[Exclusive] Financial Supervisory Service Private Equity Fund Full Inspection TF Launches on 20th... Team Leader Appointed as Kim Jeong-tae Director

Start of Crackdown on Insolvent Private Equity Funds... Targeting 10,304 Private Equity Funds and 233 Management Firms

[Image source=Yonhap News]

[Asia Economy Reporter Park Ji-hwan] A task force (TF) for a comprehensive survey of private equity funds to filter out poor-quality private equity funds will be launched next week. Kim Jeong-tae, the head of the Korea Exchange dispatched from the Financial Supervisory Service (FSS), has been appointed as the inaugural head of the TF. The FSS plans to prioritize investigations starting with areas where signs of poor quality were revealed during inspections conducted until early this year.

According to financial authorities and the financial investment industry on the 17th, the FSS's comprehensive survey TF, which will inspect about 10,000 private equity funds and 233 private equity fund management companies, will officially launch on the 20th.

An FSS official stated, "The personnel selection for the private equity fund comprehensive survey team has been completed, and the official launch is scheduled for next week." Kim has been appointed as the TF head to coincide with the launch. Kim is regarded as an expert in supervision and inspection related to the asset management industry, having served as the general deputy director in the Asset Management Supervision Bureau and Asset Management Inspection Bureau.

The inspection team will consist of about 30 members from the FSS, the Korea Deposit Insurance Corporation, the Korea Securities Depository, and Korea Securities Finance Corporation. Two-thirds of the team will be FSS employees, and one-third will be dispatched personnel. However, dispatched personnel from related institutions will undergo a training course for a certain period before being deployed to actual inspection sites.

The investigation will be conducted through a two-track approach: a comprehensive inspection of private equity funds via sales companies and on-site inspections of private equity management companies showing signs of poor quality by the FSS comprehensive survey team. The comprehensive inspection led by sales companies will involve cross-checking mutual data among management companies, custodians, and administrative service companies, while the comprehensive survey team will conduct on-site inspections of management companies. During the sales company-led comprehensive inspection, mutual checks will be made to verify whether the assets on the fund's financial statements match the actual held assets and whether the investment targets correspond to the actual assets. If any anomalies are found, they will be immediately reported to the FSS during the inspection to link with on-site inspections.

The first targets of the comprehensive survey team are expected to be four management companies that the FSS identified as showing signs of poor quality and conducted document inspections on earlier this year. Previously, following the Lime Asset Management incident, the FSS conducted a reality check on 52 asset management companies and 1,786 funds from November last year to January this year. As a result, 10 management companies were selected for intensive monitoring, and among them, five were judged to require additional inspections, leading to separate document inspections. One of these is Optimus Asset Management, which recently caused a redemption suspension incident involving about 500 billion KRW. The FSS confirmed that Optimus Asset Management purchased private bonds and other assets completely different from the investment regulations stating investment in public institution sales receivables.

The comprehensive survey team plans to sequentially begin inspections from next month and complete them by 2023. If problems are found during inspections, follow-up measures such as preventing investor damage, sanctioning financial companies, and notifying the prosecution will be promptly carried out.

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