KOFIA Chair Vows to Restore Trust in Hedge Fund Industry

Source: Regulation Asia Editors, Regulation Asia 2020-07-17

KOFIA will prevent moral hazard in the hedge fund industry by providing consulting services and strengthening the role of prime brokers, intermediaries and fund managers in monitoring efforts.

KOFIA (Korea Financial Investment Association) chairman Na Jae-chul on Thursday (16 July) vowed to strengthen risk controls and voluntary monitoring of hedge funds, reports Korea Herald.

In recent months, investors have faced heavy losses due to poor management, fraud and mis-selling at hedge funds and their intermediaries, damaging public trust in the industry. Lime Asset Management and Optimus Asset Management were two of the more notable examples.

In response, financial authorities in Korea have agreed to establish a dedicated team to inspect all private fund operators in the country over the next three years.

“We will concentrate on our capability to rebuild trust and carry out sustainable innovative tasks,” Na said. “We think now is the time for the market players to open their eyes.”

“To help them make a new leap forward, we plan to provide a manual and a checklist for the local hedge fund firms, so that they can assess whether they are doing well in terms of internal controls and risk management.”

Na said loose internal controls could give rise to moral hazard. KOFIA will try to prevent this by providing consulting services to the hedge fund industry, and by strengthening the role of prime brokerage services, funds sellers and funds management firms in monitoring efforts.

As the first step, KOFIA enacted regulations last month for the development and sale of high-risk financial products, following controversies over derivative-linked funds last year.

Na began a three-year term at KOFIA’s chairman on 1 January. The industry body represents 440 brokerages and asset management firms in South Korea.

KOFIA

KOFIA Chair Vows to Restore Trust in Hedge Fund Industry

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