Stock Trading in Korea as a Foreigner Made Easy

Korea is one of the fastest-growing countries in the world. The country is also experiencing a cultural boom due to how quickly Korean music, movies, food, and fashion are expanding to other parts of the world. All this opens up a large number of business potentials and opportunities that you can start looking up today. Due to a stable economy, and quick rates of development, you can undoubtedly say that trading in Korean stocks is a great financial decision. Stock Trading in some of the leading Korean companies is a great way to diversify your portfolio and connect with the fast economy of South Korea.

Trading Korean Stocks as a Foreign Investor

Despite the appeal that the Korean stock market has for international investors and traders, there are many obstacles that they face. Such investors end up investing in small companies due to the obstacles they face while aiming for the big fish.

But is it still possible to invest in the North Korean stock market? Absolutely!

Let us take a look at a few steps and points to consider before you set out to invest in South Korea.

1. Decide the Source of Funds

You need to first choose the source of funds while investing in the Korean stock market. Research the banks in your country that can act as the local custodian bank.

A local custodian bank is a bank or any financial institution in your own country that carries the responsibility of providing securities services. They also hold your securities in order to safe-keep them from misuse or theft. Such institutions offer services on money transfer and security.

If you are based in the U.S, Citigroup, Bank of New York Mellon, State Street Bank, etc. are popular custodian banks.

2. Choose a Local Agent

A local agent is needed if you are looking to invest in South Korea. The agent can be a foreign exchange bank, a foreign custodian, a broker, or an investment business institution.

The local agent is responsible for verifying your existence as a foreign investor. This can be done by contacting you through the details of contact provided on the FIRA.

It is also the responsibility of the local agent to ensure that the documents of identity like passport.

The local agent’s duties and responsibilities also include ensuring that no important information is missed out in the FIRA or that no fake information is included.

3. Submit a FIRA form

If you are a foreigner who wants to invest in Korea, you need to complete and submit a FIRA to get the IRC (Investment Registration Certificate).

FIRA stands for Foreign Investment Registration Application. This is the first step in registering with the FSS or Financial Supervisory Service.

One can only file the Foreign Investment Registration Application in the name of the accounting entity.

If you are a Korean national who has incorporated your business in a foreign jurisdiction under foreign law, then your business will be seen as a foreign entity. Therefore, you would have to register with the FSS.

FIRA: Registration Process

  • The FIRA form and the required documents that help with identity verification are needed for the process. You can read about the required documents listed in “Guide to Investing in Korea” for more information on the same.

A foreign investor cannot involve anybody other than the appointed local agent to perform the act.

  • The FIRA can also be registered electronically by the agent, and all the documents sent this way should be notarized.

The agent should submit the form and the documents to the FSS through FINES or the Financial Information Exchange System.

  • The local agent must also verify that all the documents submitted through FINES are true copies of the original.
  • After submitting the FIRA and the documents, you will receive the IRC electronically as well. The IRC is issued with a unique identification number and all the records of registration are maintained.

FIRA may be waived if you as an investor wish to dispose of the shares that have been bought through rights associated with overseas securities.

It can also be waived if you are equal to a local investor, or if you are looking to buy or sell shares through direct investment.

Your application for FIRA will be rejected if you possess no recognized nationality. Or if you’ve presented any misinformation knowingly in your documents.

You can also get rejected if your previous IRC has been revoked, and the time (2 years) from the revocation has not ended yet.

4. Open a Trading Account

The IRC that you’ve obtained will assist you in opening a trading account, which is the next step. This is done through a securities company registered with KRX.

You should open separate trading accounts for different security types. The account should be opened in your own name (name of the registrant) at any authorized financial institution.

As mentioned, each trading account must be opened for a specific type of securities only. If your stock IRC number is different from your bond IRC number, you can only use the former to open a stock trading account. It is the same for any type of security.

For example, if you invest in bonds using your stock IRC number, then it will be credited to another foreign investor with the same IRC number for bonds.

Parting Words

Educate yourself by going through the rules and reporting requirements before you start trading in South Korea as a foreigner. There are numerous other guides available on the internet that offer detailed information on investing in the country.

Make sure to confirm what you read so that you can have a safe trading experience in the land of morning calm!

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