REGULATION ON
SUPERVISION OF ASSET
SECURITIZATION BUSINESS
Regulation on Supervision of Asset Securitization Business
CONTENTS
I. General Provisions
§1. Purpose
§2. Originator Recognition Standards
II. Registration of Asset Securitization Plan
§3. Submission of Registration Statement of Asset Securitization Plan
§4. Information Required in Registration Statement
§5. Documents Attached to Registration Statement
§6. Information Required in Changed Registration Statement
§7. Notice of Registration or Refusal of Registration
§8. Information Required in Valuation Report
III. Registration of Asset Transfer
§9. Submission of Application for Registration of Asset Transfer and Information Required Therein
§10. Documents Attached to Registration Statement of Transfer
§11. Confirmation of Evidential Documents
§12. Exceptions to Confirmation of Evidential Documents
IV. Issuance of Asset-Backed Securities
§13. [Deleted]
§14. [Deleted]
§15. Mutatis Mutandis Provisions
V. Management of Securitized Assets
§16. Entrustment of Asset Management
§16-2. Qualifications for Asset Management Professionals
§17. Management of Securitized Assets
§18. Description of Funds Transaction
VI. Supplementary Provisions
§19. Matters to be Declared
§20. Number of Copies of Registration Statement to be Filed and Method Thereof
§21. Incorporation by Reference
§22. Disclosure of Registration Statement, etc.
§23. Investigation and Measures
§23-2. Mutatis Mutandis Application to Mortgage-Backed Securitization Business
§24. Details of Other Matters
Addenda
Enacted on May 21, 1999
Amended on August 6, 1999
Amended on April 28, 2000
Amended on June 23, 2000
Amended on December 19, 2000, FSC 2000-127
Amended on January 3, 2003, FSC 2002-83
CHAPTER I.
GENERAL PROVISIONS
§1. Purpose
The purpose of this Regulation is to prescribe matters to be decided by the Financial Supervisory Commission (hereinafter, "the FSC") and any necessary matters related to the enforcement thereof with respect to the asset securitization by financial institutions under the Act on Asset Securitization (hereinafter, "the Act"), the Enforcement Decree thereof (hereinafter, "the Decree"), Mortgage Securitization Company Act and the Enforcement Decree thereof. <Amended August 6, 1999, April 28, 2000>
§2. Originator Recognition Standards
(1) "Firms with good credit and whose assets are recognized by the FSC as in need of securitization in accordance with the standards predetermined by the FSC, prescribed under Article 2 subparagraph 2 item p of the Act corresponds to any of the following corporations. However, in the event a foreign corporation meets the standards under subparagraph 2, a domestic corporation (referring to a Korean subsidiary) established by such foreign corporation shall be deemed to have met the standard of subparagraph 2: <Amended May 21, 1999, April 28, 2000, June 23, 2000>
1.A corporation registered with the FSC pursuant to Article 3 of the Securities and Exchange Act, and rated as investment-grade (referring to the ratings given to the non-guaranteed bonds issued thereby if there is no corporate credit rating) by a Credit Rating Agency within one year from the filing date of the registration statement of the asset securitization plan;
2.A KSE listed or KSDA registered corporation (excluding those whose stocks are designated as administrative issues by the KSE or those whose stocks are designated as issues demanding investment attention or administrative issues by the KSDA). However, in the case of a foreign corporation, it shall be a corporation meeting the corresponding standards in its home country.
3.A corporation chiefly engaged in the construction, operation and management of public roads, inter-city railways and tracks which are Social Overhead Capital(SOC), among those waived for registration with the FSC pursuant to the proviso of Article 3 of the Securities and Exchange Act, and rated as investment-grade(referring to the ratings given to the non-guaranteed bonds issued thereby if there is no corporate credit rating) by a credit rating agency within 1 year from the filing date of registration statement of the asset securitization plan. <Added January 3, 2003>
(2) A credit rating agency under paragraph (1) subparagraphs 1 and 3 means a credit rating agency stipulated under Article 37 paragraph (6) of the Regulation on Securities Issuance and Disclosure. <Amended January 3, 2003>
CHAPTER II.
REGISTRATION OF ASSET SECURITIZATION PLAN
§3. Submission of Registration Statement of Asset Securitization Plan
In the event a special purpose company (hereinafter, "SPC") intends to register asset securitization plan (hereinafter, "ASP") with the FSC pursuant to Article 3 of the Act, it shall submit the following documents to the Governor of FSS (hereinafter, "the Governor"):
1.In case of registering the ASP, a registration statement of the ASP (hereinafter, "Registration Statement");
2.In case of changing the registered ASP, a changed registration statement on the ASP (hereinafter, "Changed Registration Statement").
§4. Information Required in Registration Statement
(1) The following information shall be included in the registration statement:
1.Information on the registrant
a. Outlines of the registrant;
b. Officers;
c. Matters concerning the entrustment of business affairs;
d. Accounting method.
2.Information on the Originator
a. Outlines of the Originator;
b. Business Contents;
c. Financial matters;
d. Officers and employees.
3.Information on Securitized Assets
a. Details of securitized assets by type;
b. Results of appraisal of securitized assets;
c. Method and detailed plan for the transfer of securitized assets.
4.Information on the ASP
a. Detailed structure of the ASP;
b.Plans on issuance and redemption of asset-backed securities (hereinafter, "ABS");
c. Servicer (asset management company) and methods of asset management;
d. Plans on borrowing and use of funds.
5.Other matters required for the protection of investors.
(2) Information on the securitized assets to be included in the registration statement shall be based on the following method:
1.To classify the securitized assets into the assets that preclusion prescribed under Article 8 of the Act applies and the other assets, and to describe them separately by type of assets;
2.To describe the securitized assets so as to identify and classify each asset individually in accordance with their unique characteristics or contents.
(3) The format of registration statement and the instruction for preparing the statement thereof shall be stipulated by the Governor.
§5. Documents Attached to Registration Statement
(1) The following documents (in an unavoidable case, their copies) shall be attached to the registration statement:
1.The certificate of corporation registration and the articles of incorporation of the SPC, or the documents equivalent thereto (in the case of a trust company, including the trust agreement concerned);
2.A contract on asset management entrustment;
3.A contract on business entrustment;
4.A valuation report (on the securitized assets) prepared by an independent valuation agency (referring to independent valuation agency prescribed under Article 36-13 of the Enforcement Regulation of the Securities and Exchange Act; hereinafter as such);
5.Auditor's audit report on the Originator for the last fiscal year (referring to the audit report pursuant to the Act on External Audit of Corporations; in the case of an Originator to which such act is not applicable, the report equivalent to such audit report, prepared under a law prescribing the matters related to accounting method and account settlement of such Originator).
(2) The valuation report under paragraph (1) subparagraph 4 shall be required only when a SPC issues ABS by public offering (referring to the public offering prescribed under Article 2 paragraph (3) of the Securities and Exchange Act; hereinafter as such).
§6. Information Required in Changed Registration Statement
(1) The following information shall be included in the Changed Registration Statement:
1.Matters on the registration statement to be changed;
2.Reason for applying for change in registration;
3.Contents before and after changing;
4.Independent valuation agency's opinion on the result of the change (excluded when the contents of change are not related to the contents of appraisal prepared by such independent valuation agency);
5.Other matters required for investor protection.
(2) The documents certifying the relevant facts (in an unavoidable case, their copies) shall be attached to the changed registration statement.
(3) The form of Changed Registration Statement and preparation method thereof shall be determined by the Governor.
§7. Notice of Registration or Refusal of Registration
(1) The FSC shall, when refusing to accept registration statement or changed registration statement, or to demand a change of its contents in accordance with Article 5 of the Act, notify such applicant of the facts, in writing, along with the detailed causes within 15 calendar days from the day of filing such application. However, for the omission of unimportant items or minor errors, the Governor may require appropriate supplementation.
(2) Unless any notice is given pursuant to the provisions under paragraph (1), registration statement or changed registration statement shall be deemed to have been registered as of the filing day.
(3) When a notice of registration refusal or demand for change of contents is given pursuant to the provisions of paragraph (1), the corresponding application shall be deemed not to have been filed as of the day of such notice. However, when the applicant files with the Governor the amended documents reflecting the demand for change of contents, such application shall be deemed to have been filed as of the date amended documents are filed.
§8. Information Required in Valuation Report
(1) The following information shall be included in the valuation report to be prepared by the independent valuation agency under Article 5 paragraph (1) subparagraph 4:
1.Outlines and standards of valuation;
2.Valuation results and the value of securitized assets;
3.Other matters required for investor protection.
(2) An independent valuation agency shall, when conducting the valuation pursuant to the provisions under paragraph (1), consider the matters relevant to ASP, securitized assets and ABS.
(3) An independent valuation agency shall, when it cites the opinion or valuation results made by other experts such as a CPA, a lawyer, or an appraiser with respect to the valuation under paragraph (1), describe the contents and attach a letter of confirmation issued by the expert related.
CHAPTER III.
REGISTRATION OF ASSET TRANSFER
§9.Submission of Application for Registration of Asset Transfer and Information Required Therein
(1) In case the Originator or the SPC wishes to register with the FSC the transfer, trust, or return of securitized assets, or the establishment of a right for pledge or mortgage thereon pursuant to Article 6 of the Act (hereinafter, "transfer"), such Originator or SPC shall submit to the Governor the application to register for the transfer of assets (hereinafter, "registration statement of transfer").
(2) The following information shall be included in the registration statement of transfer:
1.Outlines of Transfers;
2.Details of assets eligible for transfers by type of assets;
3.Method of Transfer:
a. Method, schedule, and details of transfer; and
b. Means of payment
4.Special contents in the contract on transfer:
a. Conditions for cancellation of transfer, transferor's right of first refusal; and
b. Risk taking, warranty liabilities, and others
5.Whether the conditions for perfecting its transfer against debtors have been satisfied;
6.In case there is any asset subject to the application of special provisions in regard to the transfer pursuant to Article 7 or 8 of the Act, the contents of special legal effects;
7.Matters on the disclosure of documentary evidence (referring to the documentary evidence under Article 11 paragraph (1);
8.Other matters required for the investors protection.
(3) The assets eligible for transfer to be included in Registration Statement of Transfer shall be described in the same method as under Article 4 paragraph (2).
(4) Registration Statement of Transfer and instructions for preparation thereof shall be stipulated by the Governor,
§10. Documents Attached to Registration Statement of Transfer
The following documents (in an unavoidable case, their copies) shall be attached to Registration Statement of Transfer:
1.A contract of the transfer of assets; and
2.An electronic file of documentary evidence (referring to evidential documents under Article 11 paragraph (1) for the assets eligible for the transfer to which Article 8 of the Act applies.
§11. Confirmation of Evidential Documents
(1) An Originator or SPC shall, when applying for registration of the transfer of assets, present the original copies of contracts of claims, contracts on establishment of pledge or mortgage and its registration certificate, registration certificate for real estate, and other evidential documents (hereinafter, "documentary evidence") that related to the securitized assets concerned, in order to obtain the confirmation thereon of the Governor.
(2) The Governor shall, after comparing the evidential documents, which are submitted pursuant to the provisions under paragraph (1) with the detailed description of the assets eligible for the transfer by type of assets, return them to the applicant together with the confirmation of registration, if there is no discrepancy between them.
(3) A SPC shall designate a person responsible for administering evidential documents, confirmed by the Governor and a place for keeping them, and when there is a request for perusal from the Governor or investors in the ABS, it shall comply with such request.
§12. Exceptions to Confirmation of Evidential Documents
(1) When an Originator or SPC submits a registration statement of transfer, together with a report on asset inspection results made by an independent valuation agency (hereinafter, "Asset Inspection Report") after its assets eligible for the transfer were inspected by such valuation agency, the Governor may waive the confirmation procedures for the evidential documents pursuant to Article 11 paragraph (1) subparagraph (2). However, these exceptions shall not apply to the assets to which the special provisions prescribed under Article 8 paragraph (2) of the Act apply.
(2) The asset inspection pursuant to the provisions under paragraph (1) by an Independent Valuation Agency shall be conducted in accordance with the following methods:
1.To confirm directly the presence of all assets eligible for transfer by reviewing the related evidential documents thereof;
2.To confirm the presence of measures to secure the claims, including establishment of mortgage or guarantee for all assets eligible for transfer,; and
3.To mark the fact that inspection and transfer had taken place on the confirmed evidential documents.
(3) The following information shall be included in the Asset Inspection Report:
1.Outlines of asset inspection:
a. Participants in asset inspection and period thereof;
b. Method of asset inspection and criteria thereon; and
c. Other matters required in connection with asset inspection.
2.Summary of asset inspection results and conclusive opinion:
a.Contents and characteristics of the assets eligible for inspection by type of assets;
b. Summary of asset inspection results; and
c. Conclusive opinion.
3.Management method of documentary evidence; and
4.In case necessary measures to prove that the transfer have been taken place, the contents thereof.
(4) The form and preparation method of Asset Inspection Report shall be stipulated by the Governor.
CHAPTER IV.
ISSUANCE OF ASSET-BACKED SECURITIES
§13. [Deleted April 28, 2000]
§14. [Deleted December 29, 2000]
§15. Mutatis Mutandis Provisions
When a SPC issues ABS through public offering, the Regulation on Securities Issuance and Disclosure shall apply mutatis mutandis thereto, unless otherwise specified under this Regulation. <Amended on December 22, 2000>
CHAPTER V.
MANAGEMENT OF SECURITIZED ASSETS
§16. Entrustment of Asset Management
When entrusting the management of securitized assets pursuant to Article 10 of the Act or the other business affairs pursuant to Article 23 of the Act, a SPC. shall clearly specify the following matters in detail in the entrustment contact:
1.Contents, scope, and method of entrusted business;
2.Related expenses such as entrustment fee and their payment method;
3.Other matters required for the investor protection.
§16-2. Qualifications for Asset Management Professionals
"A person who has a career in the business categorized by the FSC, such as claims management, securities issuance" prescribed under Article 5 subparagraph 2 item b of the Decree means a person who has had at least three years of experience in any of the following:
1.Management of securitized assets for an originator or for a credit information service company;
2.Credit management, such as credit review or nonperforming asset management pursuant to Article 2 subparagraph 1 of the Act on Structural Improvement of Financial Industry;
3.Disposition of, and exercise of rights of, securitized assets for law firms, etc.;
4.Underwriting business of securities companies;
5.Credit rating business for ABS by a credit ratings agency;
6.On-site appraisal and valuation of securitized assets by independent valuation agency; or
7.Entrustment of asset management by a person who receives entrustment from a special purpose company under an asset management entrustment agreement, pursuant to Article 23 of the Act. [Enacted on April 28, 2000]
§17. Management of Securitized Assets
(1) The separate management of securitized assets, prescribed under Article 11 paragraph (1) of the Act, refers to the management method to physically separate the securitized assets from its own assets and to keep the evidential documents separately; while the separate management of money refers to the management method to establish a separate account.
(2) The separate preparation and keeping of books, prescribed under Article 11 paragraph (2) of the Act, refer to the keeping of a separate management log book (books and records) for securitized assets in case the related business is processed by a computer system, refers to making it possible to separate the trust assets from its own assets.
(3) The provisions under paragraph (1) shall apply to the cases where an entrusted person (referring to the person to whom business matters are entrusted by a SPC. pursuant to Article 23 of the Act) performs the entrusted duties.
§18. Description of Funds Transaction
A SPC shall, when it intends to conduct transactions, such as investment, lending of money (including deposit or depositary trust), capital borrowing, payment guarantee, or provision of collateral with an Originator, asset management company or entrusted person, describe the detailed contents in Registration Statement in advance.
CHAPTER VI.
SUPPLEMENTARY PROVISIONS
§19. Matters to be Declared
A SPC shall, in any of the following cases, immediately declare such fact to the Governor: <Amended on December 22, 2000>
1.When there occurs a cause for dissolution of the SPC;
2.When an Originator, asset management company, or entrusted person becomes unable to conduct normal operation due to bankruptcy or occurrence of dishonor;
3.When there is any change in, or termination of, asset management contract, entrustment contract or other important contract, or the compliance of conditions of contract becomes impossible;
4.When the fulfillment of contract, with regard to the transfer of securitized assets, becomes impossible or there occurs any critical matter which causes difficulty in exercising the rights such as litigation;
5.When there occurs any serious problem related to the issuance, redemption, or distribution of ABS.
§20. Number of Copies of Registration Statement to be Filed and Method Thereof
(1) A SPC or Originator shall, when it files Registration Statement, Changed Registration Statement, Registration Statement of Transfer and other documents for declaration, prepare two copies of each application and file them in document form to the Governor. These provisions shall also apply to the documents attached thereto. However, it may file only one copy in the case of the electronic file pursuant to Article 10 subparagraph 2. <Amended on December 22, 2000>
(2) Notwithstanding the provisions under paragraph (1), any application and other declarations may be filed through electronic filing by use of electronic disclosure system pursuant to the Regulation on Securities Issuance and Disclosure (hereinafter, "Electronic Disclosure System"). [Enacted on December 22, 2000]
(3) For one set from the two sets of documents filed in document form pursuant to the provisions under paragraph (1), the Governor shall take necessary measures, to prevent its contents from being replaced or amended, and deliver the set of documents to the applicant together with the confirmation of registration. <Amended on December 22, 2000>
(4) In case any application and other declarations pursuant to the provisions under paragraph (1) are filed in the form of document, they shall be also filed through the Electronic Disclosure System in the form of electronic document for public view. <Amended on December 22, 2000>
§21. Incorporation by Reference
(1) In case any information or attachments to be included in an application or declaration documents to be filed by a SPC or Originator are same as those in the previously filed application and declaration documents or attachments, relevant parts may be omitted by referencing such parts. However, this provision shall not apply to the cases of Article 9 paragraph (2) subparagraph 2 and Article 10 subparagraph 2.
(2) When referencing previously filed application and declaration documents or attachments pursuant to the provisions under paragraph (1), the following subparagraphs shall be clearly stated :
1.Parts to be referenced (title of documents or page number);
2.Title and filing date of the application referenced;
3.Location where the documents of subparagraph 2 are kept and the direction for use, etc.
§22. Disclosure of Registration Statement, etc.
(1) The Governor shall allow general public to view the application or other declaration documents filed by a SPC or an Originator pursuant to the Act or this Regulation, during the period from the receipt date to the closing date of the ASP.
(2) The Governor may formulate standard formats, direction for preparation, and filing procedure of electronic documents in order to allow the public to view any application and other declarations through the information network (referring to the computer network pursuant to the Act on Popularization of Computer Network and Promotion of Utilization), upon receiving the electronic file thereof prepared by use of electronic media. <Amended on December 22, 2000>
(3) A trust company, management company, entrusted person, etc. shall, when disclosing the documents related to the securitized assets pursuant to Article 9 paragraph (2) of the Act, disclose the following documents:
1.The Registration Statement, Changed Registration Statement, and Registration Statement of Transfer confirmed by the Governor;
2.Details and present status of securitized assets (including the details if there is any change in the securitized assets due to administration, operation, and disposition of such assets); and
3.Documentary Evidence for the securitized assets (limited to the person with responsibility to maintain related documents prescribed under Article 11 paragraph (3)).
(4) The documents to be disclosed pursuant to the provisions under paragraph (3) shall be kept at the head office and each branch of a trust company, asset management company, or an entrusted person. However, the branches may provide the summary of the assets eligible for transfers, while clearly stating the place to use the detailed contents and evidential documents.
§23. Investigation and Measures
(1) The Governor may, when it is deemed necessary for the investor protection, order his/her staff to investigate SPC.
(2) In case the Governor requests a SPC to submit data or conducts investigation, the Regulation on Investigation of Securities and Futures shall apply mutatis mutandis to the method of, and procedures for, such investigation.
(3) The Governor shall, when it is deemed necessary to take measures pursuant to Article 35 of the Act following an investigation, prepare a report on the investigation results and proposals for settlement to submit to the FSC.
§23-2.Mutatis Mutandis Application to Mortgage-Backed Securitization Business
Articles 3 to 12, Articles 15 and 16, Articles 18 to 22, and Article 24 shall mutatis mutandis apply to the business relating to the securitization of Residential Mortgage Loans to be performed by the Mortgage Securitization Company, such as procedures for registration of Mortgage- Securitization-Plan and the transfer and acquisition, etc. of Residential Mortgage Loans, the management of Residential mortgage loans, the issuance of ABS, and so on. In this case, "SPC," shall be construed as "Mortgage Securitization Company" and "Asset-Securitization-Plan" shall be construed as "Mortgage-Securitization-Plan," and "Securitization Assets" shall be construed as "Residential Mortgage Loans", and "Originator" shall be construed as "Financial Institution". [Enacted on August 6, 1999]
§24. Details of other Matters
Details of other matters required for the implementation of this Regulation shall be stipulated by the Governor.
Addenda
(November 13, 1998)
§1. Effective Date
This Regulation shall be effective on November 14, 1998.
§2. Interim Measures on FSS
Until the establishment of the FSS, the Governor shall be deemed the governor of the Securities Supervisory Board. However, in the event of the performance of the investigation under Article 23, the Governor shall be presumed the governor of the Banking Supervisory Authority, the Securities Supervisory Board, the Insurance Supervisory Board and the Non-bank Supervisory Authority, which supervises its assets owner thereof, otherwise it means the governor of Securities Supervisory Board.
Addendum
(May 21, 1999)
This Regulation shall be effective on May 24, 1999.
Addendum
(August 6, 1999)
This Regulation shall be effective on August 7, 1999.
Addendum
(June 23, 2000)
This Regulation shall be effective on June 24, 2000.
Addendum
(December 22, 2000)
This Regulation shall be effective on the date of promulgation.
Addendum
(January 3, 2003)
This Regulation shall be effective on the date of promulgation.