The Financial Supervisory Service said on the 17th that it has significantly strengthened investor safeguards by detailing sales documents such as prospectuses and terms and conditions ahead of securities firms' launch of integrated managed accounts (IMA).
The Financial Supervisory Service (FSS) designated comprehensive financial investment businesses (securities firms) with at least 8 trillion won in equity capital that can handle IMA operations on the 19th on the previous month, and has formed and been operating a task force (TF) to support the IMA launch since the 20th of the same month. The TF includes the Financial Supervisory Service (FSS), the Korea Financial Investment Association, Korea Investment & Securities, and Mirae Asset Securities, which were designated as comprehensive financial investment businesses.
Through TF discussions, the IMA product prospectus for the initial launch specifies key investment risks concretely and clearly and uses expressions that are easy to understand from the investor's perspective rather than the financial company's. It includes scenario analysis results and states the tax standards.
Considering that IMA products have long maturities and cannot be terminated early, they will be launched at grade 4 (moderate risk), higher than commercial paper at grade 5 (low risk). IMA investment returns are classified as dividends income. Accordingly, the tax burden from a lump-sum payment at maturity is a variable.
The terms and conditions stipulate that the securities firm must check whether the IMA management aligns with the prospectus and immediately notify investors if significant issues such as deterioration occur. The asset management report will be delivered to investors once per quarter and will provide key information on investment items, similar to public offering funds.
Guidelines for IMA advertising were also created. The guidelines reflect the obligation to pay principal and the main characteristics of performance-based IMAs to prevent exaggerated advertising in advance. Fees and charges, including performance fees, must be clearly indicated.
Securities firms are preparing to launch IMAs reflecting these discussions and plan to roll out each company's first product sequentially within the year.
The Financial Supervisory Service (FSS) plans to actively encourage IMAs to establish themselves as a key funding tool to expand corporate finance and the supply of venture capital.
An official at the Financial Supervisory Service (FSS) said, "If indiscriminate and excessive sales competition after the IMA launch results in misselling, we will take strict action in accordance with laws and principles."