Abolishment of the Foreign Investor Registration System in South Korea: A New Era for Global Invest
In a significant move towards enhancing foreign investment, South Korea is set to abolish the foreign investor registration system, a regulation in place since 1992. This change, approved by the government and scheduled to take effect on December 14th, will streamline the process for foreign investors, aligning South Korea's practices with global standards.
Previously, foreign investors were required to register with the Financial Supervisory Service (FSS) before they could invest in listed securities in Korea. This process was viewed as a major hurdle, given its time-consuming nature and the documentation it required. However, with the new regulations, foreign investors can directly open accounts with securities firms without prior FSS registration, using LEI(Legal Entity Identifier) for corporations and passport numbers for individuals.
This abolition is expected to significantly improve foreign investors' access to the Korean stock market and lay a solid foundation for expanding foreign investment. The move aligns with practices in major advanced countries like the United States and Japan, which do not operate such investor registration systems.
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**Q1**: What was the purpose of the foreign investor registration system in South Korea?
**A1**: Introduced in 1992, the registration system was designed to manage the foreign ownership limit for listed stocks.
**Q2**: Why is South Korea abolishing the foreign investor registration system?
**A2**: The system was seen as a major hurdle for foreign investors due to its time-consuming process and documentation requirements. Its abolition is aimed at improving foreign investors' accessibility to the Korean stock market.
**Q3**: When will the abolition of the foreign investor registration system take effect?
**A3**: The new regulations are scheduled to take effect on December 14th.
**Q4**: How will foreign investors be able to invest in South Korean listed securities after the abolition of the system?
**A4**: Foreign investors will be able to open accounts directly with securities firms without prior registration with the Financial Supervisory Service.
**Keywords**: Foreign Investor Registration System, South Korea, Financial Supervisory Service, Foreign Investment, Listed Securities, Abolishment, Global Standards, Market Accessibility, Regulatory Changes, Securities Firms
**Hashtags**: #ForeignInvestorRegistrationSystem #SouthKorea #FinancialSupervisoryService #ForeignInvestment #ListedSecurities #Abolishment #GlobalStandards #MarketAccessibility #RegulatoryChanges #SecuritiesFirms
The foreign investor registration system, which has been in place for about 30 years since its introduction in 1992, will be abolished. The government approved the revised "Enforcement Decree of the Capital Market and Financial Investment Business Act" to abolish the foreign investor registration system at a cabinet meeting on June 5th. The revised decree is scheduled to be promulgated on June 13th and will take effect six months later on December 14th.
Previously, foreign investors had to register their personal information with the Financial Supervisory Service before investing in listed securities (stocks, bonds, etc.) in Korea. They had to obtain an "investment registration number (foreigner ID)" and only then could they open an account with a securities firm to trade listed securities. Foreign investor registration was known to be a major obstacle for foreigners to invest in the Korean stock market due to the time-consuming process and the required documents. This was significantly different from global standards, where major advanced countries such as the United States and Japan do not operate such investor registration systems, and global investors have continuously raised the need for system improvements.
The foreign investor registration system was introduced in 1992 to manage the foreign ownership limit for listed stocks, but it has been maintained without change for about 30 years, even though the limit was abolished in principle in 1998, except for 33 listed companies out of over 2,500 listed companies, of which only two are subject to foreign individual limits.
With the abolition of the foreign investor registration system, foreign investors will be able to open accounts directly with securities firms without prior registration with the Financial Supervisory Service. Through this revised decree of the Capital Market Act, corporations can use LEI* and individuals can use passport numbers to open accounts directly with securities firms. For existing foreign investors who have registered, they can continue to use their existing "investment registration number" to minimize inconvenience caused by system changes. After the abolition of the foreign investor registration system, management of foreign ownership limits or individual limits for stocks that require it will still be possible**.
With the abolition of the foreign investor registration system in line with global standards, it is expected that foreign investors' accessibility to the Korean stock market will be improved, creating an important foundation for expanding foreign investment.
Related institutions such as the Financial Services Commission, the Financial Supervisory Service, and the Korea Financial Investment Association plan to prepare guidelines and other measures to ensure a smooth transition. In addition, other measures such as expanding post-trade reporting for off-exchange transactions and improving the utilization of integrated accounts* that were announced in January's "Measures to Improve Foreign Investors' Access to Capital Markets" will be finalized through the Financial Services Commission's approval process (May 10th - May 30th notice period) and will be implemented together with the abolition of the foreign investor registration system.
* Legal Entity Identifier (LEI) is a standardized ID issued to corporations (introduced by G20 in 2011)
** (Foreign ownership limit) The overall foreign ownership size can be identified through trading information without individual IDs for foreign investors.
(Individual limit) Corporations can be managed based on LEI and individuals based on passport numbers for two specific stocks.