Rules on PEFs Strengthened
The Financial Services Commission and the Financial Supervisory Service released a PEF market improvement plan on April 26 so that the recent accidents related to derivatives-linked funds and LIME Asset Management are not repeated.
According to the plan, a mandatory external audit is applied to every PEF with a total asset of more than 50 billion won and every PEF with a total asset of 30 billion won to 50 billion won entailing additional issuance within six months. In addition, when it comes to cross trading, every asset without a reliable market price is subject to assessment by an independent organization such as an accounting firm and the monthly size of cross trading is limited to up to 20 percent of the average trust for the preceding three months.
The minimum capital requirement has been changed from 700 million won to capital accumulation in proportion to the trust by a factor of 0.03 percent. Also, PEF managers must submit internal control and risk management reports to the supervisory authorities.
Maturity extension or redemption deferment in the case of a qualified non-institutional investor’s PEF worth 300 million won or more is subject to a collective meeting within three months for redemption-related mandatory determinations.