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Article 13
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Unless a securities firm has obtained special-case approval for its special needs, or is concurrently operated by a financial institution and subject to other relevant acts or regulations, its total debts to other parties shall not be more than 6 times its net worth. The total amount of its current liabilities shall not exceed the total amount of its current assets; provided that, unless otherwise provided by the FSC, the total amount of debts to other parties of a securities firm trading securities for customers' accounts or for its own account shall not exceed its net worth.
In calculating the total amount of liabilities referred to in the preceding paragraph, the liabilities arising from trading of government bonds may be deducted.
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Article 14
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A securities firm, unless concurrently operated by a financial institution and subject to other relevant acts or regulations, shall, if it has already issued securities pursuant to the Act, set aside a 20 percent special reserve from the annual after-tax profit pursuant to Article 41 of the Act. However, if the accumulated amount reaches the paid-in capital amount, no further fund needs to be set aside.
If it has not issued securities pursuant to the Act, it shall set aside a 20 percent special reserve from the annual after-tax profit. However, if the accumulated amount reaches the paid-in capital amount, no further fund needs to be set aside.
The FSC may increase or decrease the percentages under the preceding two paragraphs based on business needs.
The special reserve referred to in the preceding three paragraphs shall not be used for purposes other than covering the losses of the company or, when the accumulated special reserve reaches 25 percent of the amount of paid-in capital, the portion in excess of 25 percent of paid-in capital may be used for capitalization; provided, that this rule shall not apply if the FSC has provided otherwise.
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Article 16
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A securities firm, unless it is concurrently operated by a financial institution and subject to other relevant laws or regulations, may not purchase real property for non-operating purposes. However, this restriction shall not apply to a securities firm that holds real property for non-operating purposes as a result of a merger, acquisition, branch unit closure, change in or reduction of places of business, or as a result of conducting business, or as approved by the FSC. The sum of the total amount of property and equipment used for operating purposes and the total amount of real property used for non-operating purposes of a securities firm shall not be more than 60 percent of its total assets.
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Article 18
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Unless a securities firm has obtained approval from the FSC or is concurrently operated by a financial institution and subject to other relevant acts or regulations, its funds not required for business operation shall not be loaned to other persons or used for other purposes; the funds shall be used for the following purposes only:
- Bank deposits;
- Purchase of government bonds or financial bonds;
- Purchase of treasury bills, transferable certificates of deposit, or commercial papers;
- Purchase of securities in a specific ratio in compliance with FSC provisions; and
- Other purposes approved by the FSC.
When funds are utilized under subparagraphs 4 and 5 of the preceding paragraph, the total original acquisition cost shall not exceed 30 percent of the securities firm's net worth.
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Article 18-1
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When a securities firm makes equity investment in any securities, futures, financial, or other enterprises, the total amount of its equity investments in those enterprises may not exceed 40 percent of the securities firm’s net worth, and shall comply with Article 13 of the Company Act. The FSC shall separately prescribe the scope of individual enterprises within which a securities firm may make equity investment and related provisions.
When a securities firm merges with or acquires a financial institution, if approval is obtained from the FSC, the total amount of the investment therein may be exempted from the restriction in the preceding paragraph. In that event, the amount in excess shall be brought into compliance with the restriction within 6 months after the merger or acquisition.
A securities firm that operates only securities brokerage business, when holding shares in any single company, may do so either by the method in paragraph 1, subparagraph 4 of the preceding article, or by the equity investment method in paragraph 1 herein, but not by both methods.
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Article 19
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A securities firm trading securities for its own account, unless it is concurrently operated by a financial institution and subject to other relevant acts or regulations, shall do so in accordance with the following rules:
- The firm shall not hold more than 10 percent of the total issued shares of any domestic company. The total amount of the cost of the securities issued by any domestic company held by such securities firm shall not be more than 20 percent of the securities firm's net worth.
- The firm shall not hold more than 5 percent of the total issued shares of any foreign company. The total amount of the cost of the securities issued by any foreign company held by the securities firm shall not be more than 20 percent of the securities firm's net worth; however, the total amount of the cost of such securities with equity characteristics shall not be more than 10 percent of the securities firm's net worth.
- The total amount of the investment cost of a securities firm in holdings of equity securities issued by a single related party may not exceed 5 percent of the firm's net worth. The total amount of the investment cost of a securities firm in holdings of equity securities issued by all related parties may not exceed 10 percent of the firm's net worth. However, these restrictions are exempted in the handling of exercise and hedging operations for call (put) warrants, exchange traded notes, and over-the-counter derivative financial product trading business, and in the hedging of beneficial certificates of exchange traded funds and the underlying baskets of stock represented by such beneficial certificates.
- The total amount of the investment cost of a securities firm in holdings of straight corporate bonds issued by a single securities firm may not exceed 5 percent of the securities firm's net worth. The total amount of the investment cost of a securities firm in holdings of straight corporate bonds issued by all securities firms may not exceed 10 percent of the securities firm's net worth.
The term "related party" in these Regulations is defined as determined in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Firms.
A securities firm, when holding shares in any single company, may do so either by the method of a proprietary trading position or by the equity investment method in paragraph 1 of the preceding article, but not by both methods.
If the aggregate of the securities acquired by a securities firm for underwriting purposes, counted in combination with those acquired under the preceding paragraph, exceeds the limit prescribed by the FSC, the portion in excess shall be sold within 1 year after its acquisition in accordance with Article 75 of the Act.
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