증권담보화의 현행법상 제약 및 활성화 방안 연구

The Korean Government intends to support Korean hedge funds to grow in order to develop Korea’s financial sector. Prime brokers request to allow for greater rehypothecation of securities provided by hedge funds as collateral under Korean laws. In theory, rehypothecation of collateral is available by (i) repo(sale and repurchase agreement), (ii) fiduciary transfer of title for security purposes (“YangDoDamBo” in Korean) and (iii) lending for consumption(“SoBiDaeCha” in Korean) under current Korean law. In the case of lending for consumption, ownership of the property being lent － in most cases money － is transferred to the borrower, and in return, the borrower gives that lender property of the same type, quality and quantity, which could function as quasi-collateral. Nonetheless, pledge is not suitable for the rehypothecation that includes disposal of collateral. A pledgee may re-pledge the collateral, but a pledgee is not entitled to dispose of such collateral. In case of repo and lending for consumption, the ownership of collateral is transferred to the purchaser or the borrower, and thus the purchaser and the borrower may rehypothecate collateral. Note in particular, however, that under such a set-up, if a borrower (or a repo purchaser), who commingles and rehypothecates the lender’s assets, later becomes bankrupt, the lender might not be able to get back their assets from the bankrupt borrower as the lender lacks ownership of these assets. In the case of fiduciary transfer of title for security purposes(“YangDoDamBo”), according to court precedents, interpreting it as fiduciary transfer of title, a secured creditor may rehypothecate collateral. According to the interpretation of Korean bankruptcy law and the court cases, a security provider has the right to get back the collateral from a bankrupt secured creditor. However, once the secured creditor has disposed of the collateral, in fact, the security provider might not be able to get back the collateral from a third party that purchased said collateral from the secured creditor without knowledge. At the moment, the intermediated securities holding system of Korea does not have a system to differentiate between fiduciary transfer of title for security purposes and outright transfer. A system to distinguish fiduciary transfer of title for security purposes from outright transfer is needed. Also, there are several financial regulations that hamper rehypothecation by way of fiduciary transfer of title for security purposes(“YangDoDamBo”) in Korea. First, anyone who pays interest on bonds to a foreign corporation, or who purchases (excluding repo and lending) bonds subject to withholding tax from any foreign corporation before the foreign corporation is paid the interest on bonds, is required to pay the withholding tax in proportion to the holding period of such bonds. Income tax on interest accrued is imposed upon the owner of the bonds. There is, however, special legislation that exempts repo and lending for consumption from applying this rule. According to this exception, the repo seller and the lender (as opposed to repo buyer and the borrower) may pay taxes on the interest. Still, in the case of fiduciary transfer of title, the secured creditor is required to pay the income tax on interest accrued. Second, a foreigner or a foreign corporation(“Foreign Entity”) is prohibited from trading listed securities outside the securities exchange market. A Foreign Entity intending to trade listed securities must thus trade said securities through the securities exchange markets. However, there are exceptions for repo and lending for consumption, but not for fiduciary transfer of title. Thus, for repo and lending for consumption, a Foreign Entity may trade listed securities outside the securities exchange market. It is suggested that these exceptions for repo and lending for consumption should be also applied to “YangDoDamBo” in order to facilitate rehypothecation in Korea.