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Regulatory Provisions on Asset Management Activities under The Capital Market Act

  • DONG-A LAW REVIEW
  • 2010, (49), pp.371-398
  • Publisher : The Institute for Legal Studies Dong-A University
  • Research Area : Social Science > Law

정숙연 1

1부산대학교

Accredited

ABSTRACT

The Korean collective investment regulation is considered to be first initiated in 1961 as banks started to perform trust works under the Trust Act and Trust Business Act. However, the trust services at that time was merely a subordinate service of banks and the banks began the trust services of its actual meaning since 1969 with legislation of the Securities Investment Trust Business Act. Later the Indirect Investment Asset Management Business Act that practically consolidates the Securities Investment Trust Business Act, the Investment Company Act and other similar investment managements was enacted. In accordance with the liberalization of capital market and the trend of securitization of asset, the new act was legislated for balanced regulation on existing investment trust companies and other similar asset management activities and also to apply same act on entire indirect investment. In addition, the Capital Market Act consolidates financial instruments, defined under various acts such as the Securities and Exchange Act and the Futures Trading Act, by its function to protect investors. That is, there existed too many acts regulating capital market and the range of financial industry was excessively segmented thus its function to protect investors was hardly performed in practice because of the differences in regulative mechanisms in each financial business. The Capital Market Law was legislated to resolve such problems by revising old financial acts. The Capital Market Act introduces a new concept of collective investment scheme instead of the indirect investment from previous Indirect Investment Asset Management Business Act thus leading to a meaningful change to collective investment regulation. In the point that the number of subjects for investment management has been rapidly growing by defining the inclusive concept of financial investment instruments and that the agency problem has came into the fore since the investor group and financial manager as agency are strictly separated, the importance of regulation is not neglectable. The regulation on collective investment can be explained in context of entrance regulation, sound regulation, activity regulation and organization regulation. Especially the activity regulation, as the core content of the new act, is an activity regulation associated with conflict of interest. Although the Capital Market Act regulates the entire process through design, sales and management of fund and also the evaluation of collective investment assets, the asset management regulation can be considered as the core of conflict of interest regulation. To resolve conflict of interest, the Capital market Law provides both direct regulation on practical activities and internal control system as well. This study focuses heavily on activity regulations associated with asset management under the Capital Market Law. The Capital Market Act,compared with the previous Securities and Exchange Act, specifies the conflict of interest activities in detail. However, with a shorter history of collective investment system compare to the developed countries' cases,we still have many weak points to be improved. Thus, at this point of time, a year after the enactment of new act, it will be meaningful to review problems in system itself and interpretation of the new act.

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