New Retail Investing Rules Come into Effect in South Korea

New rules restricting private equity forms (PEFs) from issuing loans have come into effect in South Korea. From 21 October, only PEFs with institutional investor clients that have appropriate risk management capabilities can offer loans, with fund management firms now required to have internal control measures. 

The changes, flagged earlier this year, create two categories of investors: general funds, which are open to individuals; and institution-only funds, which are open to qualified retail investors investing KRW300 million or more. These will be subject to stronger investor protection such as audit requirements. 

PEFs in Korea are supervised by the Financial Services Commission. The text of the changes to the Financial Investment Services and Capital Markets Act (FSCMA) subordinate regulations can be found here.