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 Securities
and Exchange Act |
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The Korean securities
market is principally
regulated by the Securities
and Exchange Act.
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This Act also covers
the supervision of
all securities-related
institutions.
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Its main purposes:
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To ensure that issuing
and trading transactions
of securities are
conducted fairly
， To facilitate the
trading of securities
， To protect investors
， To promote development
of the nation's economy.
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The Act is dedicated
to the following areas: |
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Investor protection
， Timely disclosure
， Issuer registration
， Public offerings
， Secondary market
distributions
， Tender offers
， Insider trading
， The regulation of
securities businesses
and investment advisors
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Since its enactment
in January 1962, the
Act has faced several
fundamental revisions |
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The amendments began
in the 1970s when
rapid growth enveloped
the Korean securities
market.
， In the 1990s, more
changes ensued after
MOFE unveiled its
blueprint to liberalize
the securities market.
， Post-crisis amendments
focused on market
liberalization and
on the promotion of
financial and corporate
sector restructuring.
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| Futures
Trading Act |
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The Futures Trading
Act (FTA) was enacted
in December 1995 with
the introduction of
derivatives
trading to Korea.
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Its main objectives
are: |
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To provide investor
protection
， To regulate the
futures market.
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FTA affects transactions
of physical commodities
and financial products
including interest,
foreign exchange,
securities and their
indices. Transactions
of stock-index futures
and stock-index options
fall under this act.
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FTA stipulates the
structure and operations
of the futures market,
including overall
operation of the futures
exchange;
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Licensing and regulation
of futures companies;
， Establishment of
the futures association
as a self-regulatory
organization, as well
as regulatory functions;
， The establishment
of supervisory authorities
of regulators such
as FSC.
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In 2002, sanctions
were strengthened
for manipulation and
insider-trading violations. |
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| Collective
Investment Scheme Act |
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The new asset management
act (Collective Investment
Scheme Act) was enacted
in October 2003, consolidating:
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The Securities Investment
Trust Business Act;
， Securities Investment
Company Act; and
， Investment Advisory
business related provision.
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Previously, investment
advisory business
and discretionary
investment business
were regulated under
the Act.
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Collective Investment
Scheme Act provides
for a more comprehensive
regime governing
the management
of a wide array of
indirect investments
in Korea.
， Under the new law,
an integrated set
of regulations covers
all forms of asset
management and
is designed
to strengthen the
protections available
to investors so that
investor confidence
in the asset
management industry
can be restored.
， Also, the law expands
the scope of assets
covered, including
Free Board derivatives
products and
real estate agricultural
products, livestock,
marine products, lumber,
minerals,
energy products,
and products derived
from the above, as
well as any other
assets
specified in
a presidential decree.
This allows for the
easy expansion of
the scope of
the new law
as new assets enter
the marketplace.
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As a corollary to
the expanded scope
of assets subject
to management under
the new law, various
protections have been
put into place to
safeguard investors'
interests, including
establishing a system
for general meetings
of beneficiaries and
introducing a corporate
directors system for
the investment company.
The law also provides
limits with respect
to investments in
the same class of
assets, as well as
on transactions among
related parties.
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By transferring investment
advisory business
related provision
from the Act to the
Collective Investment
Scheme Act, the scope
of advisory services
and discretionary
investments is broader
and the restrictions
on concurrently engaging
in other businesses
have been strengthened
to protect investors.
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Under the new law,
major regulatory changes
are as follows:
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Banks and insurance
companies will be
permitted to engage
in asset management
businesses
(i.e., investment
trust and variable
life insurance, respectively)
， The minimum paid-in
capital required to
establish an asset
management company
is ten
billion won
and authorization
from FSC/FSS will
be required.
， Insurance companies
will be permitted
to sell beneficiary
certificates of investment
trusts
and shares
of mutual funds.
， The range of products
managed by asset management
companies will be
expanded from
securities
and futures traded
in the regular market
to OTC derivatives,
real estate
and non-financial
products (e.g., gold,
copper and agricultural
products). |
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| Commercial
Code |
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The Commercial Code,
enacted in January
1962, is the basic
law providing regulations
for all commercial
and corporate activities.
For example, a company
drafting its articles
of incorporation must
refer to the Code
for details, such
as the total shares
authorized for issuing
and the par value
of each share.
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The Code, since its
formulation, underwent
major revisions in
1984, 1995, 1998,
1999 and 2001 to better
reflect developments
in the Korean economy.
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， In the 1984 revision
of the Code, the limits
on authorized capital
and bond issuances
were raised.
A company seeking
formal establishment
should have a minimum
capital of
50 million won. Also,
prohibition of crossholding
shares was introduced.
A subsidiary,
having a minimum 40
percent of
its shares held directly
or indirectly
by a holding
company, is restricted
from acquiring shares
of its holding
company.
If a subsidiary
holds more than 40
percent of the shares
issued by another
company,
it too will
be considered a subsidiary
of the holding company.
， The 1995 revisions
to the Code are as
follows: use of data-processing
systems
(e.g., microfilm)
permitted for storing
trade books or making
commercial
registration;
procedure simplified
for convening shareholders
meetings; rights introduced
for dissenting
shareholders to request
share price reappraisal;
auditor's position
reinforced
in a company; and
restrictions abolished
for capital increases.
， The 1998 revisions
to the Code laid the
legal groundwork for
promoting economic
reforms.
The focus was
on facilitating a
post-crisis recovery
of Korea's economy.
， The 1999 revisions
to the Code were made
to promote the sound
development of Korea's
corporate sector
and to strengthen
global competitiveness
by improving
corporate governance.
， Reflecting Korean
government's strong
intention, the 2001
revisions to the Code
improved
corporate governance
by increasing the
resolutions by the
shareholders meeting,
strengthening
the board of directors
system and strengthening
shareholder's
preemptive
rights and allowing
all-inclusive transfer
or swap of shares
to
establish holding
company. |
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