On July 29 2008, the Financial Services Commission (FSC) issued the final Enforcement Decree, Ordinance (sihaengkyuchik) and other regulations (collectively, the FIS Regulations) to implement the Capital Market and Financial Investment Services Act, which reorganises and consolidates the legal framework governing the Korean capital markets and financial investment services industry. This new consolidated legal framework, which the FSC hopes to cause a big bang in the financial investment industry, however, requires financial investment companies to renew their registrations and/or authorisations under the Act to continue their existing businesses when the Act becomes effective on February 4 2009. Although the FIS Regulations will not become effective until February 4 2009, the provisions governing the renewal of existing authorisation and registration became effective on August 4 2008.
Streamlined application process
Under the Act and FIS Regulations, the current registrants and license holders have two months from August 4 2008 to file their applications, which may not be extended. A task force team set up by the FSC and the Financial Supervisory Service (FSS) has streamlined the application process by grouping potential applications into three categories. First, any applicant that merely seeks to continue existing business may file an application by August 14 2008 using an abbreviated application under the short-form report and confirmation process (First Category Applicant). Second, any applicant that seeks to add a new "business segment (as defined in the Enforcement Decree)" may file a separate application during the period from August 14 2008 to October 3 2008, provided that the new business segment is within the same business category (adding equity brokerage service to the business scope of an existing bond broker) as defined in the Enforcement Decree (Second Category Applicant). Third, any applicant that seeks to add a new business outside of the existing business category (adding collective investment scheme service to the business scope of an existing dealer or broker) may file an application after February 4 2009.
Adding a new business segment
The Second Category Applicant that seeks to add a new business segment will be given strict scrutiny in terms of workforce and physical facilities requirement, business plan and large shareholder eligibility requirements in accordance with the requirements under the Act and FIS Regulations. Since the short-form report and confirmation process does not apply for such an application and certain potential negative consequences to the existing licence could arise during the scrutiny, it is advisable to consult with local counsel familiar with the Act and FIS Regulations.
The FSC's decision on all applications filed by October 3 2008 will be made, at the latest, by February 3 2009. An applicant that fails to meet the relevant requirements may (i) re-apply during the period from Feburary 4 2009 to May 3 2009, and (ii) continue the existing business until August 3 2009. If the applicant fails to meet the requirements in the second round, it would be deemed to be in violation of the Act, and any additional application effort will be subject to the full review and inspection process under the Act.
Eui Jong Chung