REGULATION

ON

SUPERVISION OF INVESTMENT ADVISERS

Regulation on Supervision of Investment Advisers

CONTENTS

I.	General Provisions

§1.	Purpose

§2.	Definitions

§3.	Application

II.	Registration

§4.	Filing Registration Application

§5.	Registration Processing

§6.	Implementation of Registration

§7.	Mattered to be Declared

III.	Maintenance of Sound Business Order

§8.	Investment Advisory Service Contract

§9.	Notice of Investment Results to Customers

§10.	Performance Fee

§11.	F	iling of Business Report

IV.	Supervision

§12.	Accounting

§13.	Asset Management

§14.	Retaining of Contract Documents

§15.	Restriction on Business Methods for Foreign Investment Advisors

V.	Supplementary Provisions

§16.	Delegation of Powers

Addenda

Enacted on April 1, 1998

Amended on November 27, 1998

Wholly Amended on March 26, 1999

Amended on December 24, 1999

December 29, 2000, FSC 2000-130

December 19, 2001, FSC 2001-101

CHAPTER I.

GENERAL PROVISIONS

§1. Purpose

The purpose of this Regulation is to prescribe the matters delegated to the FSC and the specifics necessary for the enforcement thereof under the Securities and Exchange Act (hereinafter, "the Act"), its enforcement decree (hereinafter, "the Decree"), its enforcement rules (hereinafter, "the Enforcement Rules"), Act on the Establishment of Financial Supervisory Organizations, its enforcement decree, and any other relevant statues thereof.

§2. Definitions

The terms used herein this Regulation shall be defined pursuant to the Act, Decree, Enforcement Decree, and the Enforcement Decree of the Securities Investment Trust Business Act.

§3. Application

Article 12 and Article 13 shall not apply to those who have registered to conduct investment advisory or investment discretionary service and those who are applicable under any of the following subparagraphs;

1. Management company under article 2 paragraph (3) of the Securities Investment Trust Business Act

2. Asset management company under article 2 subparagraph 2 of the Securities Investment Company Act

3. Securities company under article 2 paragraph (9) of the Act

4. Foreign investment advisors directly engaging in the investment advisory service or investment discretionary service in Korea by the methods provided under Article 41-24 paragraph (1) subparagraph 1 or 2 of the Decree.

CHAPTER II.

REGISTRATION

§4. Filing Registration Application

(1) A company intending to register pursuant to Article 70-2 paragraph (1) or (2) of the Act including foreign investment advisors intending to register pursuant to Article 70-9 paragraph (1) of the Act shall file with the FSC an application for registration including the information stated in the following subparagraphs.

1. Information as prescribed under Article 41-10 paragraph (1) subparagraphs 1 through 5 of the Decree;

2. Information on principal shareholders;

3. Information on the furnishing of physical facilities including computer system which is essential for operation; and

4. Other information necessary for the registration determined by the Governor.

(2) The FSC may demand for supplementary measures by specifying a period not exceeding one week when the filed documents are incomplete.

(3) The Governor shall determine any details concerning the application for registration, including its format.

§5. Registration Processing

(1) The period for processing registration of investment advisory service and investment discretionary service pursuant to Article 4 paragraph (1) (including cases where the applicant is dually applying for the registration of investment advisory service and investment discretionary service) shall be less than twenty days from the date of application. In this case, the application date shall be counted toward such period, whereas public holidays provided under the Regulation on Public Holidays of Government Offices shall be excluded.

(2) Notwithstanding Article 1, when the FSC demands for supplementary measures for registration documents pursuant to Article 4 paragraph (2), such period shall be excluded from the processing period.

§6. Implementation of Registration

(1) The FSC shall, after confirming whether an application meets the registration requirements prescribed under Article 41-7 of the Decree or whether it falls under the causes to reject the registration pursuant to Article 41-11 paragraph (1) of the decree, implement the registration considering the matters applicable under Article 17-5 paragraph (2) of the Decree. In this case, the FSC shall deliver to the applicant the registration certificate describing the matters under each subparagraph of Article 41-11 paragraph (2) of the Decree, without any delay.

(2) The Governor shall prepare and administer the register which contains the fact of registration under Article 1.

(3) The formats of registration certificate and register shall be determined by the Governor.

§7. Matters to be Declared

(1) In case any matter under the following among the registration items of investment advisory service or investment discretionary service changes, when filing business report for the quarter (referred to as that prescribed under Article 11) in which the date of change belongs, investment advisor shall declare such fact to the the FSC; provided, however, where applicable under paragraph (1), declaration shall be made within two weeks from the date of change.

1. Business title of the company and its location;

2. Capital stock;

3. Officers;

4. Investment management experts;

5. Business methods; and

6. Principal shareholders.

(2) Pursuant to the provisions under Article 70-2 paragraph (4) of the Act, any investment advisor shall, when intending to discontinue the investment advisory service or investment discretionary service, declare the fact to the Governor before the public announcement of such discontinuance pursuant to Article 70-7 and 37 of the Act.

CHAPTER Ⅲ.

MAINTENANCE OF SOUND BUSINESS ORDER

§8. Investment Advisory Service Contract

(1) Any investment advisor shall, when intending to conclude an investment advisory service contract or investment discretionary service contract, deliver the written materials describing the following information (hereinafter, "solicitation for contract") to a customer or his proxy two days prior to the date of contract conclusion, in person or mail:

1. Information prescribed under Article 41-16 paragraph (1) subparagraphs 1 through 7 of the Decree;

2. Information on officers and principal shareholders;

3. Registration number;

4. For a investment discretionary service contract, the forms of property to be provided at the time of the contract goes in effect and those to be returned at the termination of the contract;

5. Matters concerning investment methods employed in property management under such investment discretionary service contract.

(2) The detailed guidelines for filling out the document of soliciting contract shall be determined by the Governor.

§9. Notice of Investment Results to Customers

(1) Any investment advisor shall prepare the report under each item of Article 41-18 of the Decree and deliver such report to its customers or their proxies at least once each quarter, in person or mail.

(2) The detailed provisions concerning the report form of delivery methods and procedures under Article 1 shall be determined by the Governor.

§10. Performance Fee

(1) [Deleted December 24, 1991]

(2) When the investment instruments to be managed under any investment discretionary service contract are unlisted stocks, unregistered stocks, or those for which fair prices are not available, any investment advisory company shall not, enter into a contract which includes provisions on compensation on the basis of capital gains or valuation difference (hereinafter, "performance fee").

(3) Any investment advisor shall, when entering into a investment discretionary service contract for which a performance fee is paid, explain, in advance, the following matters to its customers for their understanding:

1. Valuation method of property under contract and the calculation method of such performance fee;

2. Fee scale including performance fee;

3. Characteristics and period of stock index or index rate to be used to measure investment performance;

4. Any possibility for such investment advisor to undertake any risk in investment for higher performance fee.

§11. Filing of Business Report

(1) Any investment advisor shall file its business report with the FSC within one month from the closing date of every quarter.

(2) Matters concerning the methods, procedures and forms for preparing the business report shall be determined by the Governor.

CHAPTER Ⅳ.

SUPERVISION

§12. Accounting

(1) The accounting period of any investment advisor shall be from April 1 to March 31 of the following year.

(2) The accounting of any investment advisor shall comply with the Accounting Procedure for Securities Industry and the Financial Accounting Standards.

§13. Asset Management

(1) Any investment advisor shall not make equity investment in any corporation which has any special relationship as prescribed under Article 10-3 paragraph (2) of the Decree. However, these provisions shall not apply to any case where such equity investment is related to its purpose of establishment.

(2) Any investment advisor shall neither provide collateral nor guarantee liabilities to a third party.

§14. Retaining of Contract Documents

Any investment advisor shall retain the documents deemed necessary by the Governor for five years in order to prevent any dispute with its customers.

§15. Restriction on Business Methods for Foreign Investment Advisors

The Governor may, when any foreign investment advisor directly engages in the investment advisory service or investment discretionary service in Korea by the methods under Article 41-24 paragraph (1) subparagraph 1 or 2 of the Decree, restrict its business methods for protection of investors.

CHAPTER V.

SUPPLEMENTARY PROVISIONS

§16. Delegation of Powers

(1) The FSC shall delegate the following duties to the Governor:

1. Receipt, request for supplementary measures, rejection of registration;

2. Implementation of registration; and

3. Receipt and disclosure of business reports.

(2) The Governor may determine the detailed provisions necessary for the implementation of this Regulation.

(3) The Governor shall report to the FSC the processing result of the delegated matters mentioned in paragraph (1) subparagraph 2 and 4 every quarter.

Addenda

(April 1, 1998)

§1. Effective Date

This Regulation shall be effective from April 1, 1998.

§2. Repeal of Previous Regulation and Interim Measures

(1) On the effective date of this Regulation, the Regulation on Business of Investment Advisory Companies formulated by the Securities and Exchange Commission shall be repealed.

(2) An investment advisory company which has obtained the permission to engage in investment advisory service or investment discretionary service in foreign countries pursuant to Article 70-2 of the Securities and Exchange Act from the Ministry of Finance and Economy shall be deemed to have been declared pursuant to Article 4 of this Regulation.

§3. Interim Measures on Authority and Business of FSS

Until the establishment of the FSS, the Governor in this regulation is deemed the Governor of the Securities Supervisory Board.

Addenda

(November 27, 1998)

This Regulation shall be effective from November 28, 1998.

Addenda

(March 26, 1999)

§1. Effective Date

This Regulation shall be effective from April 1, 1999.

§2. Interim Measures

Permissions and registrations conducted by the Ministry of Finance and Economy as of the enforcement date of this Regulation shall be deemed to have been conducted by the FSC under this Regulation.

Addendum

(December 24, 1999)

This Regulation shall be effective on December 24, 1999.

Addendum

(December 29, 2000)

This Regulation shall be effective on December 29, 2000.

Addendum

(December 19, 2001)

This Regulation shall be effective on the date of promulgation.