Korea Investment & Securities, Mirae Asset Securities named first integrated investment account operators
South Korea is boosting the investment-banking capacity of major securities firms through its new Investment Management Account regime, open to brokerages with at least 8 trillion won ($5.5 billion) in capital.
Industry reports said Thursday that the Securities and Futures Commission under the Financial Services Commission approved the designation of Korea Investment & Securities and Mirae Asset Securities as the nation’s first IMA operators.
In essence, the IMA system lets firms pool and manage client assets, and requires that more than 70 percent of deposits be invested in corporate-finance-related assets.
For clients, the arrangement is risk-free as the principal is guaranteed by the brokerage and investment returns are shared with them.
The designated brokerages can raise funding of up to 300 percent of their capital base by combining commercial paper issuance and IMA deposits. As of the third quarter, Mirae Asset had a capital base of 10.4 trillion won and 8.3 trillion won in outstanding CP, while Korea Investment & Securities held 10.5 trillion won in capital and 18.7 trillion won in CP. Together, the two firms could tap nearly 35 trillion won in additional funding as IMA operators.
IMA operators will also play a key role in supporting Korea’s venture and startup markets, as they are required to direct a growing share of funds raised through the accounts into venture investments, starting at 10 percent next year and rising to 25 percent by 2028.
Although the IMA framework was created in 2017 to cultivate a Korean version of investment banks, it took time for brokerages to meet the capital and governance requirements, and for regulators to fine-tune the system. In April, the FSS chief announced updates to the system and said the initial approvals would come this year to give the brokerage sector new momentum and direct more capital to Korean businesses and venture companies.
Separately, the SFC also approved Kiwoom Securities’ bid to enter the CP business, marking it the first online-based brokerage to join the market. The FSS also said in April that it would authorize additional CP issuers among brokerages with more than 4 trillion won in capital, expanding the current group of Mirae Asset, Korea Investment & Securities, NH Investment & Securities and KB Securities.
jwc@heraldcorp.com
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