The Securities Class Action Suit Law became effective on 01 January 2005. Under the Law, class action suits can be initiated for unfair trading involving the use of inside information and market manipulation. Companies can also be open to a class action for a deliberate falsification of financial statements and disclosure violations.

The Financial Supervisory Commission (FSC) announced in December 2003 a set of initiatives to streamline and rationalize the regulatory framework of the Financial Supervisory Service (FSS). The plan contains 123 initiatives that emphasize the deregulation of businesses, increase transparency in capital markets, bolster self-regulation, and deregulate foreign financial service providers. Specifically, the initiatives will:

• raise the ceiling on privately-placed bond holdings for investment of trust funds, and repeal the ceiling on privately-placed bond holdings for mutual funds;
• expand the range of firms eligible to issue commercial papers and engage in asset securitizations as originators;
• enhance the effectiveness of short-sale regulations by incorporating these into the Securities and Exchange Act; and
• enhance regulatory equity between domestic and foreign market participants, and address the concerns of foreign financial institutions.

The Korea Securities and Futures Exchange Consolidation Bill was passed in January 2004. The Bill is the legal framework for the merger of the Korea Stock Exchange, Korea Futures Exchange, and the KOSDAQ Stock Market to establish an integrated and demutualized exchange. In January 2005, the Korea Exchange (KRX), was incorporated, a consolidation of the three spot and futures exchanges. The establishment of the KRX was part of the Financial Market Stabilization Plan under Korea’s Economic Policy Direction for 2004. Other policy reforms in the Plan include outlining the legal procedures and responsibilities for electronic financial transactions.

On 19 May 2006, the government announced it was accelerating foreign exchange liberalization to attract investment capital for new infrastructure, and to promote foreign exchange market development. The foreign exchange liberalization plan is now expected to be completed in 2009 instead of 2011. The first phase of the two-phase program is scheduled for 2006-2007.

The plan will (i) internationalize the won; (ii) liberalize foreign exchange transactions, including Korean overseas investments; and (iii) accelerate development of the foreign exchange market.

The Financial Investment Services and Capital Markets Act (FSCMA) became effective on 04 February 2009. Major changes in this new legislation include:

• Financial services deregulation. The removal of restrictions strictly separating securities, futures, asset management, trust services, and other financial services businesses (excluding banking) to integrate their financial services business.
• Broadening the scope of financial investment products. The meaning and scope of financial investments and products offered will reverse from the current system of enumerating what is allowed to a system defining what is illegal.
• Deregulation of indirect investment. Current restrictions will be removed that recognize only trust investments (in the form of beneficiary certificates), corporate-type investment companies (mutual funds), and private equity funds as indirect investment vehicles. Thus, other entities recognized under the Commercial Code can be included as indirect investment vehicles.