General and Institution-Only Private Equity Fund Restructuring... 'Capital Markets Act Amendment' Passed in Plenary Session

[Asia Economy Reporter Oh Ju-yeon] On the 24th, the amendment to the Capital Markets Act for the improvement of the private equity fund system passed the plenary session of the National Assembly.

According to this amendment, private equity funds are classified into general and institution-exclusive based on the scope of investors. Before the amendment, they were divided into 'management participation type' and 'professional investment type' according to the purpose of operation.

By classifying private equity funds based on the scope of investors, general private equity funds can raise funds from general investors, professional investors, and institutional investors, while institution-exclusive private equity funds can raise funds only from institutional investors such as pension funds and financial companies.

In addition, the same operational regulations will be applied to both general private equity funds and institution-exclusive private equity funds. Diversification investment regulations and management participation obligations will be removed, and leverage and loans up to 400% of net assets will be allowed.

Furthermore, the limit on the number of private equity fund investors has been expanded from 49 to up to 100. Also, investor protection measures for general private equity funds have been significantly strengthened: when soliciting or selling private equity funds, a key product description document must be provided, and if private equity funds are sold to general investors, the seller must subsequently verify whether the fund management activities comply with the description document.

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