■Open discussions with individual investors
“Conflict with value increase to revitalize the market”
Government reaffirms its stance on abolishing the gold investment tax
Illegal short selling blocking system revealed
“I have no intention of going to another public office”
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Lee Bok-hyeon, head of the Financial Supervisory Service, applauds while listening to attendees’ remarks at the ‘Open Debate with Individual Investors’ held at the Korea Exchange in Yeouido, Seoul on the 25th. Photo courtesy of Financial Supervisory Service
When a plan to postpone, instead of abolish, the financial investment income tax scheduled to be implemented next year was discussed, Financial Supervisory Service Director Lee Bok-hyeon strongly criticized it as a “cowardly decision.” Regarding short selling, he did not say anything, saying that he could not determine the timing of resumption considering procedures such as building a computer system and revising the law.
Director Lee met with reporters after completing the ‘Open Discussion with Individual Investors’ held at the Korea Exchange on the 25th and said, “As the capital market environment has changed, the negative impact of the introduction of the gold investment tax has become greater,” adding, “The government plans to abolish the gold investment tax.” “There is no change in our position,” he said. As the Democratic Party of Korea, which pledged to implement a gold investment tax, won a landslide victory in the 22nd general election, the government and the ruling party reaffirmed its position in response to speculation that it would become difficult to abolish the gold investment tax.
Director Lee said, “The current capital market situation has changed significantly from when the gold investment tax was introduced, not only has overseas investment increased, but in a situation where there are many alternative investment assets, excessive burden on income such as dividends can lead to a decrease in liquidity.” “Based on the opinions of individual investors and institutional investors that not only is the negative impact of this policy more significant, but it also completely conflicts with the value industry, we will re-coordinate the opinions within the government and deliver them to the National Assembly,” he said.
In particular, Director Lee voiced opposition to the gold investment tax deferral plan, which was recently discussed as an arbitration proposal. He raised his voice, saying, “The postponement of the gold investment tax is a cowardly decision to say the least,” and added, “In order to revitalize the capital market when the value industry is an issue like now, we need to comprehensively judge how to implement policies on capital income, such as dividends.” At the same time, he emphasized, “The 22nd National Assembly must also think forward about value business as a policy for people’s livelihood.” Investors who participated as panelists in the debate on this day also conveyed the position that the implementation of the gold investment tax should be abolished as it could dampen investment sentiment and lead to liquidity outflows.
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On this day, the Financial Supervisory Service, together with the Korea Exchange, Korea Securities Depository, and Korea Securities Finance, announced a plan to establish a computer system to prevent illegal short selling. It was decided to block non-leveraged short selling in advance through institutional investors’ own computer system, and automatically detect non-leveraged short selling by regular analysis using the ‘Illegal Short Selling Central Blocking System (NSDS)’, which is scheduled to be built on the exchange. It was concluded that detection in advance in real time was undesirable as it not only caused technical difficulties but also affected the speed of trading transactions, and decided to pursue detection after the fact.
However, it is expected that it will be difficult to complete it in a short period of time as the law must be revised along with the system construction. Whether to extend the total ban on short selling scheduled for the end of June this year is also tied to institutional improvements such as the establishment of a computer system. Regarding the timing of the resumption of short selling, Director Lee said, “We cannot say for sure because there is a need to review whether the background and reasons for the complete ban on short selling have been sufficiently resolved and how quickly the computerization plan will be prepared.” “I promise not to make a unilateral decision, but to listen to market and investor opinions.”
On this day, additional measures regarding illegal short selling requested by investors were also mentioned. Hwang Seon-oh, Deputy Governor of the Financial Supervisory Service, said, “We are preparing strong sanctions, such as imposing punitive fines on illegal short selling or banning them from entering the capital market for more than 10 years,” adding, “Global investment banks (IBs) are also responding to ex post facto detection.” “They responded positively with empathy,” he said.
Regarding his future, Director Lee expressed his intention to focus on responding to pending issues such as normalizing real estate project financing (PF). Director Lee said, “The Financial Supervisory Service has the role of first responding to the market and executing, so if (I) leave now, the response to pending issues may be shaken,” adding, “I’m not saying I won’t finish my term, but even if a successor comes in the third or fourth quarter of this year, “I think it will be okay,” he said. He added, “I have no intention of going to another public office.”
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