The Financial Services Commission (“FSC”) announced on February 1, 2016 that it intends to reform the existing regulatory regime applicable to foreigners investing in listed securities by introducing integrated accounts for foreign investors (“Omnibus Accounts”). Amendments to relevant regulations which will allow for the implementation of Omnibus Accounts are expected by April 2016 with trials of the new product taking place from May 2016 and full implementation due in 2017.
Once the Omnibus Account system comes into effect, global securities companies or asset managers will be permitted to open Omnibus Accounts with Korean securities companies or custodians in the name of such global securities company or asset manager, and to process trade orders for its end investors (including, but not limited to, individuals, corporations, and funds) on an integrated basis through such Omnibus Account.
Although “Special Nominee Account” system is currently available whereby trade orders of several end investors are processed in an integrated manner, such system involves cumbersome process under which the custodian is required to reconcile the individual settlement instruction relating to each end investor received from the global securities companies or asset manager with individual transaction report for each end investor delivered by the relevant Korean securities company prior to the settlement date and effect settlement (i.e. integrated orders, separate settlement). In contrast, the new Omnibus Account to be introduced will allow the custodian to reconcile the single settlement instruction delivered by the account holder (global securities company or asset manager) and the single transaction report delivered by the relevant Korean securities company (i.e. integrated orders, integrated settlement) which is expected to enhance both process efficiency and convenience.
However, the existing foreign investor registration system will be maintained in order to monitor each end foreign investor for foreign exchange, tax and foreign shareholding etc. purposes under the new Omnibus Account system whilst introducing criteria for global securities companies or asset managers which would be permitted to open an Omnibus Account in its own name, and also posting of transaction detail report for each end investor following the settlement date to the regulatory body shall be required. It is also expected that, although orders of all end investors may be processed in an integrated manner, netting of sale and purchase orders amongst end investors will be restricted.