The Democratic Party of Korea will prepare private equity fund regulations to prevent a second Homeplus Co. incident.
Han Jeong-ae, the Democratic Party policy committee chair, and Yoo Dong-soo, the senior deputy chief for economic affairs, on the 5th each led as the primary sponsor of a Financial Investment Services and Capital Markets Act amendment bill. Yoo, the deputy chief, serves as Director General of the Democratic Party MBK Homeplus incident resolution task force.
The Financial Investment Services and Capital Markets Act amendment bill introduced by the Democratic Party of Korea that day includes measures prepared through a party-government consultation with the Financial Services Commission on Dec. 1 last year. At the time, the party and government agreed to prepare measures to prevent cases in which large private equity funds, after mergers and acquisitions, are fixated on realizing short-term profits and undermine the mid- to long-term value of corporations.
The amendment bill introduced by Chair Han includes measures to strengthen the soundness oversight of private equity fund (PEF) operations. These include strengthening borrowing regulations for proper leverage management, expanding the general partner (GP) reporting obligations to financial authorities, expanding information provided to limited partners (LPs), and imposing an obligation to notify workers when acquiring corporations.
The amendment bill introduced by Deputy Chief Yoo contains measures to secure GP accountability. These include strengthening GP registration requirements such as establishing eligibility requirements for major limited partners, preparing grounds to cancel unlawful GP registrations, strengthening internal controls, and mandating the appointment of compliance officers.
Policy Committee Chair Han Jeong-ae said, "It has been 20 years since private equity funds were introduced, and as their influence on the capital market and corporations has grown, commensurate responsibility and control mechanisms are necessary," and added, "We expect this amendment bill to restore trust in the capital market and serve as a turning point for private equity funds to focus on their original positive function of building a sound venture and patient capital ecosystem."