South Korea’s regulator hones licence accuracy

South Korea’s Financial Supervisory Service (FSS) has announced revised licensing requirements and procedures that will lower the barrier of entry for financial investment services providers with securities, exchange-traded derivatives, over-the-counter (OTC) derivatives operations. “With the revised manual in place, the FSS expects applicants to more accurately prepare the authorisation of operating financial investment services as well as minimise both the cost and the time required for preparation of the licence application.”

The core changes outlined in the new manual include requirements for human resources and physical facilities, and arrangements for the prevention of conflict of interest, as well as standardised forms for filing as part of licensing process.

“Previously, the number of professionals in certain business was ambiguous such that applicants had difficulties in managing their human capital,” stated the regulator in a release. “From now on, the revised manual will clearly specify the number of professionals required before applying for the financial investment services business licence.”

The new manual divides professionals required for filing financial investment services licences into three categories: securities brokerage and dealings, exchange-traded derivatives brokerage and dealings, and OTC brokerage and dealings; then further subdivided into type of professionals required when conducting asset management, corporate finance, research and analysis, investment advisory, risk management, internal control, middle and back office work. Depending on the nature of business, the financial institution applying for a licence will need to employ 11 to 30 professionals in order to qualify for a licence.

“Before, it was also quite difficult to self-evaluate the physical facilities as they are usually not quantifiable,” stated the release. “From now on, the FSS will evaluate business continuity by examining IT facilities, communication channels, business space, security system, and supplemental facilities. For the evaluation of an applicant’s business plan, the FSS will check profitability forecasts, internal controls for investor protection and the legitimacy of business.”

In terms of the arrangements for conflict-of-interest prevention, the manual will provide more guidance on internal control standards and the integrity and the efficacy of Chinese walls among business divisions that many have conflicting interests.

While the business plan and qualification checklists were previously in standardised format, the FSS will provide standardised forms for filling business plans and qualification checklists to enhance efficiency during the application process.

The FSS will soon release an English language version of the revised guideline for the use of oversea applicants.

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South Korea’s regulator hones licence accuracy