Chairman Lee Eog-weon of the Financial Services Commission presided over the third meeting on propelling a transition to productive finance with officials from the venture industry, financial institutions, market infrastructure providers, and experts on December 22. At today’s meeting, officials discussed plans for capital market reform initiatives intended to transform capital markets into a key platform for propelling innovative growth. In his opening remarks, FSC Chairman Lee laid out four major policy initiatives put forward by the government.

A Summary of Opening Remarks by FSC Chairman

Throughout history, some of the key technologies and innovative ventures, such as the Internet, smartphone, and autonomous driving technology, have been born out of bold investment and infrastructure restructuring by the government together with the private sector’s inventiveness and push for drive. Capital market constitutes a platform where this type of collaborative effort by the public and private sectors can most effectively result in innovation. Since the market can selectively determine future potential and bear risks to invest in long-term growth, it can serve as the most appropriate and productive platform to push for a productive finance drive.

In this regard, the government plans to pursue capital market reform measures intended to boost the efficiency in the functioning of capital market infrastructures and facilitate a more seamless interconnection between the financial sector and innovative companies.

First, from a market infrastructure perspective, in order to ensure safety in the transactions of startup and venture stocks, authorities will allow the entry of electronic securities registries specializing in unlisted stocks. With the introduction of electronic registration of securities tailored for small scale and unlisted stocks, there will be increased convenience for stock transactions and management, which will also help startups and venture businesses to raise funds more easily.

Second, authorities will revamp regulations on PEFs (institution-only PEFs) in line with global standards. Since it has been recently pointed out that PEFs are heavily focused on making short-term yields, it is necessary to strengthen the responsibility and soundness of PEFs to restore their original function of supplying venture capital to innovative businesses and providing support for industrial reorganization and corporate restructuring. Along with the government’s implementation of regulatory reforms, it is therefore crucial to have the PEF industry’s voluntary efforts for self-improvement.

Third, authorities will bring about improvements to the stewardship code to promote institutional investors to invest in the sustainable growth sectors with a stronger sense of responsibility in their fiduciary capacities. In carrying out their fiduciary duty and making investments on behalf of other investors, institutional investors should faithfully adhere to the responsibility of sustainable investment. To this end, based on the decisions reached by the stewardship code development committee, authorities will support relevant revisions to the stewardship code establishing a system to monitor compliance and expanding the scope of stewardship code’s application.

Fourth, authorities will continue to provide the management and supervisory functions needed to encourage large investment banks (comprehensive financial investment business entities) to take up the leading role in supplying venture capital in the market. In this regard, the five securities companies that have been recently approved or designated for the provision of promissory notes or investment management account (IMA) services recently announced plans to supply venture capital worth a total of KRW20.3 trillion (KRW15.2 trillion in new funding) in the market over the next three years. Since the necessary regulatory upgrade has been made this year subjecting large IBs to the supply of venture capital in the market, authorities will work closely with the private sector through a joint consultation body to further expand the supply of venture capital and bring about tangible outcomes next year.

* Please refer to the attached PDF for details.