FSC Provides Guideline on Underlying Assets for Fractional Investment Service Providers

The FSC has released a guideline (only available in Korean) addressing the underlying asset requirement for trust beneficiary certificates in the context of fractional investment services offered by designated innovative financial service providers within the financial regulatory sandbox program. The guideline, discussed with the innovative financial service selection committee on 28 November 2023 and finalized at the FSC’s regular meeting on 13 December 2023, aims to provide regulatory clarity.
In adherence to the „principle of supplementarity,“ fractional investment service providers are encouraged to explore traditional investment vehicles first. Regulatory exemptions, under the Special Act on Support for Financial Innovation, allowing the issuance of trust beneficiary certificates can be granted if traditional means are deemed non-viable.
Entities applying for fractional investment business under the regulatory sandbox program must prioritize traditional investment vehicles, ensuring a significant contribution to innovation and investor convenience. The “supplementarity principle“ is applied flexibly, permitting testing of innovative financial services if traditional investment vehicles see limited usage in the fractional investment market.
The guideline outlines key underlying asset requirements for trust beneficiary certificates. These include objective valuation, avoidance of regulatory bypass through paper certificates, easy disposal governed by domestic laws, exclusion of pooled assets, and compatibility with financial market stability and social order.
Investor protection measures are specified for both truster and trustee, emphasizing sound operation of trust asset securitization. This guideline is positioned as a crucial reference for selecting innovative financial services in the regulatory sandbox program, enhancing predictability for businesses, strengthening investor protection, and expediting the selection committee’s reviews.
As part of ongoing efforts, the authorities plan to collaborate with the National Assembly in amending the Financial Investment Services and Capital Markets Act to establish a legal framework for trust beneficiary certificates promptly.