Scholars in Seoul on Thursday lashed out at financial authorities, saying their policy drive to nurture local hedge funds five years ago was a hasty decision.

Pointing to the dispersed monitoring power of the nation’s two financial regulators, the upper organization of the two, the Financial Services Commission, should be disbanded, they said.

“To prevent more fraud cases involving homegrown hedge fund asset managers, a drastic change in local financial supervision system has to be carried out,” said Jun Sung-in, an economics professor at Hongik University, at a forum held at the National Assembly.

“Breaking up the FSC and securing the FSS’ independence from the political circles should come first.”

The FSC was a key driver of the new capital market law that lowered the market entry bar for homegrown small hedge fund operators in 2014. The revision of the law has allowed small asset managers with a lack of experience and strategies to acquire the legal qualifications to manage funds, Jun said. Their minimum required investment funds also reduced from 500 million won ($417,000) to 100 million won, according to the expert.

Ko Dong-won, a financial law professor at Sungkyunkwan University, also supported Jun’s idea, saying the FSC’s dual role as a market regulator and a financial policymaking body should be split for the political independence of the Financial Supervisory Service. As the lower organization, the FSS should report cases to the FSC.

Korea is the only country in the world that has two organizations sharing the power to monitor financial markets, Ko said. “Not only transferring FSC’s regulator role, its policymaking role should also be transferred to the Ministry of Economy and Finance.”

By Jie Ye-eun (yeeun@heraldcorp.com)