KIC Managing 234 Trillion Won, No Private Committee Oversight on Investments

Employee Investment Scale Increases Fivefold in Over 4 Years
10-20 Cases of Detection and Disciplinary Actions Annually Through Internal Regulations and Monitoring

[Asia Economy Reporters Kim Hyunjung (Sejong), Lee Hyunju] Korea Investment Corporation (KIC) has been criticized for not imposing restrictions on financial investment product trading for private members of its Operating Committee who hold key decision-making authority, raising calls for measures to prevent conflicts of interest. Despite being a global sovereign wealth fund managing assets exceeding 230 trillion KRW, it has been pointed out that KIC lacks transparency that meets public expectations.

According to data submitted to Rep. Chu Kyung-ho of the People Power Party, a member of the National Assembly's Planning and Finance Committee, on the 14th, private members of the KIC Operating Committee are not subject to the corporation’s ethics and conduct regulations nor included in the monitoring of financial product investment transactions. The Operating Committee not only receives reports on the corporation’s mid- to long-term investment policies, investment performance, and the selection results of external asset managers and advisors, but also gains access to information about specific countries or investment items discussed during meetings.

Due to these characteristics, financial public institutions such as the Korea Deposit Insurance Corporation, Korea Credit Guarantee Fund, Special Post Office Pension Management Corporation, and Korea Trade Insurance Corporation apply internal regulations restricting investment transactions when appointing private members. These members are required to complete integrity pledges or pre-assessment forms on work ethics, confirming and pledging to prohibit acts of obtaining financial gain by using information acquired during their duties.

Rep. Chu stated, "Despite being one of the world’s top sovereign wealth funds, KIC does not restrict financial investment product trading for private members," and urged, "Relevant regulations should be revised to establish measures preventing conflicts of interest." According to KIC, as of the end of August, KIC’s managed assets amounted to 201 billion USD (approximately 234.5 trillion KRW), which is 39% of the national budget (604.9 trillion KRW) after the second supplementary budget this year.

Although KIC receives reports on investment transactions through internal regulations and verifies violations via compliance officers, employee misconduct is still identified annually. However, considering the rapid increase in the number of traders, transactions, and amounts each year, both internal and external assessments conclude that control and management remain feasible.

According to KIC, from September 2016 to August 2017, 67 employees traded financial investment products, conducting a total of 1,170 transactions worth 6.94 billion KRW. This increased to 82 employees, 1,942 transactions, and 11.42 billion KRW from September 2017 to August 2018 (with exchange-traded funds added to reportable financial products starting January 2018). The numbers have steadily risen each year, with 142 employees conducting 1,805 transactions worth 35 billion KRW in just 11 months from September last year to July this year. This represents more than a fivefold increase in investment scale (based on transaction amounts) over about four years.

The number of disciplinary actions and violations identified during transactions is around 10 to 20 cases annually. These include trading financial investment products during working hours or investing using unreported accounts. This year, cases such as trading during working hours (2 cases) and violations of mandatory holding periods (3 people) were confirmed. Last year, violations included trading during working hours (1 person), mandatory holding period violations (8 people), delayed submission of transaction details (4 people), and use of unreported accounts (1 person). From 2017 to July this year, over four years and seven months, about 75 violations were identified.

Rep. Chu emphasized, "Although the number and amount of employee investment transactions are increasing annually, internal information use in investment transactions by employees is relatively controlled through monitoring even of personal accounts," adding, "Restrictions on investment transactions using internal information by private members and provisions allowing for post-action measures must be clearly specified in the regulations."

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