Selling offshore funds in Korea

FSS registration

If you’re a foreign asset manager and you want to sell your funds in Korea, you have to register them first.

Typically, the registration process takes 6 to 8 months.

Although article 182(4) of the Financial Investment Services and Capital Markets Act requires the review to be completed within 20 days, you shouldn’t be misled by this. Article 182(5) excludes from the count any time spent obtaining necessary materials and the FSS interprets this provision quite broadly. This is because reviews are handled by a small team of officials who are under a heavy workload — there were 381 registrations in the last 12 months.

The registration fee is around KRW 60,000 per year.

Sales through a local investment dealer or broker

Under the current law, an offshore fund that is registered can only be sold through a local investment dealer or investment broker.

This means that foreign asset management companies must partner with a Korean financial institution and pay corresponding fees.

However, this is about to change, to some extent.

According to news reports, the Korean government is contemplating allowing global asset management companies to sell their fund products directly to institutional investors by establishing a Korean subsidiary and obtaining an investment broker license under that subsidiary’s name.

Blackstone seems to be taking the lead. It is reported that Blackstone established a Korean subsidiary, Blackstone Korea Investor Solutions, to obtain an investment broker license and sell its fund products directly to Korean investors.

We’ll have to wait and see how the lawmakers decide, but if they go ahead with the change, it will come as a shock to many Korean financial institutions that have been making profits from local distribution fees.