Abolition of Foreign Investor Registration System... What Is the Impact on the Domestic Stock Market?

Abolishing Foreign Investor Discrimination System Unseen Abroad 'Positive'
Expansion of Foreigners' OTC Trading and English Disclosures Also Promoted... Expectation of Increased Foreign Investment

[Asia Economy Reporter Minji Lee] Attention is focused on whether the abolition of the foreign investor registration system, which has been in place for about 30 years, can revitalize the domestic stock market. Academia and market experts expect it to play a significant role in resolving the Korea discount.

According to the Financial Services Commission on the 24th, amendments to the Capital Markets Act and other regulations will be made to abolish the foreign investor registration obligation, and computer system development will be completed by the third quarter. The foreign investor registration system was introduced in 1992 when foreign investment in listed stocks was permitted, and from now on, investment in domestic listed securities will be possible without prior registration procedures.

Accounts can be opened immediately at securities firms through real-name verification, with identification methods being LIE (Legal Entity Identifier) for corporations and passport numbers for individuals. Foreign investors who have previously registered will continue to use their existing ‘investment registration number.’

The Financial Services Commission explained, “Global investors have continuously raised concerns that access to the Korean capital market is hindered by various regulations such as the foreign investor registration system,” adding, “The investment environment for foreigners will improve in line with international standards, which will likely lead to an expansion of foreign investment.”

Additionally, the system requiring the final investor of integrated accounts to report stock market investment details will be abolished to establish a post-management framework. Domestic securities firms will manage detailed investment information of global investors, and when necessary for supervisory purposes by financial authorities, securities firms can be requested to provide the final investor’s investment details. The Financial Services Commission stated, “After the regulatory improvements, a six-month pilot operation period will be set to intensively inspect the post-management system, and any deficiencies will be promptly addressed.”

The scope of post-reporting for foreign over-the-counter (OTC) transactions will also be significantly expanded. While trading of listed securities by foreigners is principally conducted on the exchange and post-reporting has only been possible in special cases, going forward, post-reporting will be allowed for types requiring less document review.

Regarding English disclosures, from 2024, large listed companies will be gradually required to disclose important information in English as needed by the market. From 2024 to 2025, the improvements will apply to KOSPI-listed companies with assets exceeding 10 trillion won or those with foreign ownership of 30% or more, and from 2026 onward, the scope will expand to KOSPI-listed companies with assets over 2 trillion won.

These regulatory improvements were deliberated and approved at the 6th Financial Regulatory Innovation Meeting held on the 19th. At the meeting, Hayounggu, Chairman of Blackstone, said, “It feels like a long-standing congestion has been relieved,” adding, “The integrated accounts are expected to be revitalized through this improvement plan.” Following this, Professor Jeongsoo Lee of Seoul National University analyzed, “The government’s preparation of dividend procedure improvements in the context of the abolition of the foreign investor registration system will play a significant role in resolving the Korea discount.”

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