The Financial Supervisory Service warned general private equity fund managers to thoroughly adhere to compliance and internal controls to prevent issues from arising. Up until now, somewhat relaxed regulations have been applied to private equity funds, but during the comprehensive investigation process resulting from the so-called "Lime incident," several cases of internal control failures were detected, prompting the financial authorities to address the issue.
Since the private equity fund issues of Lime, Optimus, and Discovery Asset Management in 2020, the FSS, which had been closely monitoring private equity funds, recently completed a comprehensive investigation of domestic private equity fund managers. However, even before the investigation results were fully announced, it was found that one out of the three private equity funds investigated had been flagged for compliance issues.
Seo Jae-wan, deputy director of financial investment at the FSS, emphasized on the 16th during the "2025 Asset Management Compliance Officer Workshop" that "while the private equity fund market has rapidly grown, the awareness of compliance has not kept pace with this quantitative growth," urging that adequate monitoring capabilities be established to prevent companies and their employees from facing tangible and intangible disadvantages due to internal control failures.
The FSS raised compliance issues in front of asset management personnel because the number of sanctions against private equity fund managers has surged recently.
According to the FSS's sanction disclosure on the 20th, the number of private equity fund managers sanctioned by the FSS has significantly increased over the past five years. The number of sanctions against collective investment companies for private equity funds was 16 in 2021, reduced to 11 in 2022, and only 4 in 2023; however, it surged to 48 last year. From the beginning of this year until the previous day, the number of sanctions reached 26, about 70% more than the same period last year (15 sanctions).
Already a third of the investigation subjects have been sanctioned even before all the comprehensive investigation results have been released. An FSS official explained, "We are announcing the sanction details sequentially, and further sanctions are still pending."
The FSS initiated comprehensive investigations into over 200 private equity fund managers that were registered at the time following the private equity fund crisis in 2020. As of 2023, the comprehensive investigations have been completed, and the results of the sanctions are being disclosed sequentially.
Within the investment industry, it is pointed out that issues that have festered due to the financial authorities' negligence in monitoring private equity funds are now emerging all at once.
An insider from the investment industry noted, "Private equity fund managers have somewhat been off the radar of the financial authorities' surveillance," adding, "As numerous small managers have emerged wildly, the excessive competition prioritizes immediate revenue and survival over compliance awareness that operators should uphold."
The number of domestic private equity fund managers has rapidly increased since regulatory improvements in 2015. The number of asset managers, which was 87 at the end of 2015, rose to 494 by the end of last year, with about 85% (422) registered as general private equity collective investment companies. The assets managed by private equity funds have more than doubled from 199 trillion won in 2015 to 445 trillion won in 2020. This year, the asset size is expected to reach 700 trillion won.
However, as the number of private equity fund managers has rapidly increased, the FSS also finds it challenging to examine each manager individually.
An FSS official stated, "Considering the scale of private equity fund managers, we plan to look into compliance issues through various methods such as interviews and document requests in addition to inspections," adding, "Inspections will be focused on large managers that influence the market to minimize investor losses."