Download KSDA committed to informing investors

KSDA committed to informing investors
Korea Herald
The headquarters of the Korea Securities
Dealers Association in Seoul
Korea's individual stock investors tend to earn less in bull markets and lose
more in bearish ones than their foreign counterparts or financial institutions.
This seems natural, since they have to fight the fluctuating indexes with limited
access to information and lack of cohesive power that could move the market,
either north or south. Moreover, a rash of overseas funds flooded into the local
market recently, which drove the current rally but also sparked concern over
their sudden pullout. This has deepened retail investors' jitters prompting the
nation's top securities association to step up efforts to protect individual
investors.
The Korea Securities Dealers Association recently revamped its organization,
aiming to provide investors with better education programs and protect them
from possible market hazards.
"We have launched free lectures for students, teachers and other ordinary
people to help them have a greater understanding of securities deals and the
overall economic situation," said an association official.
As of the end of last month, some 12 universities, six schools and 16 individuals
had applied for the KSDA class. So far, a total of 2,719 people benefited from
the program, which encompasses information on stock trading, asset
management, investment tactics for derivative products and tips for portfolio
formation.
The official noted the nonprofit group also plans to publish various education
materials, including comic books, while pushing a plan to make the textbooks
used by primary, middle and high schools include securities-related content.
"We have also expanded our on-line services, such as counseling via Internet
sites, as part of our policy of strengthening our role as the protector of
investors."
Established in 1953, the KSDA currently has 35 regular members based either
in Korea or foreign countries, including such giant brokerages as Samsung
Securities, Goodmorning Shinhan, Meritz and Merrill Lynch.
According to the association's latest publication, its principle roles include
promoting self-regulation in the nation's securities industry as well as operating
the Kosdaq, the over-the-counter bond market and the OTC bulletin board,
which is the "third market" designed for companies unlisted on either the Korea
Stock Exchange or Kosdaq.
The booklet, titled "Securities market in Korea," points out that following the
1997-1998 financial crisis, Korea's capital market has opened itself up globally,
consequently heating up competition here and making regulation tough.
"Major reform measures (taken after the financial crisis) also include the
strengthening of shareholders' rights, the improvement of mergers and
acquisitions procedures and the enhancement of corporate management
transparency," it read.
Former Top Japan MOF Official Pushes 2nd Asia
Bond Fund
DOW JONES NEWSWIRES
TOKYO -- A former top Finance Ministry official in Japan said Tuesday that Asian
countries could decide by December on a second, more ambitious fund to encourage the
development of bond markets in the region. Takatoshi Ito, a professor at the University
of Tokyo and a former deputy vice finance minister for international affairs, said a fund
agreed to by 11 central banks in the Asia-Pacific region in June will have only a limited
impact, so a second fund is necessary.
Ito proposes that Asian countries establish an Asian Bond Corp. The special purpose
vehicle would buy a basket of Asian sovereign bonds issued in local currencies by
governments in the region. The body would then use those bonds to back offerings of its
own bonds denominated in a weighted average of currencies from countries
participating in the scheme.
Korea is keen for a fund that securitizes loans and bonds from small- and medium-sized
firms, according to Ito. The initial bond issues could be limited in scale in that they may
only cover two or three currencies - say Japan, Thailand and Korea. As more countries
join, new funds could be established, he said.
So far the proposal has not raised any opposition from the U.S., Ito said. "The U.S. is
much more interested now in the stability of Asia and the growth of Asia," he said,
compared to the late 1990s when the U.S. opposed the idea of an Asian Monetary Fund.
Structured products take off in Taiwan
Financial Times
Five securities houses sold structured products worth T$700m ($20m) in Taiwan in
their first week after gaining permission, officials at the Over the Counter Exchange
said. Local currency linked structured notes are another first in the island's capital
market, which is being pushed towards greater liberalisation.
The government gave its approval to 15 local brokerages earlier this month for selling
structured products. T$100bn of overseas structured notes were sold in Taiwan last year.
Securities firms have said they expect local structured products to match that annual
volume.
The figures showed that Taiwan's first Exchange Traded Fund (ETF), which was
launched in late June, delivered on the expectations that it would act as a catalyst for
more new financial products.
SIA President of SIA answers your questions
With Sarbanes-Oxley currently affecting publicly held companies, do you foresee any
trickle down effect to other entities, for instance non-for-profits. And if so, when?
ANSWER: The Sarbanes-Oxley requirements do not specifically affect nonpublic
companies. But we're seeing some public companies question whether they should
become private, and private companies postponing their decisions to go public. So that
is one type of trickle down effect.
Sarbanes-Oxley requires that companies provide more accurate financial information to
investors and imposes corporate governance standards, demanding greater responsibility
of corporate officers (to be accountable for the financial information the company
reports to the marketplace).
Since Sarbanes-Oxley went into effect, public companies have significantly altered their
procedures with regard to filing quarterly earnings statements. In a recent survey of
public companies, 79 percent said their statements are now reviewed by their general
counsel's office, 71 percent of the reviews involve a full audit committee -- in 2002 the
percentages were 9 and 46, respectively.
In a strict legal sense, the Sarbanes-Oxley rules do not affect nonprofits. But the
standards set by Sarbanes-Oxley assuredly have had an impact on the financial reporting
of many types of enterprises.
Further, the investing public is more sensitive to financial transparency issues. There are
a series of laws and regulations governing the operations of nonprofits and their
reporting obligations. The IRS site is a good resource to learn more, for example, about
those reporting obligations.
Are boards of directors doing a better job of monitoring what's going on?
ANSWER: Yes, according to a number of surveys that have been recently released. As
I mentioned in my response to the first question, in a recent survey of public companies,
79 percent said their statements are now reviewed by their general counsel's office, 71
percent of the reviews involve a full audit committee -- in 2002 the percentages were 9
and 46, respectively.
Companies must now disclose whether their board's audit committee has at least one
financial expert and if not, the reason for it. They must also disclose who this expert is,
his or her qualifications, and if he or she is independent of management. In addition,
new rules restrict accounting firms from acting as auditor of a company's financials
while also providing non-auditing or consulting work for the same client.
These changes ensure the independence of directors and strengthen corporategovernance practices and issuer accountability, integrity, and transparency. They also
increase the checks-and-balances among investors, issuers, and the regulators. In
addition, investors can be assured of new and better oversight with the Public Company
Accounting Oversight Board, which has the ability to punish wrongdoers.
Is it safe to go back to the stock market now?
ANSWER: Investor protection has been significantly strengthened. A good number of
important reforms have been put in place, some initiated by the industry itself, others in
partnership with Congress, the SEC, and the self-regulatory organizations (set up by the
industry to police itself). But remember -- there's always risk involved when investing.
The markets will continue to go up and down.
Leven's hot on Korean M&A
FinanceAsia
Johan Leven, Goldman Sachs, Head of Asian M&A:
What are the trends you are seeing in Korean M&A?
We are now seeing more deals being done to international standards. Professional
advisors are being given greater autonomy to do deals. The principals are increasingly
letting their advisors get on with it without detail-managing. That is producing very nice
results. A good example of this was the sale of Hyundai Petrochemical.
Has the sale of Chohung to Shinhan been positive for Korea?
It has. There are three buckets of deals in Korea. There are the sell downs by
government; the sell downs by creditors; and then normal private M&A. The Chohung
deal is a good example of the government taking another important step to transfer
ownership back to private hands. It is important for Korea.
Do you see the sale of Hyundai ITC to Prudential as the first of many deals in the ITC
sector?
The ITC sector has its own problems and there is clearly a need for operations and
assets to continue to get restructured and for consolidation in this sector. The jury is still
out as to the best form and home for many ITCs.
Will Korea be the hottest M&A market in Asia outside Japan?
It's going to continue to be a very important market. It's a large regional market with
very significant restructuring and consolidation needs. It will continue to rank highly in
the M&A league tables in the region.