On April 26, 2018, Financial Supervisory Service (“FSS”) held a briefing session on the revision of supervision process of privately placed funds. FSS explained that there had been numerous delays in the creation of privately placed funds due to the unofficial prior consultation and the limited manpower of FSS. The reforms are aimed at facilitating smooth and speedy creation of privately placed funds by streamlining the review process.

Key Changes

1. Preparation and distribution of self-assessment checklists in relation to the creation and reporting of privately placed funds (including private equity funds)

Prepare checklists to use in assessing key issues involved in the creation of privately placed funds, including collective investment agreement, and distribute to asset management companies, and in the case of PEFs, the GPs.

2. Revision of the method of review and the process of supervision of privately placed funds (including PEF)

1) Elimination of prior consultation

- Do away with the unofficial consultation at the request of the asset management company prior to the creation of privately placed funds.

- If official opinions of FSS are needed, FSS will utilize official channels, including authoritative interpretations and no-action letters.

2) Submission of self-assessment checklist

- An asset management company will conduct the self-assessment, using the checklist, and submit the results of the assessment at the time of its reporting of the creation of a privately placed fund.

3) Theme checks of significant events

- FSS will periodically review market trends and significant events by sampling reports.

3. Inspection of internal control systems of asset management companies with inadequate reports

Inspection of internal control systems of asset management companies with inadequate reports, including delays in submitting reports and omitting material facts in the reports.

4. Reform of supervision process of foreign funds

Designate the last week of every two months as collective consultationㆍintensive processing time to address case backlogs (beginning on March 2018) and computerize the submission management system of sales registration application forms of foreign funds for the convenience of applicants (beginning on January 2018).

We expect the above reforms to further promote the autonomy and creativity of the asset management industry. At the same time, the supervision process of the regulatory authorities will likely become more rigorous, and consequently, the asset management industry should be thoroughly prepared for legal risk management and compliance.