The South Korean Financial Services Commission (FSC6) announced on May 5th that the government has passed the amendment to the FSCMA Implementation Order of the Financial Investment Services and Capital Markets Act, abolishing the registration requirements for foreign investors.
It is reported that the registration requirements for foreign investors in South Korea have been implemented since 1992 and have a history of about 30 years. This requirement is expected to be abolished from December 14th of this year (six months after the revision was released on June 13th). According to the foreign investor registration system, foreign investors must register with the Korea Financial Supervisory Authority (FSS) before investing in domestically listed securities (stocks, bonds, etc.) in Korea. For foreign investors, they must register with a financial institution and obtain a registration certificate (foreign investor ID) before opening an investment account with a securities company. Due to the potentially time-consuming and extensive paperwork involved in this process, some have pointed out that this rule is a significant obstacle for foreign investors to invest in the Korean stock market. In addition, this registration requirement for foreign investors has not been implemented in major developed economies such as the United States and Japan. From the perspective of promoting South Korean regulations to be more in line with global standards, global investors are constantly calling for the need to change this regulation.
The registration system for foreign investors in South Korea was introduced in 1992, aiming to manage the maximum investment limit for foreign investors. Although the country lifted investment restrictions for foreign investors in principle in 1998, the foreign investor registration system has not undergone significant changes in the past 30 years. Currently, out of more than 2500 listed companies in South Korea, only 33 projects have been included in the regulatory list by the authorities, and the total shareholding ratio of foreign investors has been restricted. There are also 2 projects that restrict foreign individual quotas.
After the amendment of the Financial Investment Services and Capital Markets Law takes effect, foreign investors can open investment accounts in Korean securities companies without the need to register with FSS in advance. Foreign corporate entities can use their legal entity identifiers (LEls), and individual foreign investors can open investment accounts using their passport numbers. Investors who have obtained a foreign investor ID can continue to use their investor ID to minimize inconvenience caused by institutional changes. Although the registration requirements for foreign investors have been lifted, the relevant authorities in the country still believe it is necessary to manage the total amount of foreign investors' holdings and personal restrictions for specific projects.
In addition, the "Plan to Improve Foreign Investors' Access to the Korean Capital Market" released in January by the country requires other measures to modify financial investment business rules, such as expanding the scope of post declaration over-the-counter transactions and facilitating the use of comprehensive accounts by foreign investors. These measures will be finalized through FSC review and will take effect together with the abolition of foreign investor registration requirements.
