​​Establishment of Mutual Funds​

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2. Methods in applying for approval of establishment of mutual fund

(1) Applying for normal approval 

The mutual fund management company shall submit an application for approval of the establishment of a mutual fund together with all required documents via the SEC website. The required documents are details of the mutual fund scheme, a draft of prospectus, a draft of commitment and a draft of contract on the appointment of fund supervisor. The SEC will notify the results within 90 days after receiving the application and a complete set of the required documents.​

​(2) Applying for automatic approval

The mutual fund management company shall submit an application for approval of the establishment of mutual fund together with all required documents via the SEC website . Applying for automatic approval is allowed only in the case that the mutual fund to be established fully complies with all conditions as follows:

​​​​1. In the case that the mutual fund has the policy to invest in assets that are exposed to foreign exchange rate risk, the foreign exchange rate exposure must be fully hedged;

2. In the case that the mutual fund has the policy for distribution of return payment, the return payment must be straight forward and easy to understand;

3. The investment policy shall not be specified with the features of a feeder fund under the Notification on Investment;

4. The mutual fund shall not have the policy to invest in derivatives or structured notes, except investment for the purpose of risk hedging;

​​5. There shall not be any classification of the investment units;

6.​ The mutual fund shall not require an approval or waiver from the SEC.

The mutual fund that provide beneficial interest for investors in the form of a life or healthcare insurance and the money market fund with constant NAV are prohibited from applying for automatic approval. 

However, if a mutual fund management company files an application for automatic approval not in compliance with the specified conditions, the SEC may proceed with one or more of the following actions:

1. ​​Suspend a filing of a new application for normal or automatic approval for a maximum period of not over one year;

2. Prohibit the mutual fund management company from the initial public offering for sale of the investment units of the mutual fund that has been approved;

3. ​Disclose the case to the general public.​

Also, the directors and executives of the mutual fund management company may be subject to action under the  SEC notification regarding the qualifications and prohibited characteristics. In exercising the discretion to giving such instructions, the SEC takes into consideration conducts of the mutual fund management company, impact on the investors and remedial action beneficial to the investors.