This article was published on the ChosunBiz MoneyMove (MM) site at 10:59 a.m. on Apr. 30, 2025.
Foreign asset management firms will be allowed to directly sell overseas funds in Korea. However, the financial authorities plan to limit the sales target to institutional investors due to the high possibility of incomplete sales to individual investors given the complex structure of overseas funds.
According to the financial authorities and the investment industry on the 30th, the Financial Supervisory Service (FSS) recently informed the Korea Financial Investment Association of the qualification requirements and procedures for global asset management firms' investment brokerage business. An FSS official noted, "Offshore funds have a high possibility of incomplete sales when sold to general investors, and we will proceed cautiously as both the Lime and Discovery incidents were similar situations."
The Financial Services Commission announced in its business plan for the year released in January that it would allow foreign asset management firms to engage in fund brokerage by the first half of the year. The financial authorities have not previously permitted foreign asset management firms to engage in fund brokerage due to basic principles of separating fund management and sales, as well as protecting the domestic investment industry, but have decided to lower the threshold this year.
Unlike domestic asset management firms, foreign asset management firms have not been allowed to establish sales corporations through affiliates, and thus could only sell indirectly through separate channels such as securities firms and banks. While direct sales are possible for certain funds that investors inquire about first, the effectiveness has been minimal due to the small size of the direct sales market.
If the permit is granted this time, foreign asset management firms will be able to establish sales corporations as subsidiaries and promote the sale and investment of funds operated by their affiliates. However, authorities are expected to limit the sales targets of foreign asset management firms to institutions. The main clients are expected to be pension funds and mutual aid associations. Both general individual investors and professional investors, who have wider product choices, will be excluded from the sales targets.
Authorities are concerned that allowing foreign asset management firms to sell directly to general investors may lead to incomplete sales. An FSS official stated, "Given the complex structure of overseas funds, there is a significant risk of financial accidents if they are sold directly to general investors with relatively low financial understanding," adding that the system will begin on a limited basis initially.
As the door opens for foreign asset management firms to sell funds, domestic securities firms and asset managers are breathing sighs of relief. A source from the investment market noted, "We expected difficulties to increase as foreign asset management firms entered the already competitive fund market, and it is somewhat fortunate that sales to individual investors will remain as they are now."
However, the government plans to continue providing opportunities for foreign investment institutions to enter the Korean capital market. An FSS official remarked, "We initially planned to grant investment brokerage licenses after system improvements by June, but the progress is faster than expected," noting that many foreign asset management firms have shown interest and discussions are actively ongoing.