Korea Branch Compliance Officer - Securities flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

FISCMA License Categories

The Act classifies investment business into six categories: investment trading, brokerage, collective investment, advisory, discretionary management, and trust. Each requires separate FSC approval or registration.

Branch License vs Registration

Foreign securities branches need FSC license for trading, brokerage, and collective investment, but only registration for advisory and discretionary management business.

Enforcement Decree Capital Rules

The Enforcement Decree sets minimum equity capital for each license category, scaled by business scope and whether the branch serves retail clients.

Professional Investor Threshold

The Enforcement Decree defines professional investor criteria by asset size and financial sophistication. Classification determines suitability, disclosure, and solicitation obligations.

Suitability Duty

For retail investors, the firm must assess investment purpose, financial situation, and experience before recommending a product, and document the assessment.

Appropriateness Duty

When a retail investor refuses to provide information, the firm must confirm the product is appropriate or obtain written confirmation before proceeding.

Explanation Duty

The firm must explain the product's structure, risks, fees, and key terms, and retain a signed confirmation receipt from the investor.

Unfair Trade Practices

Prohibited conduct includes false statements, misleading omissions, guaranteed-return promises, and unauthorized discretionary trading under the Act.

FSC vs FSS Roles

The FSC sets policy and grants licenses; the FSS conducts examinations, issues supervisory recommendations, and refers sanctions to the FSC.

Regulation on Financial Investment Business

This FSS regulation sets detailed conduct, capital, and reporting standards that foreign securities branches must follow in Korea.

Event-Driven Reporting

Branches must report capital changes, sanctions, and other material events to the FSS within deadlines set by supervisory rules.

Corrective Orders

FSS examination findings can result in corrective orders, business suspension, or referral to the FSC for administrative sanctions.

STR Filing

Suspicious transaction reports must be filed with KoFIU without tipping off the customer, following KoFIU timing and threshold guidance.

Enhanced Due Diligence

EDD applies to high-risk customers and politically exposed persons, requiring deeper source-of-funds and beneficial ownership verification.

Beneficial Ownership Identification

The branch must identify the natural person who ultimately owns or controls the customer, not just the nominal account holder.

AML Recordkeeping Period

CDD and transaction records must be retained for at least five years after the relationship ends or the transaction date.

Compliance Officer Independence

The compliance officer must be independent of business units and report directly to the branch manager or board, not to revenue-generating staff.

Internal Control Standards

These standards must cover conduct, conflicts of interest, information barriers, and whistleblowing channels, and be documented for FSS review.

Annual Compliance Report

The compliance officer files an annual report and must report material violations to the FSS without delay.

Conflict of Interest Management

Conflicts between the branch and its parent or affiliates must be identified, disclosed, and managed under internal control standards.

Foreign Exchange Transactions Act

Cross-border securities transactions are subject to this Act and FSC foreign exchange regulations, including reporting and soundness ratio requirements.

Hedging Documentation

Overseas derivatives used for hedging must have a genuine economic purpose, be documented, approved, and reported to regulators.

Cross-Border Outsourcing

Outsourcing and cloud arrangements with overseas providers require FSS notification or approval and a documented risk assessment.

Short Selling Restrictions

Naked short selling is prohibited; short sellers must report net positions above thresholds and disclose them to the market.

Market Manipulation

Prohibited conduct includes wash trades, matched orders, and creating a false appearance of active trading in a security.

Front-Running

Trading ahead of a client order or using non-public order information is a criminal offense under the Act.

Client Asset Segregation

Client assets must be segregated from the branch's own assets and held in FSS-approved trust or custody arrangements.

Commingling Prohibition

Mixing client and proprietary assets is prohibited and subject to criminal penalties under the Act.

Complaint Handling Procedure

Branches must maintain a documented complaint procedure with defined response times and escalation paths to the FSS.

Administrative Fines

과징금 can be imposed for conduct and disclosure violations, with amounts scaled to the violation and gain obtained.

License Revocation

The FSC can revoke a branch license for capital deficiency, illegal conduct, or failure to maintain internal control standards.

Sanctions Appeal

Branches may challenge FSC sanctions through administrative litigation within statutory deadlines, and sanctions may be reported to home regulators.