Chairman Yim Jong-yong of the Financial Services Commission.(Photo:FSC)

On April 23, Chairman Yim Jong-yong of the Financial Services Commission said the FSC will monitor the issuance of the equity linked securities(ELS) and other financial products for investments as they have been increasing too fast.

During a meeting with top executives of securities firms in the country held at the Korea Press Center in downtown Seoul on July 3, he said he went through the current status of the financial investment commodities  and risk factors associated with them.

The chairman dealt with such issues as the increasing risk factors with the ELS issuance expanding fast. Some participants noted that the risk factors have not been rising, while some responded that the risk factors have been expanding fast increasing the chances for the rise in interest rates and changing financial market trends to expand the market risks. Some participants said the financial investors might not know what’s been happening in the financial market, especially, the rising risks, with some financial products linked with overseas securities market indices have been increasing confusing the financial market in Korea.

Chairman Yim Jong-yong briefed the press on the FSC’s policy direction for capital market reform. Key tasks will be to vitalize the KONEX, OTC trading in unlisted stocks and the derivatives market.

Included in some of the key changes, the FSC will ease KONEX regulations, establish a secondary OTC market for unlisted shares and expand the current derivatives market.

In order to facilitate the KONEX market, listing regulations will be eased and more incentives will be given to both institutional and individual investors. A special listing will be introduced for early-stage startups to allow them to be listed without designated advisors. Meanwhile, a stronger set of investor protection measures will be implemented for special listing programs.

The current Free Board market for the trading of unlisted stocks will be reorganized into two-tier markets: K-OTC for trading unlisted blue chip stocks and K-OTC BB for trading all unlisted stocks.

Lastly, in a bid to expand the derivatives market, new products will be introduced. “Mini KOSPI 200” Futures and Options will be launched for the trading of a smaller unit of KOSPI 200 derivatives products to attract more investors. New futures products will be developed with individual stocks listed on the KOSDAQ as underlying assets to investors offering risk-hedging tools for KOSDAQ investments. Moreover, Chinese Renminbi (RMB) futures will be introduced to provide a risk-hedging instrument for RMB trading.

At the meeting, Chairman Yim mentioned that despite a small proportion of venture capital and PEF out of the  total financial market share, they are playing a crucial role of providing funds for those who have little access to conventional financial channels. He stressed that VCs and PEFs should grow more important so that Korea’s capital markets can support young entrepreneurs to help realize their dreams.

“Financing non-listed companies through investing in VC and PEF will become one of the key roles of finance in the future,” said Yim.

Participants pointed out that the banking sector’s conservative business practice and complicated regulations are main obstacles hampering venture capital investment. Meanwhile, they expressed expectations that the government’s policy supports will facilitate the venture capital market.

After carefully listening to all opinions and suggestions, Chairman Yim promised that the FSC will exert its utmost efforts to facilitate the venture capital market. At the same time, he committed that he would closely communicate with the market when devising relevant policy measures.