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Korean J Financ Stud > Volume 50(2); 2021 > Article
Korean Journal of Financial Studies 2021;50(2):171-200.
DOI: https://doi.org/10.26845/KJFS.2021.04.50.2.171    Published online April 29, 2021.
Problems of Private Equity Placements in South Korea and Suggestions for Amendable Measures
Jae Hyun Gwon
Assistant Professor, Incheon National University
국내 사모펀드 투자권유 및 판매의 문제점과 개혁방안
권재현
인천대학교 교수
Correspondence:  Jae Hyun Gwon, Tel: +82-32-835-8722, Fax: +82-32-835-0784, 
Email: gwon@inu.ac.kr
Received: 31 October 2020   • Revised: 5 March 2021   • Accepted: 9 March 2021
Abstract
In the context of the protection of individual investors of private investment funds in South Korea, this study examines the current regulation of private placements from legal and economic perspectives. It compares Rule 506 of Regulation D in the United States with the similar regulation of South Korea. The most distinguishing feature of South Korea’s regulation is that any individual who can evidence a certain investment amount, regardless of accreditation or sophistication, is eligible to participate in private equity funds, which has recently resulted in “incomplete sales” problems in Korea. To conform to the definition of private equity, it is best to abolish the threshold criteria of minimum investment amount. Otherwise, the “sales” of private equity via commercial banks and central institutions for financial stability must at least be banned so that individual investors do not confuse private placement with public offering. In return, public advertisement can be permitted for private equity funds with only accredited investors and sophisticated investors. Public fund investment in private equities are de facto private equities; they are inappropriate for individuals, who may be confused with private funds and public funds. As such, they need to be limited.
Key Words: Private Placement, Private Equity Regulation, Accredited Investor, Sophisticated Investor, Rule 506
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