YOON&YANG

Recently, Korean institutional investors, including pension funds and mutual aid associations, have been expanding their investment base in alternative assets, including offshore private equity, private credit, and infrastructure funds, while Korean financial authorities have likewise shown a growing willingness to facilitate the entry of foreign collective investment business entities into the domestic market. Amid this trend, interest has grown in the registration procedures required to sell in Korea the collective investment securities (“Foreign Collective Investment Securities”) of a foreign collective investment scheme (commonly referred to as an “Offshore Fund”) operated by a foreign collective investment business entity. As of the end of July 2026, 3,854 offshore funds were listed in the registry of the Korea’s Financial Supervisory Service (FSS).  
 

An offshore fund must be registered in accordance with the procedures prescribed under the Financial Investment Services and Capital Markets Act (“FSCMA”), and depending on the distribution structure and the flow of funds, may also give rise to reporting or notification obligations under the Foreign Exchange Transactions Act (“FETA”) for the Korean investors, distributors, and other relevant parties. Without a comprehensive understanding of the effective financial regulatory framework, it is practically difficult to carry out the appropriate registration in accordance with the applicable rules, regulations and laws. This newsletter provides an overview of the applicable laws, the basic registration procedure, and introduction on the roles of the relevant authorities involved in the Offshore Fund registration regime, and further explains the legal services that Yoon & Yang LLC can provide at every stage of the registration process.

1. Overview of the Offshore Fund Registration Regime

2. Composition of the Registration Application and Scope of Documents Required in Practice

3. Key Practical Considerations

4. The Role of Korean Law Firms: Legal Support for Each Stage 

1. Overview of the Offshore Fund Registration Regime

A. Scope of the Registration Obligation and Requirements for Registration 
 

Where a foreign collective investment business entity of a foreign investment trust or an undisclosed investment association, or a foreign investment company intends to sell Foreign Collective Investment Securities in Korea, the Offshore Fund must be registered with the Financial Services Commission (FSC) pursuant to the FSCMA (Article 279(1)). The criterion for the registration obligation here is not the mere fact that an Offshore Fund has been organized or established overseas, but whether the Foreign Collective Investment Securities are to be sold in Korea. The Korean financial authorities take the position that, in addition to the direct sale of an Offshore Fund to Korean investors, a structure in which investors invest in an Offshore Fund through a domestic financial product, such as a specified money trust, may also constitute a sale in Korea (FSC Statutory Interpretation No. 180347). It should also be noted that, prior to the registration of a foreign collective investment vehicle, the relevant Foreign Collective Investment Securities may not be sold or advertised for sale in Korea (Article 303(1) of the Enforcement Decree of the FSCMA).  
 

The applicant seeking to register an Offshore Fund in Korea must satisfy (i) the eligibility requirements applicable to a foreign collective investment business entity, as prescribed by Presidential Decree and (ii) the eligibility requirements for the sale of Foreign Collective Investment Securities (Article 279(2) of the FSCMA and Article 301 of the Enforcement Decree thereof). The principal requirements are as follows:  
 

• Eligibility requirements for a foreign collective investment business entity: Assets under management must be at least KRW 1 trillion as of the end of the most recent fiscal year; the minimum equity capital requirement corresponding to the type of fund to be sold in Korea must be satisfied; no administrative sanction equivalent to or more severe than a business suspension, or any criminal punishment equivalent to or more severe than a fine, must have been imposed by the supervisory authority of its home country or of Korea during the preceding three years; and a qualified contact person in Korea must be appointed. 
 

• Eligibility requirements for the sale of Foreign Collective Investment Securities: The fund must have been issued, or be scheduled to be issued, under the laws of a country specified under applicable laws and regulations, including an OECD member country, Hong Kong, or Singapore; fees, commissions, and other costs must be clearly specified and must not be excessive; and redemption or other means of recovering the invested funds must be available at the investor’s request. 
 

• Relaxation of requirements: Where sales are made only to professional investors prescribed by the Enforcement Decree of the FSCMA, including the State, the Bank of Korea, and certain financial institutions, the eligibility requirements are relaxed such that the foreign collective investment business entity need only show that it has not, during the preceding three years, been subject to an administrative sanction equivalent to or more severe than a business suspension, or a criminal punishment equivalent to or more severe than a fine, imposed by a domestic supervisory authority in connection with business substantially corresponding to the financial business; and, with respect to Foreign Collective Investment Securities, that matters concerning fees, commissions, and other costs borne by investors are clearly set out.  
 

As such, considerably relaxed eligibility requirements apply where the foreign collective investment vehicle is intended to be sold only to professional investors, and for this reason it is common practice to register an Offshore Fund as a collective investment vehicle exclusively for professional investors for a simpler and faster registration.  

B. Registration Procedure and Reviewing Authority
 

The FSCMA vests the authority over the registration of a foreign collective investment vehicle in the FSC (Article 279(1)); however, the Enforcement Decree of the FSCMA delegates to the Governor of the FSS the authority to receive and review registration application, requests for supplementation of deficiencies, decide whether to grant registration, notify applicants of the decision, and cancel registrations and conduct hearings in connection therewith (Schedule 20 of the Enforcement Decree of the FSCMA). Accordingly, in practice, the application is filed with the Governor of the FSS, instead of the FSC, and its receipt and review are handled by the FSS (Asset Management Supervision Department).
 

The provisions governing the registration of domestic collective investment vehicles (Article 182(2) through (9)) apply mutatis mutandis to the registration procedure (Article 279(3)). Under these provisions, once a registration application is received, a decision on registration must, in principle, be made within 20 days, and the result and the reasons therefor are notified to the applicant in writing; if the application contains any deficiency, the applicant may be required to remedy it, and the period required for supplementation is not counted toward the review period. Registration applications are submitted through the Financial Information Network System (“FINES,” https://fines.fss.or.kr); however, in practice, submission through FINES does not result in formal acceptance of the application immediately. In recent practice, review of a registration application does not commence until approximately three to five months after its submission, and the application is not treated as having been received for registration-processing purposes until after the substantive review has been completed.
 

Once registration is granted, the required matters are entered in the collective investment vehicle registry and publicly announced, and an obligation to register any subsequent change arises if the registered matters are changed. Even after registration, the investor-protection obligations under Article 280 of the FSCMA continue to apply. Accordingly, a foreign collective investment business entity must provide investors with an asset management report at least once in every three months, and the foreign collective investment business entity or the foreign investment company must, in principle, publicly announce and post the net asset value of the Foreign Collective Investment Securities on a daily basis. In addition, an investor may request the foreign collective investment business entity, the foreign investment company, or a domestic distributor to allow inspection of the books and records relating to the collective investment property attributable to that investor, or to issue a copy or an extract thereof, and the relevant recipient may not refuse such request absent justifiable grounds. If the registration requirements subsequently cease to be satisfied, or if there is a violation of sales regulations or other grounds for cancellation, the registration may be cancelled after a hearing (Article 282(1)).
 

C. Applicability of the Foreign Exchange Transactions Act
 

Since an Offshore Fund is generally a non-resident organized or established under foreign law, the act of a domestic investor acquiring collective investment securities from an Offshore Fund may constitute a capital transaction under the FETA (Article 3(1)19(b)). The FETA imposes a reporting obligation on a person intending to engage in a capital transaction, but allows certain capital transactions prescribed by Presidential Decree to be subject only to a post-transaction report, or to be exempted from the reporting requirement altogether (Article 18(1)). In particular, where the collective investment securities of an Offshore Fund are denominated in a foreign currency or are payable outside Korea and thus constitute foreign currency securities, the Foreign Exchange Transaction Regulations exempt an institutional investor’s trading of foreign currency securities from the reporting requirement while imposing a separate reporting obligation, and, in principle, require a retail investor’s trading of foreign currency securities to be conducted through an investment broker or dealer (Article 7-33 of the Foreign Exchange Transaction Regulations).
 

Accordingly, the mere fact that an Offshore Fund is sold in Korea does not automatically give rise to a reporting or notification obligation under the FETA on the part of the Offshore Fund or the foreign collective investment business entity; rather, under the ordinary structure where subscriptions and redemptions are made through a domestic distributor and a foreign exchange bank, it is the domestic investor and the domestic financial institution that carry out the procedures under the FETA applicable to the relevant transaction. The authority to receive and accept reports concerning capital transactions under the FETA in principle belongs to the Minister of Finance and Economy, but a substantial portion of that authority has been delegated or entrusted to the Governor of the Bank of Korea or the head of a foreign exchange business institution, etc. (Article 23 of the FETA); accordingly, to whom a report or notification must be made may vary depending on the nature of the transaction. That said, where the structure departs from the ordinary pattern described above – for example, where the fund directly receives investment funds into a domestic account, or a Korean affiliate or other person associated with the fund repeatedly handles remittance or currency exchange on the fund’s behalf – the possibility cannot be ruled out that the fund itself may become subject to a reporting obligation, or an obligation to register as a foreign exchange business, under the FETA. Accordingly, the flow of funds should be carefully examined from the structuring stage of the transaction.
 

2. Composition of the Registration Application and Scope of Documents Required in Practice

 A registration application for an Offshore Fund is submitted in accordance with Form No. 39 of the Enforcement Rules of the Regulation on Financial Investment Business, addressed to the Governor of the FSS. The registration particulars are prepared in accordance with the matters required to be stated in a registration statement in the case of a publicly offered collective investment vehicle, and in accordance with a separate form in the case of a privately placed collective investment vehicle. The latter form is composed of four parts: (i) matters concerning the collective investment vehicle (name, type/form/structure, investment management professionals, management of property, subscription and redemption, valuation, fees and commissions, distribution of profits, and taxation, etc.); (ii) matters concerning the financial status, etc. of the collective investment vehicle; (iii) matters concerning related companies such as the collective investment business entity, the trust business entity, and the general administration company; and (iv) matters concerning attached documents. In addition to the common documents required – such as the collective investment vehicle’s constitutive documents (articles of incorporation, LPA, etc.) and copies of the outsourcing agreements with the trust business entity or the general administration company – the following documents, separately prescribed for a foreign collective investment vehicle, must also be submitted:

• the investment prospectus (PPM, etc.) submitted for the offering or sale of the fund abroad;
 

• an audit report evidencing the equity capital, and a document evidencing that the assets under management as of the end of the most recent fiscal year are at least KRW 1 trillion; 
 

• a confirmation letter, etc. from the foreign supervisory authority evidencing that no administrative sanction equivalent to or more severe than a business suspension, nor any criminal punishment equivalent to or more severe than a fine, has been imposed within the most recent three years;
 

• a document evidencing that the foreign collective investment vehicle has been authorized under the laws of the relevant country; and 
 

• documents concerning the contact person including the domestic agent appointment agreement, as well as documents concerning the sales agent.
 

In addition, in practice, a Korean translation (or an excerpted translation) of each document, notarial certificates and powers of attorney, an Offshore Fund checklist and a certificate confirming satisfaction of formal requirements, and evidence of payment of the registration license tax may also be required. The specific documents to be submitted may vary depending on the investors to whom the fund is to be sold and the form of the fund, etc., and therefore, without systematic preparation in advance, there is a risk that requests for supplementation due to deficiencies in the documents will recur. 
 

3. Key Practical Considerations

For registration of an Offshore Fund, the following matters should be reviewed in advance:  
 

• Possibility of a prolonged review: Although the registration review period is set at within 20 days, as the receipt of registration applications is processed sequentially, it appears that the process generally took four to five months or longer when the review backlog was heavy. Accordingly, in cases where the schedule for executing an investment in overseas assets has already been fixed, a strategy of allowing sufficient time before filing the application is necessary.
 

• Advance review of eligibility requirements: Whether the eligibility requirements for a collective investment business entity and for the sale of a product are satisfied may vary depending on the characteristics of the individual business entity and fund. Where registration is applied for without a prior review, there is a risk that the registration will be rejected for failure to meet the requirements, or that requests for supplementation will recur.
 

• Confirmation of the scope of, and exceptions to, the registration obligation: The FSCMA does not separately provide for exceptions to the registration obligation; however, since the registration obligation, as a matter of statutory language, arises only where Foreign Collective Investment Securities are “sold in Korea,” transaction structures that do not constitute a domestic sale – such as the “reverse inquiry” approach, whereby a domestic investor first requests an investment without having been solicited – are used in practice. That said, whether a given case falls within this category must be strictly determined based on the structure and circumstances of the transaction, including who initiated the first contact, whether there was any solicitation such as an IR session or distribution of materials in Korea, and whether a domestic intermediary was involved; where the transaction is determined to constitute a domestic sale, it may be subject to sanctions as an unregistered sale. Furthermore, as noted above, it is the position of the Korean financial authorities that a structure whereby investment is made in an Offshore Fund through a domestic financial instrument such as a specified money trust may likewise constitute a domestic sale, and the scope of application of the registration obligation should therefore be reviewed conservatively.
 

• Review of compliance with the FETA in light of the structuring of the flow of funds: The obligation to report a capital transaction under the FETA rests with the domestic investor engaging in that transaction; however, the fund, too, should pay close attention to how the flow of funds is structured. The Supreme Court has held that, where a collective investment business entity is not a party to a contract on trading of foreign currency securities and merely gives investment instructions to a custodian bank or other foreign exchange business institution, it does not fall within the scope of entities required to register as a foreign exchange business (Supreme Court Decision 2019Do19161 rendered on December 24, 2020). However, the possibility cannot be ruled out that, where an Offshore Fund or an associated person in Korea directly receives funds from domestic investors and remits them abroad, or repeatedly handles currency exchange or payment on its behalf, an issue may arise as to the obligation to register as a foreign exchange business or to report each individual transaction. It is therefore advisable to design the structure such that subscription, redemption, and distribution proceeds are processed through lawful financial institutions, such as a domestic distributor and a foreign exchange bank.
 

4. The Role of Korean Law Firms: Legal Support for Each Stage 

Registering an Offshore Fund is not merely an area where the laws of the fund’s jurisdiction of establishment intersect with the Korean capital markets laws, but a complex area of legal practice that, depending on the distribution structure, also requires consideration of issues under the FETA and tax law. Accordingly, without the support of specialized legal advice, there is a heightened risk of delay or refusal of registration, and, further, of cancellation of registration or sanctions for violation of the relevant laws. Yoon & Yang LLC, drawing on its expertise across the full range of legal advisory work relating to financial investment business and collective investment vehicles both in Korea and abroad, is equipped to provide the following legal services at every stage of the Offshore Fund registration process.
 

[STEP 1. Pre-Registration Stage: Review of the Collective Investment Vehicle’s Structure and Compliance with the Relevant Laws]
 

Yoon & Yang LLC identifies the overall structure of the collective investment vehicle for which registration is being pursued – including its form of organization or establishment, its management structure, and its investor composition – and reviews in advance whether such structure satisfies the eligibility requirements for a foreign collective investment business entity and for the sale of Foreign Collective Investment Securities under the FSCMA, as well as whether any other issues arise under the relevant laws. In particular, where multiple parties, e.g., an investment manager, a trust company, and an administration company, share roles through outsourcing agreements, or where the structure is multi-party or multi-layered, as in an umbrella fund structure, we conduct a precise analysis – based on the underlying contractual relationships – of which status under the FSCMA (foreign collective investment business entity, trust business entity, general administration company, etc.) each party corresponds to, and who, as the actual manager, must satisfy the eligibility requirements. For example, where a foreign collective investment business entity outsources all of its management activities to another foreign collective investment business entity, the latter must itself have assets under management of at least KRW 1 trillion (Article 301 of the Enforcement Decree of the FSCMA); accordingly, whether the registration requirements are satisfied may depend on how the entrustment structure is designed. In addition, Yoon & Yang LLC reviews the regulatory framework of the Offshore Fund’s jurisdiction of establishment – including the laws applicable to collective investment vehicles in that jurisdiction and the status of authorizations granted to the collective investment business entity by the supervisory authority of that jurisdiction – and ensures consistency with the domestic registration requirements and the matters to be stated in the registration application. Through this review, structural issues in the Offshore Fund can be identified at an early stage prior to filing the registration application, and remedial measures can be proposed, thereby minimizing the risk of delay or rejection that may otherwise arise at the subsequent review stage.
 

[STEP 2. Registration Application Stage: Support for Document Submission and Consultation with the Supervisory Authority]
 

Yoon & Yang LLC reviews any and all documents necessary to be submitted before the relevant authorities, including, but not limited to the registration application, the collective investment vehicle’s constitutive documents (articles of incorporation, LPA, etc.), outsourcing agreements, the investment prospectus (PPM, etc.), confirmations that each related company is not subject to any disqualifying grounds or business suspension with respect to each related company, and documents evidencing the investment management track record, assisting with their translation and ensuring their consistency. It also facilitates communications necessary in the course of document submission to, and prior consultation with, the Asset Management Supervision Department of the FSS, which, in practice, handles registration matters. In addition, by responding promptly to any requests for supplementation that may arise during the review process, Yoon & Yang LLC helps to minimize the registration review period.
 

[STEP 3. Post-Registration Stage: Ongoing Compliance and, Where Necessary, Responses to Issues under the FETA]

Even after registration has been completed, an Offshore Fund must provide investors with an asset management report at least once in every three months, and the net asset value must, in principle, be published and posted on a daily basis; however, where certain grounds exist, such as where the fund invests in foreign currency assets, the frequency of such announcement and posting may be separately set at an interval not exceeding 15 days. In addition, a foreign collective investment business entity must report the status of domestic sales of Foreign Collective Investment Securities, as of the last day of each month, to the Governor of the FSS by the 20th day of the following month, through the investment broker or dealer acting as its sales agent (Article 7-54 of the Regulation on Financial Investment Business). Yoon & Yang LLC supports compliance with these ongoing obligations on disclosure and reporting.
 

In addition, Yoon & Yang LLC examines the distribution and settlement structure to ensure that the flow of funds relating to subscription, redemption, and distribution proceeds does not give rise to additional issues such as the obligation to register as a foreign exchange business or to report individual transactions. Where necessary, it provides advice on the reporting and notification procedures under the FETA that may be required of domestic investors and distributors. It also reviews tax issues, such as withholding tax, that may arise in the course of making payments of redemption proceeds or distributions within Korea.
 

Registering an Offshore Fund is not a mere administrative procedure, but a comprehensive area of legal practice requiring holistic consideration of the structure of the collective investment vehicle and the requirements under the FSCMA and other relevant laws, as well as the management of issues under the FETA and tax law that may arise depending on the distribution structure. Yoon & Yang LLC, drawing on its extensive practical experience across the field of financial regulation, domestic and international fund investment, and financial transactions generally, is equipped to provide effective legal services at every stage from the pre-registration review of the structure, through the filing of the registration application, to ongoing compliance after registration.
 

Drawing on extensive expertise in domestic and cross-border real estate fund investments and financial transactions, Yoon & Yang LLC’s Alternative Investment Practice Group is well positioned to provide practical and strategic legal services throughout every stage of data center investments—from legal due diligence and contract negotiations to regulatory monitoring and dispute prevention.
 

[Korean Version]