Cheap assets lure funds from expats

Ethical standards for stock analysts will be tightened to rebuild confidence in the equity market, the Financial Supervisory Service said yesterday.

The watchdog said that the new Capital Market Consolidation Act, which will take effect on Feb. 4, includes a set of tough regulations on unethical trading practices.

An analyst involved in insider trading, for example, will be charged a fine of up to 500 million won ($367,242) under the new act, up from the current 20 million won.

The scope of "insider" will be broadened to include major shareholders and employees of a related company and its subsidiaries, at the same time, from major shareholders and employees of a related company. The law also regulates legal and financial agents of a company`s M&A deals, such as lawyers and accountants, as insiders, and thus bans them from purchasing stocks of the related company.

"Inside traders have been taking advantage of the loophole in the existing law. We will tighten the level of supervision with the operation of the Capital Market Consolidation Act," a high FSS officer said in the press release.

Hwang Kun-ho, chairman of the Korea Financial Investment Association, also emphasized on the same day that he will put top priority on protecting investors and establishing an advanced self-regulatory system based on the new law.

"Maintaining the proper level of autonomy for securities firms is important, but considering the far-reaching effects of their analysis reports on companies, we have no other choice but to strengthen related regulations to clarify sources of responsibility," the former chairman of the Korea Securities Dealers` Association, told Yonhap News Agency, yesterday.

KOFIA is a mammoth financial organization to be launched on Feb. 4, to coincide with the implementation of the Capital Market Consolidation Act. On the day, the Korea Securities Dealers Association will be merged with the Asset Management Association of Korea and the Korea Futures Association, under the name of KOFIA.

Hwang, who studied business administration at Seoul National University, started his career at Daewoo Securities in 1976 where he was promoted to vice president. He served as the president of Meritz Securities.

The Capital Market Consolidation Act was approved by the National Assembly in July last year. It was designed primarily to break down barriers among banks, securities firms and insurers to promote competition and strengthen the competitiveness of the overall financial industry.

As a means to vitalize the corporate financing to further develop the capital market, Hwang suggested the introduction of the off-board electronic bonds trading system. "Although Korea Exchange doesn`t allow such system, it is needed to slake companies` thirst for cash by activating the corporate bond market," he said.

By Lee Yong-sung





(danlee@heraldm.com)