Strengthening the Soundness of REIT Asset Management Companies... Enforcement of the Amendment to the Real Estate Investment Company Act

Real Estate Investment Trust (REIT) and Asset Management Company (AMC) Structure Diagram

[Asia Economy Reporter Moon Jiwon] The Ministry of Land, Infrastructure and Transport announced on the 22nd that the amendment to the 'Real Estate Investment Company Act,' which improves the licensing requirements for REITs Asset Management Companies (AMCs), introduces management soundness standards, and a change approval system, will be enforced from the 23rd.

Real Estate Investment Companies (REITs) are indirect real estate investment entities that collect funds from multiple investors in the form of joint-stock companies, invest in real estate, and return profits. Asset management companies are entrusted by REITs to perform asset investment and management tasks.

This amendment was revised and promulgated in December last year to strengthen investor protection for REITs, and after a six-month preparation period for subordinate statutes, it will be enforced from the 23rd.

According to the amendment, first, the licensing requirements for asset management companies are improved. The previous requirement of '7 billion KRW in capital' is changed to '7 billion KRW in equity capital,' and an obligation to maintain this is imposed to check whether losses accumulate due to poor management after the initial license.

Also, physical facility requirements such as computer equipment, which were previously reviewed but not clearly stipulated, are now explicitly stated in the law, and detailed regulations are set forth in enforcement ordinances and guidelines. Asset management companies that have already been licensed must also meet the physical facility requirements according to the amended enforcement ordinances and newly established guidelines, but a grace period of up to six months after enforcement is provided considering installation time.

Along with this, compliance requirements for maintaining management soundness and management status evaluations have been introduced. To enable stable operation of assets entrusted by REITs, asset management companies will conduct management status and risk evaluations during their business operations, and corrective measures can be taken if improvements are necessary based on evaluation results.

From now on, not only REITs but also asset management companies will be managed through change approvals. Important matters such as decision-makers (major shareholders) and business scope, which could affect investor protection but were previously managed only as reportable items, will be reviewed through change approvals to ensure no issues arise in investor protection.

Restrictions on concurrent positions, prohibition of using undisclosed asset management information, and conflict of interest prevention under the Real Estate Investment Company Act, which previously applied only to REIT executives, will now be expanded to executives of asset management companies. This is expected to strengthen the operational responsibility of asset management companies for REITs.

Han Jeonghee, Director of the Real Estate Industry Division at the Ministry of Land, Infrastructure and Transport, said, "With the recent increase in public REITs, the accessibility of REITs to the general public is improving," and added, "Through this amendment, protection for investors such as the general public investing in REITs is expected to be strengthened."

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