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South Korea to Ease Rules on Asset Managers, Funds

Reuters
Wednesday, 12 Sep 2007 | 11:36 PM ET

South Korea will loosen regulations on foreign asset management firms and domestic private equity funds as early as this year, the finance ministry said on Thursday.

The draft law, to be reviewed by the cabinet, is the latest in a series of deregulation moves for the financial industry as the government strives to raise its financial clout in Asia.

For foreign asset managers selling overseas funds in South Korea their minimum asset size under management will be cut to 1 trillion won (US$1.07 billion) each, from the current 5 trillion won, the ministry said in a statement.

The ministry also will exempt domestic private equity funds from regulations limiting overseas investment, enabling them to buy more foreign assets via special purpose companies based in other countries.

"We are aiming for the revised law to be in force within this year," said Hong Seong-ki, a finance ministry deputy director in charge of securities law.

Under the revised law, investment funds are able to buy equity-linked warrants and securities issued in other countries.

Plus, they can borrow or lend exchange traded funds (ETFs) for arbitrage trade, taking advantage of differences between market prices and net asset value.

ETFs are similar to index funds tracking key stock indexes and traded on stock exchanges.

Meanwhile, to win a fund management license, top shareholders in foreign asset managers should have not taken administrative measures for domestic rule breaches in the past few years, according to the statement.

Top global fund managers, including Fidelity and Franklin Templeton, have been building a presence in Asia's third-largest asset management market, valued at $300 billion, betting on the country's burgeoning corporate pension management market.