FSC vice chairman signs up for second public growth fund on launch day

Sales of the second Public Participation Growth Fund kicked off Wednesday, with Financial Services Commission Vice Chairman Kwon Dae-young personally subscribing to the fund and inspecting the sales floor. Kwon urged selling institutions to fully explain the product's characteristics — including the risk of principal loss and redemption restrictions — to prevent mis-selling.

Kwon visited the NH NongHyup Bank branch at Government Complex Seoul, one of the fund's authorized sales outlets, where he went through the actual subscription process himself — completing an investor profile assessment, reviewing the prospectus and terms and conditions — before signing the enrollment documents. He also checked for any inconveniences or procedural difficulties that consumers might encounter during the sign-up process.

"The Public Participation Growth Fund will serve as a meaningful investment opportunity for the public to share in the fruits of growth in future strategic industries, and as a foundation for mutual benefit by channeling the capital that high-tech strategic companies need to grow," Kwon said. He added that the fund, which targets raising 600 billion won ($442 million) annually for five years starting this year, was first launched in May and sold roughly 87 percent of its offering on the first day alone — prompting an earlier-than-planned launch of the second tranche given strong public demand.

The second Public Participation Growth Fund has a total offering of 600 billion won and will be on sale from Wednesday through Oct. 15 — 10 business days in total. Sales will close early if the full allotment is sold out. The fund is available through 10 banks and 14 securities firms.

The second round expands the share reserved for low-income investors. During the first five business days — Wednesday through Oct. 7 — 300 billion won, or 50 percent of the total offering, will be set aside for low-income subscribers. The move reflects the first fund's outcome, in which low-income investors accounted for about 35 percent of sales, exceeding the 20 percent target. Subscribers to the first fund are not eligible to participate in the second.

The subscription process has also been simplified. Income verification documents that applicants previously had to submit in person can now be confirmed by financial institutions through public MyData services. However, applicants subscribing in person at some securities firm branches will still need to submit the relevant documents directly.

Tax benefits include an income deduction of up to 40 percent on the amount invested, and dividend income is subject to a separate flat tax of 9.9 percent — including local taxes — for up to five years.

Investors should note, however, that the Public Participation Growth Fund is a high-risk product with no guarantee of principal. It is a closed-end fund with a five-year maturity, designed to be held to term. Even after the fund is listed on an exchange following its establishment, liquidity may be low and shares could trade below the fund's net asset value.

"Just as a great tree grows from a small seedling, we will do our utmost to nurture the seeds planted by the public today so they grow into Korea's future industries and the fruits of that growth return to the people," Kwon said.

Meanwhile, the Financial Services Commission recently announced plans to overhaul the management framework for dormant financial assets. Under the new system, banks, securities firms, insurers, savings banks and mutual finance institutions will be required to publicly disclose each year the amount of dormant assets they have returned to customers, the remaining balance, and the scale of long-inactive assets — along with self-set refund targets and management indicators. Dormant financial assets stood at around 1.5 trillion won at the end of last year, having fluctuated between roughly 1.4 trillion won and 1.6 trillion won for years without any significant decline.