KSD Initiates Mutual Check and Surveillance System to Prevent Recurrence of Optimus Incident

TF Formed on the 8th to Support Private Equity Fund System Improvement
Standardization of Product Codes... Establishment of 'Standard Code Management Criteria for Fund Investment Target Assets'
Mutual Verification through 'Fund Asset Balance Reconciliation Support System'
"Restoring Investor Confidence in Private Equity Funds"

[Asia Economy Reporter Oh Ju-yeon] The Korea Securities Depository (KSD) has taken its first step in supporting improvements to the private equity fund system. The plan is to build a system that can actively support institutional improvements to enhance the transparency of private equity funds and prevent a recurrence of the Optimus incident, where large-scale redemptions were halted, thereby contributing to the restoration of investor trust.

On the 12th, KSD announced that it formed a task force (TF) involving the entire asset management industry on the 8th to support the private equity fund system improvement project and held its first meeting. At this meeting, the overall progress of the private equity fund system improvement support project was shared, and industry opinions were gathered regarding the standard code system for non-marketable assets and the fund asset balance reconciliation support system. KSD plans to actively reflect the participants' opinions shared in the TF to establish a private equity fund-related system by December and provide services through this system starting in the second half of the year.

On the 8th, the Korea Securities Depository formed a task force (TF) involving the entire asset management industry under the supervision of the Financial Supervisory Service and held the first meeting (Kick-off).

First, KSD will establish the "Fund Investment Target Asset Standard Code Management Criteria," which standardizes product codes for non-marketable assets that are electronically unregistered or not deposited, and based on this, build a "Fund Asset Balance Reconciliation Support System" to support mutual reconciliation and verification between collective investment managers (operation details) and trustees (trust details).

KSD expects that the establishment of this system will strengthen mutual checks and monitoring among private equity fund market participants, enhance transparency in fund management processes, and restore investor trust in private equity funds.

Following the large-scale redemption suspension incident involving Optimus Asset Management this year, there have been calls for infrastructure to enable mutual monitoring and checks among market participants.

Accordingly, KSD established the "Private Equity Fund Transparency Enhancement Promotion Team" (department-level) and deployed nine fund specialists to directly visit and consult with about 40 related institutions in the asset management industry, including financial authorities, collective investment managers, trustees, administrative management companies, and bond rating companies.

KSD intends to transparently manage private equity fund assets based on FundNet, an infrastructure for asset management businesses. As a short-term project, it will build a fund non-marketable asset standard code management system to support asset detail matching among participants, accept operational instructions for non-marketable assets, and establish a fund asset balance reconciliation support system that compares and verifies asset details using the standard codes for non-marketable assets managed within this system. This will provide functions such as asset detail matching verification, asset existence verification, and fund management method inspection.

KSD expects that by supporting standard codes jointly used by the asset management industry and balance reconciliation accordingly, it will fundamentally prevent a second Optimus incident, support transparent management of private equity fund assets among participants, strengthen investor protection, enhance private equity fund transparency, and thereby improve industry competitiveness. Additionally, by establishing a system capable of reporting private equity fund holdings and trading details to supervisory authorities, it is anticipated to contribute to strengthening supervisory functions.

KSD stated, "Strengthening transparency and accountability in the private equity fund market will enhance financial consumer protection while enabling market stability and the restoration of market trust. From the industry's perspective, standardizing non-marketable asset codes generated and managed independently by each institution and computerizing operational instructions will significantly reduce workload, and risk management will be strengthened through integrated electronic contract management and balance reconciliation support."

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