On Mar. 13, 2025, SK FIA issued the 2 revised best practices effective May 13, 2025.
On Feb. 20, SK FIA proposed best practices for alternative investment.
SK FIA proposed revising Best practices for alternative investment risk management.
In addition to Best Practices for risk management of financial investment companies.
Follows SK FSS Feb. 19, 2025 drafted revisions re risk management, see #244399.
Revisions re Alternative Investments
A chief risk officer (CRO) may be granted the right to request reconsideration when making investment deliberations; in case of selecting an overseas due diligence company, a company independent from a transaction counterparty must be selected.
When making overseas investments, details regarding transaction introducers must be reviewed and recorded; the quorum and composition criteria of a decision-making body such as the investment review committee must be reasonably established.
Investing in overseas assets requires external expert review, formulation of a fund creation policy; creation standards must be more rigorous for a publicly offered fund.
The terms and conditions of alternative investment contracts must be reviewed, while related internal procedures must be established and documented for risk management.
Regulate matters re internal control of advisory fees for real estate funds, allocate and expense loan handling fees over the loan period; carry out monitoring once a year after fund creation but on a periodical basis where special circumstances arise.
Stipulate a periodic fair value assessment of alternative investment fund assets and the formation of a collective investment property evaluation committee.
CRO and compliance officer must build a performance-based compensation system to ensure that alternative investment performance is not linked to compensation.
Revisions re Risk Management
Establish quorum and composition requirements of a decision-making body re investments; require regular management of details regarding investment assets.
CRO may be granted the right to request reconsideration when making investment deliberations; details re transaction introducers must be reviewed and recorded.
The terms and conditions of alternative investment contracts must be reviewed, while related internal procedures must be established and documented for risk management.
An audit report must be prepared and reported after sensitivity analysis for measuring cash flow; monitoring must be conducted once a year for each investment asset.
However, monitoring must be conducted on a frequent basis for investment assets that are deemed to have a high possibility of insolvency; require the establishment of impairment loss recognition criteria for alternative investment assets.
Asset soundness classification criteria must be established where necessary.
Consultation Period
Comments shall be submitted by Mar. 12 for planned effectiveness from May 13, 2025.
Mar. 2025 Revisions Finalized
On Mar. 13, 2025, SK FIA issued the 2 revised best practices effective May 13, 2025.
Regulators
SK FIA
Entity Types
B/D; HF; Inv Co
Reference
RF 3/13/2025; CP 2/20/2025
Functions
Accounting; Actuarial and Valuation; Audit; Compliance; Financial; HR; Operations; Record Retention; Risk; Sales Practices; Treasury
