Changes Promoted For Laws on Trusts

The state-run think-tank, Korea Development Institute said Thursday that different trust-product related laws applied to investment trust firms, securities firms and banks should be combined into one. The Ministry of Finance and Economy admitted a need to combine the laws as requested by the institute.

The institute said in a report that "banks, securities firms and trust investment companies are regulated by each different laws. And this resulted in an increasingly competitively environment."

The report added that it is necessary to reform the nation's regulatory environment by making the trust related laws into one standardized law. The think-tank pointed out that three financial institutions sell trust products that are similar in the form of indirect investment since these institutions make investment for their customers with the money collected from them.

Currently, investment trust companies are regulated by a securities investment trust act while mutual funds which are sold by securities firms are governed by a securities investment company act. Banks are controlled by a trust act. According to the securities investment trust act, no tax is levied on trust products sold by investment trust companies. But the think-tank pointed out that there is no taxbenefit for mutual funds to the contrary, being less advantageous for investors.

Unlike securities firms and investment trust firms which could only invest in bonds and stocks, banks have advantage over two financial institutions since lenders can invest in other financial products like real estates and loans. The government-run research institute said that a new financial product is allowed to be sold by one industry only.

by Lee Sang-ryeul