KOREAN REPUBLIC: FSC introduces New Omnibus Account for Foreign Investors

Thursday February 4 2016

The Financial Services Commission has announced plans to introduce an “omnibus account” in an effort to make it easier for foreign investors to trade locally-listed stocks in the Korean Stock Market. The newly introduced omnibus account system is expected to reduce transaction costs of global asset management companies and make foreign investors’ trading of locally-listed stocks through global securities firms more convenient.

The Omnibus account
The Omnibus account is a single account established by a global asset management company or securities company for the purpose of consolidating trading orders and settlements from multiple clients.

The current system will be improved based on the following three principles:

• Enabling convenient trading of foreign investors in the Korean stock market in accordance with global investment practices;
• Ensuring conformity with other relevant domestic rules such as the Korean tax regime, and
• Maintaining monitoring of foreign capital in Korea’s FX and stock markets.

Expected Changes with the Introduction of the Omnibus Account
The introduction of an omnibus account will greatly reduce inconvenience and transaction costs for global asset management companies as separate accounts for each of the funds will be integrated into a single account.

Additionally, foreign retail investors or small and medium sized institution will be able to invest in Korean stocks more easily through global brokerage companies as they will also no longer have to open separate accounts for each fund to invest in the Korean stock market.

The core function of the foreign investor registration system will be maintained. Monitoring will be kept on foreign capital flows in Korea’s FX and stock markets as investments of end clients after settlements will be reported to the FSS. 

Implementation
The Regulation on Financial Investment Business will be amended and the electronic system of Foreign Investment Management System will be reformed by April 2016 for the introduction of omnibus account system.

The omnibus account will be fully introduced in 2017 after going through a test operation starting May 2016.

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