Korea to allow foreign investors to trade domestic stocks through overseas brokerages

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Foreign investors will soon be able to directly invest in Korean stocks through overseas brokerage firms, as financial authorities here plan to ease requirements for opening omnibus accounts, officials said Wednesday.

The omnibus account system, introduced in 2017, allows multiple foreign investors to trade through a single account. However, it has proved largely ineffective due to its intricate and rigid account opening requirements.

Previously, foreign investors could only open an omnibus account through either an affiliate of a domestic financial investment firm or a foreign brokerage where a domestic firm was the majority shareholder.

Under the latest regulatory overhaul, the government plans to extend this permission to overseas securities companies, enhancing foreign capital’s access to the Korean stock market, improving the market accessibility.

To that end, the Financial Services Commission (FSC), the country’s top financial regulator, approved a new service proposed by Hana Securities as an innovative financial service earlier in the day, granting it special regulatory exemption status. This financial regulatory sandbox allows nonresident foreign investors to trade Korean stocks through omnibus accounts opened with a local securities company in Hong Kong.

For its part, the Financial Supervisory Service (FSS), the financial watchdog, plans to establish implementation guidelines. It will evaluate overall operations through a pilot program, make necessary improvements and promptly institutionalize the system by amending relevant regulations.

The system is expected to be expanded to most brokerage firms as early as the first half of this year.

"The regulatory enhancement reflects feedback from both foreign investment firms and domestic securities companies across the financial investment industry,” an FSS official stated. “It will improve access to Korean stocks for nonresident foreign investors, helping to advance into the capital market by broadening investor participation and drawing in new capital.”