registration is Sought by a Korean National Disguised as a Foreign Investor
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In order to prevent a Korean national from investing in Korean securities as a foreigner, the amendment includes a provision enabling a financial investment business company to refuse or cancel foreign investor registration applied by a Korean national in the name of an overseas company as a foreign investor.
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