SOUTH KOREA Law and Practice Contributed by: Dongwook Kang, Chris Kim, Seung-Wan Chae and Jongwoo Kim, Bae, Kim & Lee LLC
following amounts over the GPF’s net assets (leverage ratio) must be lower than 400%: • the aggregate amount of assessed risks incurred by the GPF’s exposure to derivatives; • the aggregate amount of guarantees and the value of the assets provided as collateral for a third party; • the aggregate amount of borrowed monies; and • other transactions that have a leverage effect. Restrictions on Management Participation Investment A private fund making investments in a portfolio com - pany with the aim of participating in its management, business restructuring or improvement on its govern - ance (such investments are “management partici - pation investments”) by way of acquisition of either 10% or more of the total number of outstanding voting shares in the portfolio company or less than 10% of the total number of outstanding voting shares in the portfolio company that enables the IPF to exercise de facto control over the major business of the portfolio company (eg, by way of appointment and dismissal of directors) must dispose of such voting shares in the portfolio company within 15 years of their acquisition. In addition, a private fund must report any manage - ment participation investment to the FSS within two weeks of the investment. The establishment of a private fund does not require prior authorisation or registration from the regulators. However, an ex-post report must be filed with the FSS within two weeks of the establishment of a private fund. 2.3 Disclosure/Reporting Requirements Unlike public funds, a private fund is not required to file a security registration statement – a public disclo - sure document on the fund terms and its operation available on the website of the FSS. However, it is subject to certain disclosure or reporting obligations to the investors and the regulators. Investor Disclosure Requirements – General Private Funds Offered to Retail Investors Distributors and any other persons engaged in invest - ment solicitation or sales of GPFs vis-à-vis prospec -
tive retail investors must provide the retail investors with a key product information document for each GPF. In addition, GPF managers must provide retail inves - tors in the GPFs with a quarterly asset management report for each GPF, including information on the base price of the collective investment securities as of the end of each quarter and a summary of the asset man - agement activities during the quarter. The key product information documents and the quar - terly asset management reports of GPFs are not pub - licly available. Regulatory Reporting Requirements – GPFs GPF managers must file a quarterly report with the FSS for each GPF they manage, including the follow - ing information: • the current status of transactions of derivative products; • the current status of guarantees and the provision of fund assets as collateral; • the current status of borrowings; • the current status of the fund assets; • measures to mitigate risks associated with the management of the fund assets; and • the current status of other transactions having the leverage effect. In addition, if any of the following events occurs in relation to a GPF, its manager must report the event to the FSS within three business days: • the GPF’s leverage ratio surpasses 400%; • the GPF holds a non-performing asset; or • a decision on redemption (including deferral of redemption) is made regarding an open-ended fund. Finally, a GPF manager must file an amendment report within two weeks when there is a change in any item reported in the fund establishment report of a GPF it manages.
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