On April 26, 2018, Financial Supervisory Service (FSS) held a briefing session announcing the plan for revision of supervision process for private placement funds. This plan aims to support the speedy establishment of private placement funds (including PEFs) through simplification (computerization of reporting procedure, etc.) of the FSS review procedure. While this plan is expected to streamline the review procedure before/after establishment of private placement funds, it will also internally stress the self-assessment and responsibilities of the asset management companies with respect to establishment of private placement funds. The details of this plan, which will enter into force as of May 4, 2018, are as follows:


1. Distribution of Pre-Inspection Checklist:

FSS plans to prepare and distribute to asset management companies (GPs in case of PEFs) a pre-inspection checklist which will enable them to assess the key issues related to establishment private placement funds (including PEFs), such as the collective investment agreement. The checklist related to PEFs will include prerequisites for establishment of PEF, compliance with reporting deadline, prerequisites for GPs, compliance with partner prerequisites, LP's qualifications and satisfaction of investment requirements, directions for SPCs, items required to be included in the report and preparation/submission of attachments, and inclusion of the purpose of investment, etc. in the articles of incorporation in case of special-type PEFs.


2. Revision of Review Method and Supervision Process:

FSS plans to cease the unofficial prior consultations which used to be held before establishment of private placement funds at the request of asset management companies. Matters requiring the official opinion of the Financial Services Commission/FSS such as those requiring legal review will be handled officially through authoritative interpretation, no-action letters, and Q&As, etc. When establishing a private placement fund, the asset management company has to go through the self-assessment checklist and submit the result thereof when filing the report. In this regard, FSS is planning to abolish the total inspection, and instead regularly monitor the market trends through sampling of reports and conduct theme checks on significant events. This revision will enable the asset management companies to establish and operate PEFs simply by preparing and submitting the checklist and related documents online, without separate written reports or consultations. This will remove the procedural inconvenience of having to visit the FSS in person and file the written report every time a PEF is established.


3. Inspection of Internal Control System of Asset Management Companies with Inadequate Reports:

FSS plans to inspect the internal control system of asset management companies with inadequate reports, including delay or omission in reporting. It seems this revision is intended to increase autonomy and responsibility with regard to establishment of private placement funds by asset management companies through strengthening the reporting and assessment requirements, while enabling speedy establishment of the funds through simplification of review process and granting of autonomy to the asset management companies in establishing the private placement funds.