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Newsletter | July 2016, Issue 2
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SECURITIES
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FSC Announces Plans to Boost the Investment Advisory Business
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On March 25, 2016, the Financial Services Commission (“FSC”) announced several plans to boost the investment advisory business to support investing by individual investors.
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Below are the key points of the announcement:
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1. Introduction of New Type of Investment Advisory License and Independent Financial Advisors
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The FSC announced a plan to introduce a new type of investment advisory license with a lower entry barrier. It will be geared more towards investment advisors looking to provide investment advice to general individual investors.
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Holders of the new investment advisory license will be permitted to provide investment advice regarding investments in deposits, funds, and derivative-linked securities.
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It has been proposed that the minimum capital requirement for the new investment advisory license will be KRW 100 million, which is significantly lower than the KRW 500 million currently required for a full-blown investment advisory license on financial investment products.
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To do so, the FSC plans to announce the amendment of the Enforcement Decree of the Financial Investment Services and Capital Markets Act within this year.
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Also, the FSC has announced a plan to introduce Independent Financial Advisors (“IFAs”).
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IFAs can neither operate as investment product manufacturers or distributors nor be affiliated in any way with investment product manufacturers or distributors, and would be prohibited from receiving fees or compensation from anyone but the investors.
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The FSC plans to announce the amendment of the Financial Investment Business Rules to introduce the IFA system within this year.
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2. Access to “Robo-Advisors” to Be Expanded to Front Office
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A “Robo-Advisor” is an automated investment tool that provides algorithmic-based portfolio management functions.
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Currently, the use of “Robo-Advisors” has been limited to back office use by investment experts, because under current regulation, investment advisors have been prohibited from allowing investors to elicit investment advice directly from “Robo-Advisors.”
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To expand the business scope of “Robo-Advisors” by allowing investors to interface directly with “Robo-Advisors,” the FSC plans to allow investment advisors to test the use of “Robo-Advisors” in the front office, where they can be accessed directly by investors. Beginning in July 2016, investment advisors will be allowed to do so following the submission of a business plan to the FSC.
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3. Investors to Be Allowed to Contract Online to Receive Discretionary Investment Management Services
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Today, investors must physically visit a financial institution to contract in a face-to-face environment for discretionary investment management services as no online contracting is permitted.
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Going forward, the FSC intends to allow investors to contract online to receive investment advisory and discretionary investment management services regarding Individual Savings Accounts (“ISA”).
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In the mid-to-long term, similar to the discretionary investment management service for ISA, the FSC plans to allow online contracting for certain discretionary investment management services, if they meet specific criteria (e.g., investing in indirect financial investment products, excluding fixed income securities with sufficient diversification).
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Back to Main Page
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If you have any questions regarding this article, please contact below:
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For more information, please visit our website:
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