Mandatory Disclosure of Fund Manager Performance and Compensation Systems

[Asia Economy Reporter Koh Hyung-kwang] Going forward, it will be mandatory to disclose fund managers' performance and compensation systems to investors.

On the 30th, the Financial Services Commission announced that the amendment to the Capital Markets Act for improving the OTC derivatives market risk mitigation, asset management, and crowdfunding sectors has passed the Cabinet meeting. Initially, three separate bills were submitted to the 20th National Assembly, but as the bills were discarded due to the expiration of the National Assembly's term, a merged amendment to the Capital Markets Act combining the three bills was newly prepared.

First, the amendment establishes a legal basis for disclosing information related to fund managers. Although investors can currently check fund managers' careers and performance through the Korea Financial Investment Association website, the disclosure scope has been limited due to voluntary regulation, and there was a lack of grounds for sanctions against false disclosures. Since the amendment provides a legal basis for fund manager disclosures, financial authorities will now be able to impose sanctions for non-disclosure and false disclosure.

The disclosure scope will also expand, allowing investors to know about fund managers' compensation systems. The amendment also includes legal grounds for the Trade Repository (TR) for OTC derivatives transaction information and the implementation of the margin exchange system for uncleared OTC derivatives transactions. Obligations have been established for financial investment businesses to report OTC derivatives transaction information to the Trade Repository, with fines of up to 100 million KRW imposed for violations. Additionally, a licensing system for trade information storage businesses has been introduced, prohibiting the use of similar names such as "trade information storage" without authorization, and requiring Financial Services Commission approval when the Trade Repository establishes or changes its operational regulations.

Regarding crowdfunding, the amendment expands the range of companies eligible to raise funds through the system. Currently, only companies within seven years of establishment are eligible, but the amendment allows any small and medium-sized enterprise (SME) to raise funds through crowdfunding regardless of business age. Crowdfunding is a funding method where entrepreneurs with creative ideas or business plans raise capital from multiple participants through securities issuance on an online platform.

This content was produced with the assistance of AI translation services.