The amendment would remove self-assessment exemptions for private equity funds after the Homeplus crisis, potentially giving the FSS a more formal supervisory role while raising industry concerns over cost and competitiveness.
Representative Han Min-soo of the Democratic Party of Korea has proposed an amendment to the Capital Markets Act that would strip institutional private equity funds, or PEFs, of exemptions allowing them to value assets internally and operate without trustee monitoring. The bill follows the Homeplus rehabilitation case, where MBK Partners-managed fund was the majority shareholder, and is part of a broader push by the ruling party to strengthen oversight of the sector. The amendment would delete asset valuation and trustee oversight exemptions for PEFs from Article 249-20, Paragraph 1 of the Capital Markets Act, specifically removing references to Article 238 and Article 247. Under the current regime, general partners (GPs) can calculate portfolio values in-house and report them to limited partners (LPs) quarterly, while trustees are exempt from monitoring fund operations. If passed, PEFs would instead face regular external valuation and trustees would gain a legal basis to check before execution whether a GP's investment instructions comply with relevant laws and fund articles. The change is widely seen as opening a formal path for the Financial Supervisory Service, or FSS (South Korea's financial watchdog), to supervise a market that has largely relied on self-regulation. Supporters argue that minimum valuation and oversight mechanisms could have forced earlier and more gradual recognition of falling asset values in cases such as Homeplus. The next dispute is expected to center on how unlisted PEF assets should be priced, with the FSS reportedly already reviewing overseas precedents and the public-fund model of a valuation committee calculating fair value cited as a leading option. Industry participants say the proposal could impose heavier time and cost burdens on domestic managers, increase the risk of disputes over valuations, and deepen what they describe as reverse discrimination because the rules would apply only to PEFs registered in South Korea. That would leave overseas PEFs, including MBK in this context, outside the scope. The bill is one of about ten pending PEF-related measures in the National Assembly, alongside proposals on GP performance-fee and employee-compensation reporting, compliance officers, major shareholder suitability reviews, and lower leveraged buyout borrowing limits. South Korea's Financial Services Commission and the Democratic Party plan to review the bills together during the regular National Assembly session. The debate is drawing attention beyond South Korea. Axios said early last month that the FSS's sanctions on MBK were unprecedented, though limited, and could chill PEF activity in the country. Industry officials and legal advisers also argue that mandatory reporting of key employee compensation is uncommon outside the European Union and has been ruled unconstitutional by a U.S. federal court. The sector says tougher rules may further erode the international competitiveness of domestic PEFs, whose assets under management remain far below global firms such as Blackstone, KKR and EQT.