Funds of Funds Special Assets: A Review of Korea’s Securities Regulation
Introduction
A comprehensive review of Korea’s securities regulation has been conducted, revealing a complex regulatory structure with limited operational transparency. Despite efforts to benchmark the country’s financial sector framework against international standards, there are still significant challenges to address.
Overview of Funds of Funds Special Assets
According to data released by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), Korea’s funds of funds special assets reached a total value of KRW 307.6 billion in 2022. The majority of these assets were held in investment trusts, accounting for 78.4% of the total.
Asset Allocation
In terms of asset allocation:
- Stocks made up the largest portion of the funds, accounting for 62% of the total.
- Bonds accounted for 10.3%.
- Other assets such as real estate and commodities made up a smaller proportion.
Regulatory Challenges
The review found that Korea’s securities regulator, the FSC, has sufficient powers to inspect and investigate regulated entities, but its on-site examination program is limited in scope. The regulator also lacks the authority to impose significant administrative sanctions, and the enforcement process can be lengthy and opaque.
Cooperation with Foreign Regulators
Korea has a robust system in place for sharing information and cooperating on cross-border investigations. However, there may be challenges in coordinating efforts between different domestic authorities.
Recommendations for Improvement
The review highlights the importance of strengthening the regulatory framework to address emerging risks and preventing conflicts of interest. It recommends:
- Improvements to the consultation process
- Increased transparency around decision-making processes
Conclusion
While Korea’s securities regulation has made significant progress in recent years, there are still areas that require improvement to ensure a stable and efficient financial system.
By addressing these challenges, Korea can further strengthen its regulatory framework and promote a healthy and transparent financial market.