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Foreign investor registration to be scrapped in Korea

Published: 19 Jan. 2023, 18:18 Updated: 19 Jan. 2023, 20:11

Financial Services Commission (FSC) Chairman Kim Joo-hyun speaks at a meeting held to discuss financial innovation in Yeouido, western Seoul, on Thursday. [NEWS1]

Investing in Korea is going to be made easier, with the regulators ending a system that's out of line with international standards.

The move is being taken in part to end the "Korea discount," in which the country's shares trade at price-earnings ratios out of line with international comparables.

“We will scrap the foreign investor registration system that was required from foreigners trading any kind of securities in the local market,” said Kim Joo-hyun, chief of the Financial Services Commission (FSC), at a meeting held to discuss financial innovation in Yeouido, western Seoul, on Thursday.

Under the registration system, which was adopted in 1992, foreign investors must visit the Financial Services Commission to apply for an Investment Registration Certificate. Documents have to be in Korean and a representative has to be hired if the individual cannot go in person. The process is supposed to take five days, but often takes longer.

The FSC concluded it will “sufficiently be able to accomplish the purpose of the system even after abolishing it, like the management of investment limits and market monitoring,” Kim added.

Foreign investors will be able to trade using their passport number or the legal entity identifier, a reference code used across markets and jurisdictions to identify legal entities participating in financial transactions.

The FSC will also expand the scope of over-the-counter trading open to foreigners. Listed companies with assets of more than 10 trillion ($8.1 billion) won will be gradually required to increase the number of regulatory filings containing important information starting next year.

Specific details of the changing regulations are scheduled to be announced on Jan. 25.

The government last year announced its ambition to eliminate the factors causing the “Korea discount.”

Finance Minister Choo said at a press conference last week that trading hours of the country’s foreign exchange market will be extended to 2 a.m. in the second half of next year at the earliest. Currently, the local foreign exchange market operates from 9 a.m. to 3:30 p.m.

On the same day, Kim said the FSC will allow the issuance of security tokens and create a “safe circulation system.”

The FSC will “allow the digitization of security tokens, which wasn’t legally allowed, using the distributed ledger technology and make sure they are legally and safely guaranteed property rights,” said Kim.

A platform that enables over-the-counter trading of the security tokens will be will be institutionalized.

“I believe inconvenience and unexpected risks are inevitable in the process of setting up and practicing a new regulation system that did not exist.” Kim added, the FTC will “minimize the risks that inevitably follow regulatory innovation through active communication with market participants.”

BY JIN MIN-JI [[email protected]]