Capital Markets Act and Enforcement Decree: Licensing, Business Conduct, and Branch Permissions
This domain tests whether you can map a foreign securities branch’s proposed activity to the correct FSCMA permission and identify the conduct obligations that attach to it.
Licence or registration
FSCMA divides investment business into investment trading, investment brokerage, collective investment, investment advisory, discretionary investment, and trust. Trading, brokerage, collective investment, and trust require FSC authorisation; advisory and discretionary investment require registration. A foreign financial institution must establish a Korean branch or business office and obtain the relevant foreign investment business licence. The branch’s permitted scope is stated in its licence and cannot be expanded by relying on parent-level permissions.
Boundary issues
Adding a new activity requires prior licence or registration amendment. A branch licensed only for brokerage cannot manage customer assets on a discretionary basis; it needs discretionary investment registration. Foreign exchange business may require separate FX dealer or broker permission under the Foreign Exchange Transactions Act. Conduct rules such as suitability, explanation, segregation, and conflict management apply from the first day of licensed activity, not after a supervisory examination.
Worked example
A Hong Kong broker’s Seoul branch holds investment brokerage and wants to launch a wrap account in which the branch allocates client assets among offshore funds. The branch argues the parent is licensed offshore and the activity is merely advisory. That is wrong: discretionary management of client assets is discretionary investment business, requiring registration and an amended licence. Advisory registration alone would not cover execution and rebalancing. The branch must also check whether distributing the offshore funds needs collective investment registration or an exemption.
Traps
Treating registration as a licence; assuming a branch licence covers affiliates; forgetting FX permission; launching before permission; confusing advisory with discretionary management.