The Globalization of the Korean Capital Markets Discussion paper for the workshop at Stanford University

Euni Valentine

The Globalization of the Korean Capital Markets Discussion paper for the workshop at Stanford University

Euni Valentine

THE WALTER H. SHORENSTEIN ASIA-PACIFIC RESEARCH CENTER (Shorenstein APARC) is a unique Stanford University institution focused on the interdisciplinary study of contemporary Asia. Shorenstein APARC’s mission is to produce and publish outstanding interdisciplinary, Asia-Pacific–focused research; educate students, scholars, and corporate and governmental affiliates; promote constructive interaction to influence U.S. policy toward the Asia-Pacific; and guide Asian nations on key issues of societal transition, development, U.S.-Asia relations, and regional cooperation. The Walter H. Shorenstein Asia-Pacific Research Center Freeman Spogli Institute for International Studies Stanford University Encina Hall Stanford, CA 94305-6055 tel. 650-723-9741 fax 650-723-6530 http://aparc.stanford.edu

The Globalization of the Korean Capital Markets and other discussion and working papers may be downloaded from the Shorenstein APARC website. Copyright © 2013 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. January 2013

Contents Acknowledgements....................................................................... vii Participants................................................................................... ix Background and Outline................................................................. 1 Discussion Summary....................................................................... 3 Appendix: Workshop Agenda....................................................... 17

Acknowledgments This discussion paper is the result of a workshop on the globalization of the South Korean capital markets, jointly hosted by Stanford University’s Korean Studies Program (KSP) and the Korea Capital Market Institute (KCMI), at Stanford University on April 20, 2012. For generous financial support, KCMI and KSP express appreciation to the Koret Foundation.

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Participants Gi-Wook Shin Gi-Wook Shin is the director of the Walter H. Shorenstein Asia-Pacific Research Center; the Tong Yang, Korea Foundation, and Korea Stanford Alumni Chair of Korean Studies; the founding director of the Korean Studies Program; a senior fellow of the Freeman Spogli Institute for International Studies; and a professor of sociology, all at Stanford University. As a historical-comparative and political sociologist, Shin’s research has concentrated on areas of social movements, nationalism, development, and international relations. He is the author/editor of numerous books and articles. His books include Beyond North Korea: Future Challenges to South Korea’s Security (2011); U.S.-DPRK Educational Exchanges: Assessment and Future Strategy (2011); History Textbooks and the Wars in Asia: Divided Memories (2011); South Korean Social Movements: From Democracy to Civil Society (2011); One Alliance, Two Lenses: U.S.-Korea Relations in a New Era (2010); First Drafts of Korea: The U.S. Media and Perceptions of the Last Cold War Frontier (2009); Cross Currents: Regionalism and Nationalism in Northeast Asia (2007); Rethinking Historical Injustice and Reconciliation in Northeast Asia (2006); Ethnic Nationalism in Korea: Genealogy, Politics, and Legacy (2006); North Korea: 2005 and Beyond (2006); Contentious Kwangju (2004); Colonial Modernity in Korea (1999); and Peasant Protest and Social Change in Colonial Korea (1996). Shin received his BA from Yonsei University in Korea and MA and PhD from the University of Washington.

Sung Hoon Cho Sung Hoon Cho joined Korea Capital Market Institute (KCMI) in 2001 as a research fellow and has been serving as vice president of KCMI since May 2008. His research interests include investment banking, corporate finance, and corporate governance. He has published research reports and policy recommendations including “Conflicts of Interest in Securities Industry,”

“Governance of the Fund Management of Korea’s National Pension,” and “An Analysis of Disparity between Ownership and Control in Korean Business Groups (Choebols).” Before joining KCMI, Cho worked at Korea Telecom for ten years and participated in designing the privatization scheme of Korea Telecom. Cho received a BA from Seoul National University and PhD in business administration from Ohio State University

Young-Man Hong Young-Man Hong is currently Commissioner of the Financial Services Commission (FSC), where he has held various positions since 2005. Prior to FSC, he was deputy director of National Policy at the Secretary Office of the President. Hong received a BA in political science and diplomacy from Yonsei University, an MA in public administration from Seoul National University, and a PhD in economics from the University of Washington.

John Kim John Kim is the co-country head of Goldman Sachs Korea and head of Investment Banking Korea. He is also co-chair of the Korea Operating Committee. In these roles he has responsibility for firm-wide leadership of Goldman Sachs in Korea. Kim joined Goldman Sachs in 2000 as an executive director in Corporate Finance based in Seoul. In 2003, he moved to Hong Kong Corporate Finance. He returned to Korea to assume his current role and was named managing director in 2005. Kim started his career at Merrill Lynch in New York and Hong Kong. He then moved to Salomon Smith Barney in Korea and to Credit Suisse First Boston in Hong Kong and Seoul. Kim earned a BA from Amherst College in 1989 and an MBA from the Amos Tuck School of Business, Dartmouth, in 1994.

Yu Cheol Seong Yu Cheol Seong has been working for the Tong Yang Group for over 20 years, covering the business areas of equity brokerage, fixed income sales, trading of Brady Bonds and U.S. Treasuries, structuring of financial products, and venture capital, through his career at Tong Yang Securities headquarters Seoul, Tong Yang Securities Hong Kong, Tong Yang Fixed Income Hong Kong, Tong Yang Venture Capital, Tong Yang Life Insurance, and Tong Yang Securities New York office.

Bosung Shin Bosung Shin is a Senior Research Fellow at the Korea Capital Market Institute (KCMI). His main research area is banking and his publications include academic papers on various issues on financial structure and industrial growth, conflicts of interest in financial conglomerates, banking crises, and credit availability.   He has participated in various government-run committees and task forces to overhaul financial market regulations. Before joining KCMI in 2003, he worked at Korea Long-Term Credit Bank and Shinhan Bank. Shin received his PhD in finance from Yonsei University in Korea.

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Darrell Duffie Darrell Duffie is the Dean Witter Distinguished Professor of Finance at Stanford’s Graduate School of Business, where he has been a member of the finance faculty since receiving his PhD from Stanford in 1984. Duffie is the author of, among other books,  Dynamic Asset Pricing Theory (Princeton University Press, third edition 2001) and a co-author of The Squam Lake Report: Fixing the Financial System  (Princeton University Press, 2010). His recent research focuses on asset pricing, credit risk, fixed-income securities, and over-the-counter markets. Duffie is a fellow and member of the Council of the Econometric Society, a research associate of the National Bureau of Economic Research, a member of the Financial Advisory Roundtable of the New York Federal Reserve Bank, and a fellow of the American Academy of Arts and Sciences. He was the president of the American Finance Association in 2009.

Jay H. Eum Jay H. Eum is a co-founder and Managing Director of TransLink Capital. He is responsible for TransLink’s investments in Carbonite (NASDAQ: CARB), ChartBoost, Enterprise DB, Livescribe, SoundHound, and YuMe as well as supporting TransLink’s portfolio companies with their customers and partners primarily in Korea. Most recently, Eum was the head of Samsung Ventures America. He was responsible for starting up the U.S. operations for Samsung Venture Investment Corp., the venture investment arm of Samsung, and leading their U.S.-based investments and portfolio management. Under his leadership, Samsung Ventures America grew to a team of five investment professionals and invested over US$80M in 27 U.S.-based start-up companies. He directly led several successful Samsung Ventures’ investments including AnalogTech (NASDAQ: AATI), Athena Semiconductor (acquired by Broadcom), Continuous Computing (acquired by RadiSys), DivX (NASDAQ: DIVX), InPhi (NASDAQ: IPHI), Intellon (NASDAQ: ITLN), MontaVista (acquired by Cavium), Pure Digital (acquired by Cisco), Sandbridge (acquired by Qualcomm), SiBeam (acquired by Silicon Image), Techwell (NASDAQ: TWLL) and Teknovus (acquired by Broadcom). He also led investments in GCT Semiconductor and Intematix. Prior to joining Samsung, Eum was an investment officer with the Silicon Valley office of Vertex Management, a global VC firm headquartered in Singapore. At Vertex, he focused on investments in communications, mobile, and Internet including GRIC Communications (NASDAQ: GRIC). He also represented Vertex at several portfolio companies including PayPal (acquired by eBay), Mobile 365 (acquired by Sybase), Aicent, and R2 Technology. Before Vertex, Eum was Senior Director of business development at Dialpad Communications (acquired by Yahoo), where he closed strategic partnerships with Microsoft, Cisco, and Earthlink. Eum also worked as an Associate at McKinsey in Palo Alto, New York, Beijing, and Seoul and at Goldman Sachs in Hong Kong. Eum received his MBA from Stanford University and an MS in Biochemistry and a BS in Chemistry from Seoul National University.

Michael Keyoung Dr. Michael Keyoung has more than 15 years of healthcare and life sciences experience through his role as scientist, surgeon, consultant, and investor. At Burrill & Company, Keyoung is Managing Director and Head of Pan-Asia. Keyoung is General Partner of

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Burrill’s U.S. and Asia venture funds, portfolio manager of Burrill’s U.S., European and Asian public portfolio companies, and leads Pan-Asia transaction business. His previous investments include Pharmasset (acquired by Gilead for $11B), Ferrokin (acquired by Shire), Third Wave (acquired by Hologic) and Corcept (NASDAQ:CORT). Keyoung has served on the Board of Directors at New York County Medical Society and Board of Overseers at the Cornell University-Weill Medical College in New York, and currently serves on the boards of private biopharma companies and organizations in the U.S. and in Asia, including SK Biopharmaceuticals (spinoff from SK holdings). Keyoung is currently on UCSF Medical School’s faculty at Clinical and Translational Science Institute and at T1 Translational Catalyst Program. Previously, Dr. Keyoung was a co-founder of a life sciences healthcare investment partnership in New York. He also served as an advisor and consultant to leading life sciences venture capital firms, medical devices, pharma, and biotechnology companies. His previous clients include, Eli Lilly, Bausch & Lomb, UCB Pharma, Samsung Electronics and Hanmi Pharmaceuticals. Dr. Keyoung was a Howard Hughes Medical Institute fellow and received his clinical surgical training at the University of California, San Francisco and biomedical fellowship at Memorial Sloan Kettering Institute and Rockefeller University in New York. He performed preclinical drug discovery research for Aventis (now Sanofi-Aventis) and Merck while at Cornell, and participated in cutting-edge translational clinical trials at leading academic centers. As a National Institute of Health-Medical Scientist Training Program scholarship recipient, he received both his Medical Doctorate and Doctor of Philosophy degrees in Neuroscience and Neurology from Cornell University Weill Medical College and Memorial Sloan Kettering Cancer Center. He has over 35 articles, book chapters, and presentations in publications such as Nature Biotechnology and Nature Medicine.

Taek-Geun Kwon Taek-Geun Kwon is the founder and Managing Member of Toro Investment Partners, LP (Toro), a hedge fund management company formed in June 2011 in partnership with the Fisher family of San Francisco and Kathryn Hall, the founder and CEO of Hall Capital Partners, LLC. Taek also serves as an advisor to TPG Capital (TPG), a global private equity firm where he was a Managing Director of TPG Growth, the firm’s middle market and growth equity platform, as well as a firm-wide advisor focused on the technology and media sectors, prior to founding Toro. Before joining TPG in 2005, Kwon spent over ten years in various entrepreneurial and executive roles at leading technology and media companies. He was a founding executive of CommerceBid (an enterprise software company sold to Commerce One) and a founding Vice President of Hotwire (an online travel agency sold to Interactive Corp./Expedia), served as divisional Executive Vice President of Interactive Corp., and led the turnaround and restructuring of Friendster as CEO. Kwon received a BS in Mechanical Engineering from Cornell University, where he was a member of the National Engineering Honor Society, a member of the varsity lightweight football and wrestling teams, and runner-up in the World DJ Championships.

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Bhang Gil Choi Bhang Gil Choi is President & CEO of Shinhan BNP Paribas Asset Management Company (SH AMC), Ltd. He is also one of the senior member of the Group Executive Committee of Shinhan Financial Group. For the first ten years of his career, Choi performed equity investment operations at the Korea Stock Exchange and Shinhan Bank’s Finance Department. As general manager of the chairman’s office, he managed non-bank depository institutions including the Shinhan Group’s securities, life insurance, capital, leasing, and merchant banking business units. After the Asian currency crisis, Choi solidified the basic framework for Shinhan Financial Group’s strategy of “universalization first, enlargement later.” During his tenure as managing director at the holding company, SHG took on its current corporate governance structure of twelve subsidiaries. As head of the merger committee, Choi took charge of the acquisition of Goodmorning Securities and its merger with Shinhan Securities. He also initiated the listing of SHG’s stocks on the New York Stock Exchange. Choi planned and materialized the acquisition of Chohung Bank, and then served as Senior Executive Vice President at Chohung for two years to successfully oversee the integration process. As SH AMC’s Senior Executive Vice President, Choi oversaw alternative investments, planning and personnel management.

Heung Sik Choe Heung Sik Choe was recently named president of Hana Financial Group, one of the largest financial groups in Korea, and also serves concurrently as president of the Hana Institute of Finance. Before joining the Hana Financial Group, he was a professor at the School of Business, Yonsei University, and president of the Korea Institute of Finance, one of the most recognized research institutes covering financial policy in Korea. Early in his career, he worked at the Hyundai Research Institute and the Korea Institute of Public Finance. In 1997, Choe was appointed as a specialist member of the Presidential Commission for Financial Reform, and in 1998, during the financial restructuring in the aftermath of the Asian financial crisis, he was a standing counselor to the Chairman of the Financial Supervisory Commission. He has also served as a member of the Presidential Commission on Policy Planning and the National Economic Advisory Council for the President, and from 2007 to 2009, as a nonstanding director of the Korea Deposit Insurance Corporation. Choe earned his bachelor’s degree from Yonsei University and PhD (Doctorat d’Etat) from Université Paris Dauphine.

Warren Park Warren Park is a Senior Researcher/Economist on the Financial Industry Team of the Hana Institute of Finance, where he focuses his research primarily in the areas of asset management and banking. He is also the editor-in-chief of Hana Insight, an English-language quarterly that covers Korea’s financial services industry, financial markets and other related topics. Prior to his current role, he worked for several years as a Senior Manager on the Product Strategy and Structured Funds Teams of Heungkuk Asset Management, where he focused mainly on developing overseas funds for Korean investors. Prior to that role, in 2007 and the first half of 2008, he served briefly as a Senior Economist on the Hana Institute of Finance’s

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Financial Markets Team, where he covered many of the events leading up to the global financial crisis. Warren received his BA in religious studies from Brown University in 1993 and his MS in Finance from the University of Illinois, Urbana-Champaign in 2006.

Yong-Rin Park Yong-Rin Park is head of the Policies and Regulations Department at Korea Capital Market Institute (KCMI) and his main research interest is in venture capital, private equity, and small and medium enterprises (SME) financing. He joined KCMI in mid-2009. He is currently serving on various advisory committees in areas ranging from venture capital to asset management. Before receiving his PhD in Management with finance concentration from University of California, Irvine, Kim worked in the investment banking division of ING Barings, and was also with Monitor Company as a management consultant.

Hwa-Jin Kim Hwa-Jin Kim is a professor of law and business at Seoul National University School of Law and William W. Cook Global Law Professor at University of Michigan Law School, where he teaches Investment Banking and International Corporate Governance. Kim served as vice dean for international affairs of his school and as editor-in-chief of the Journal of Korean Law. He has also taught at the law schools of Stanford and Tel Aviv University. Before joining academia in 2006, Kim practiced corporate and securities law in Korea and Switzerland, where he advised and worked for or with global investment banking houses in their international mergers and acquisitions and capital market transactions. Kim has advised the Office of the President of Korea, Korea Financial Supervisory Service, and Ministry of Justice of Korea. He is a board member of the Korea Association for Chief Financial Officers, Korean Financial Investment Association, and STX Corporation, Korea. He won the Book Prize from the Korean National Academy of Arts and Sciences in 2005 and 2010 (in business and law, respectively). His papers have been published by Oxford, Cambridge, Columbia, and Berkeley Universities. A member of the New York Bar, Kim received his BS in mathematics from Seoul National University; Dr Jur, magna cum laude, from Ludwig Maximilian University of Munich, where he was an Adenauer Scholar; and his LLM from Harvard Law School.

Michael Wishart Michael Wishart retired from Goldman, Sachs & Co. in June 2011, after three decades covering the technology industry as an investment banker. Wishart graduated magna cum laude from St. Lawrence University in 1978 with a B.S. degree with honors in Mathematics. He was an Arjay Miller Scholar at and received his M.B.A. from the Graduate School of Business at Stanford University in 1982. Wishart worked at Smith Barney, Harris Upham & Co. in the Investment Banking Division from 1978 to 1980 and from 1982 to 1991. He joined Lehman Brothers in 1991 as a Managing Director. He subsequently organized Lehman’s Global Technology Group, which he led until joining Goldman Sachs as a Managing Director in 1999. Wishart was elected a

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Partner of the Firm in 2000. He was Chairman of Goldman’s Global Technology Group and retired as an Advisory Director. Wishart is Vice Chairman of the Board of Trustees at Sacred Heart Schools, Atherton, where he also chairs the Investment Committee.

Euni Valentine Euni Valentine spent fifteen years in investment banking, where her positions included Managing Director, Head of European Technology and Global Head of Semiconductors at UBS Warburg. Her responsibilities included client coverage, business plan development, and transaction execution. She also spent ten years at Lehman Brothers in both New York (Mergers & Acquisitions) and London (European Head of Technology). Prior to her investment banking career, Valentine was a lawyer and worked as U.S. legal counsel to Shin & Kim in Seoul, Korea and as an associate attorney in the tax department at Coudert Brothers in New York. Valentine graduated from Stanford University and Columbia Law School.

Andrew J. Malik Andrew Malik was named Chairman of Needham & Company in 2008. Prior to Needham, he spent twenty-one years at Lehman Brothers, where he was a partner and subsequently managing director. During his time at Lehman, Malik’s duties included serving as head of Technology Capital Markets and head of the Banking Development Group. Prior to Lehman Brothers, he ran Capital Markets and Institutional Sales for C.E. Unterberg, Towbin (which became L.F. Rothschild, Unterberg, Towbin) from 1971 to 1987. Earlier in his career, Malik was a security analyst with Josephthal & Co. and a partner in charge of Institutional Sales with Muriel Siebert & Co. A well respected Wall Street veteran, he has worked on more than one thousand equity, debt, and M&A transactions. In addition, he has served on the Board of Directors of several technology companies and venture firms, including a number of years as chairman of the Audit Committee of Hummingbird, Inc. Malik also lectures extensively on college campuses on a variety of topics related to corporate finance.

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Background The Shorenstein Asia-Pacific Research Center of Stanford University (APARC) and the Korea Capital Market Institute (KCMI) jointly hosted a workshop, “Globalization of the Korean Capital Markets,” at Stanford University on April 20, 2012. In the context of a globalizing world economy in which financial systems and capital markets are increasingly interdependent and interwoven, the Republic of Korea (hereafter Korea) is becoming a prominent and important force in the global economic arena. As the twelfth largest economy and a member of the Organisation for Economic Co-operation and Development (OECD) and the G20, Korea is among the key countries that play a role in helping to shape and influence the direction of world economic policy and development. Despite its global economic standing, however, Korea’s financial system is still immature and unsophisticated in many areas, lagging behind its economic status. According to a World Bank survey, Korea’s financial system is ranked twenty-sixth in the world, and is often criticized as cumbersome and lacking transparency. In order for Korea to continue its economic growth and achieve the Korean government’s stated goal of becoming a regional financial center, it is clear that its capital markets need to be modernized. The APARCKCMI workshop was organized to bring together senior representatives from the financial services industry, academic institutes, and regulatory bodies to identify and discuss issues facing Korea’s capital markets. The objective of the workshop was to conclude with a list of recommendations that could be presented to the Korean government to address the issues that were identified as hindering development of the Korean capital markets.

Workshop Outline The workshop opened with a presentation from the Financial Services Commission (FSC), the Korean regulatory body, providing a broad framework within which particular aspects of the capital markets could be discussed. The FSC acknowledged in its paper* that Korea’s financial investment industry and capital markets are significantly underdeveloped compared to the real economy and that regulatory and policy incentives must be provided to enhance stability, facilitate capital allocation, and promote industry development. Greater financial stability cannot be achieved without efficiently functioning, deep and broad capital markets. Unfortunately, as set forth in the FSC’s presentation, Korea’s capital markets currently are dominated by individual investors (institutional investors represented only 20.7 percent of all investors in Korea in 2009, versus 84.4 percent in the United States) and short-term trades (only 16.4 percent of total trades in 2009 were for shares that were held for more than one year). Both of these characteristics lead to high levels of volatility in the stock markets. Furthermore, with a domestic investment banking industry that is fragmented and far from competitive based on international standards, and an immature asset management industry, it has become imperative for the Korean government to more aggressively pursue policies and regulations that will promote investment, growth, and industry consolidation if it is to achieve its stated goal of a stable, globally competitive, and efficiently functioning financial services industry. Following the FSC’s presentation, there were three market segments that were represented at the workshop and analyzed during the morning and afternoon discussion sessions: • The investment banking industry • The asset management industry • The private equity/venture capital industry The role of Korea’s stock exchange and the role of corporate governance as important aspects in the development of the capital markets were also discussed during the afternoon session. During the lunch break, Professor Darrell Duffie of Stanford University’s Graduate School of Business presented his paper, entitled “Replumbing our Financial System: Uneven Progress.” In his presentation, Professor Duffie discussed the changes in the “pipes and valves” of the financial systems following the financial crisis of 2007–2009 and raised areas where financial stability still remain a concern. The paper will be published in the January 2013 edition of the International Journal of Central Banking. The workshop concluded with a dinner discussion about the advantages of operating a niche investment bank such Needham & Company, which focuses on mid-market companies in selected industries. Needham & Company was represented by its chairman, Andrew Malik. * Complete files of workshop presentations are available at http://ksp.stanford.edu/events/globalization_of_the_korean_capital_markets/.

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Discussion Summary The Investment Banking Industry The FSC’s presentation clearly set forth in its opening remarks that investment banking was a “strategic industry” and that strong investment banks were a policy and regulatory priority for the Korean government. The FSC’s policy is to support private sector initiatives that will further the development of one or more domestic financial groups that can achieve global leadership positions, as the Samsung Group has achieved in the electronics industry. Yet, the investment banking industry in Korea remains highly fragmented and underdeveloped, with the capital markets playing an important but as yet limited role compared with the capital markets in developed countries such as the United States and the United Kingdom. As seen in Figure 1 below from Tong Yang Securities’ presentation “Perspectives from a Korean Investment Bank,” Korean investment banks are still very small in size on an absolute as well as relative basis, with low levels of leverage and virtually no global capabilities. 78.4

Goldman Sachs Morgan Stanley Korean Investment Bank #1

57.2

Korean Investment Bank #2

18.2x 15.5x 2.8

5.2x

2.7

Capital (in trillions won)

4.2x

Leverage Ratio

Figure 1  Capital Base and Leverage Ratios of Global vs. Korean Investment Banks, FY 2010 Source: Presentation by Tong Yang Securities, “Globalization of the Korean Capital Markets” workshop, Stanford University, April 20, 2012.

In order to promote the growth and globalization of the Korean investment banking industry, the Korean government must address the following issues in the near-term: • Need for consolidation among Korean investment banks; • Need for differentiation among Korean investment banks; • Need for a regulatory environment that facilitates the growth and financial commitment of global (foreign) investment banks in Korea; • Need to modify the regulatory balance that is currently too restrictive toward investment banks in Korea and hinders their ability to expand and become competitive internationally.

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Industry Consolidation. Consolidation among Korean investment banks is a critical step to improving the overall quality and profitability of Korean investment banks. In the highly fragmented current landscape, investment banks are typically small and frequently unprofitable parts of large conglomerates that seem to be willing to subsidize the investment banking business with little or no incentive to exit or expand it. As set forward below in Figures 2 and 3, the number of investment banks in Korea since the credit crisis of 2008 has grown from forty in 2008 to fifty-one in 2011, rather than declined as a result of bankruptcy or consolidation, with the top three securities companies representing only 23.8 percent combined market share.

Domestic

Foreign

60

59

16

15

13

44

44

2002

2003

57

61 54

54

54 21

12

14

14

44

42

40

40

40

2004

2005

2006

2007

2008

63

62

61

15

13

47

48

51

2009

2010

2011

12

Figure 2  Number of Domestic and Foreign Securities Companies in Korea, 2002–2011 Source: Financial Supervisory Service and company filings.

Samsung 8.8% Daewoo 8.7%

Top 3 market share: 23.8%

Korea I&S 6.3% Other 51.1%

Hyundai 6.1% Woori 6.1% Mirae Asset 4.7%

Daishin 3.8%

Tong Yang 4.4%

Figure 3  Market Share by Net Revenue of Securities Companies in Korea (FY ending March 31, 2011) Source: Financial Supervisory Service and company filings.

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As a result, the market for traditional investment banking services is extremely competitive and mostly unprofitable, with the principal source of revenue coming from simple brokerage activities. In order for a globally competitive Korean investment bank to emerge, a parent company that is truly committed to transforming its investment banking business into a globally competitive operation must acquire several investment banking competitors as well as build up internal capabilities through organic growth and investment. The cultural challenges of operating a globally-competitive investment bank will make this a difficult task for the Korean conglomerates that currently own the principal Korean investment banks. The operating environment of a global investment bank such as Goldman Sachs is highly specialized and stands in stark contrast to the operating environment of companies in most other industries. Yet, Korean investment banks need to address these issues and recruit senior management and professionals who have expertise and experience in global investment banking in order to transform their domestic operations. The capital commitment that will be necessary for a parent company to consolidate the investment banking industry and build up its investment banking operations will be significant. Returns to shareholders will require a long-term horizon and will not be without meaningful risk. The Korean government and the FSC should facilitate this move toward consolidation through tax and regulatory incentives that can provide the impetus for selected financial groups to make the necessary long-term investment and promote industry consolidation. For example, since there are limited synergies between investment banking and non-financial industries (no global investment bank is currently imbedded in a non-financial institution), a tax incentive such as a credit for any losses incurred upon disposition of an investment banking subsidiary could be offered to conglomerates that are not financial services companies. Similarly, financial services companies could be motivated to pursue consolidation if, for example, they were given investment credits (i.e., the ability to deduct part of the investment costs against their tax liability) for acquisition of other investment banking businesses. From a regulatory perspective, simplified licensing or approval procedures for investment banks with larger capital bases (such as the FSC’s recent proposal to revise the Financial Services and Capital Markets Act [FSCMA] to only allow investment banks with equity capital in excess of 3 trillion won to be issued hedge fund licenses) would also promote industry consolidation. Market Segmentation and Competitive Differentiation. Related to this urgent need for industry consolidation is the need for differentiation among investment banks as a means to improving profitability and establishing market identities. The U.S. investment banking industry is characterized by (i) a handful of global players (some of which are owned by non-U.S. banks) with worldwide capabilities, (ii) a number of mid-market firms that are strategically focused on mid-market companies and typically do not compete with the global firms, and (iii) numerous niche firms that specialize in particular product areas such as mergers & acquisitions (M&A) or credit markets or industry sectors such as media, natural resources/energy, or healthcare. While competition is still strong within each of the market segments, this kind of market differentiation provides both the global firms as well as the smaller firms with the ability to operate profitably and manage competition.

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In contrast, as Goldman Sachs presented in their discussion, the more than fifty Korean investment banks compete in the same marketplace for the same mandates without meaningful service differentiation. As a result, mandates are often won purely based on price, with fees frequently rebated back to the client. This creates an environment in which client loyalty, which results from providing value-added advice and services, is low. According to KCMI’s presentation, “Importance of Strong Investment Banks,” only 25.8 percent of clients used the same investment bank after the first transaction in Korea versus 70.0 percent in the United States. In Korea, there are no niche firms that focus on the mid-market or specialize in specific areas such as M&A or industry sectors. In addition, Korean investment banks not only compete among themselves but also, for many of the more lucrative global mandates, against global investment banks that have much stronger capabilities and are much better capitalized. The lack of consolidation and the absence of any meaningful initiatives by investment banks to improve profitability by establishing a market niche seem to be largely attributable to inertia and the absence of any effective incentives, rather than any particular strategic determination on the part of the parent conglomerates. Given the relatively small size of the investment banking business within the parent conglomerates, there is little incentive either to grow the business by investing additional capital or to be seen to withdraw from the investment banking business by selling the business unit or reshaping the business toward a specialty market niche. As discussed above, by providing tax, regulatory, and other financial incentives to promote industry consolidation, the Korean government can help create a competitive environment in which differentiated players emerge to address specific market needs. Global Investment Banks in Korea. A third area of important development for the capital markets is the role of global investment banks in Korea. Currently, there are about a dozen non-Korean investment banks (down from twenty-one in 2008) operating in Korea. Global investment banks play an important role in Korea by bringing leading edge financial technology, know-how, skill sets, and global operating capabilities into Korea. With the liberalization of the regulatory environment and the growth of the Korean economy creating corporate giants as well as individual wealth, global investment banks such as Goldman Sachs have grown their capabilities in Korea in the last ten years from representative offices with limited corporate finance operations to full service investment banking firms that include research, asset management and, most recently, over-the counter (OTC) derivatives trading. Global investment banks bring significant benefits to the Korean investment banking industry as well as to the domestic capital markets. In addition to the transfer of state-ofthe-art investment banking know-how that results from global investment banks operating in Korea, corporations as well as consumers ultimately benefit from the availability of global products and heightened competition, which leads to lower fees and improved capital markets efficiency. It is generally acknowledged that industries that have had to compete on a global basis have better corporate operating standards (such as Samsung Group) than companies that have competed only in domestically-protected markets (such as banking). As a result, continued investment by global investment banks in Korea will be

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critical to ensuring the long-term development of the Korean investment banking industry as well as the Korean capital markets, to the benefit of Korean consumers, corporations, and investors. The integration of global investment banks with local market players through market liberalization has a number of policy and regulatory implications. In order to achieve the Korean government’s objective of building a globally competitive investment banking industry and transforming Seoul into a regional financial center, the Korean government must encourage an open and competitive market in which non-Korean investment banks are permitted and even encouraged to consolidate the Korean investment banking industry, and it must avoid the natural tendency to protect domestic investment banks. The Korean investment banking industry should be fully liberalized and Korean investment banks should not be protected from being absorbed into global or foreign investment banks. Instead, the Korean government should adopt a policy that encourages global investment banks to increase their investment in Korea and thereby put increasing competitive and financial pressure on the fragmented Korean investment banking industry to help trigger domestic consolidation. This will also eventually lead to the emergence of niche market players to complement the role of the global investment banks. The UK experience provides an example of successful industry transformation after the investment banking market was liberalized in the 1980s. Despite the initial absorption of all of the major stand-alone UK investment banks by foreign financial firms in the 1980s–1990s, not only has London remained the financial center of Europe but Barclays of the UK is now emerging as a significant player in the global investment banking business, having made substantial investments into their investment banking business over time. Domestic capital markets will become more efficient, and Korean corporations and consumers ultimately will be better served, by encouraging and providing incentives to global investment banks to expand into the Korean market through the acquisition of Korean investment banks, as well as through continued investment into their Korean operations. Some specific regulatory recommendations that would encourage further investment in Korea by global investment banks include: • Simplification of the licensing scheme that currently permits application of certain types of licenses at particular times only and requires separate licenses for each type of product; • Permitting the sharing of customer transaction data among affiliates within global investment banks to enable improved operating efficiency and reduce operating costs; • Enabling the elimination of duplicate fixed operating costs by permitting core functions (such as risk management and compliance) to be conducted within the global investment bank without limitation on whether such functions are delegated to an affiliate. Reassessment of Regulatory Balance and Role. Since the global credit crisis of 2008, the trend in both the United States and globally has been toward re-regulation aimed at increasing consumer protection. With the passage of the Dodd Frank Act and the Basel III capital

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requirements, global investment banks have been required to lower their overall leverage. In contrast, Korean investment banks, which were subject to high capital requirements and had relatively low leverage compared to the global investment banks prior to the 2008 crisis, did not experience any bankruptcies or bail-outs as was the case in the United States in late 2008 and early 2009. While this was a positive development for Korean consumers in that they did not suffer the investment losses that many U.S. consumers suffered during the credit crisis, it raises the question of whether the regulatory balance in Korea is too restrictive toward the investment banking industry. The most obvious regulation that prevents Korean investment banks from operating on a competitive basis with global investment banks is the higher capital ratios required in Korea. As can be seen in Figures 4 and 5 below, the current capital ratios of total asset/ equity fall into the 10-13x range for U.S. investment banks, while the capital ratios of Korean investment banks tend to be in the 5-7x range. Furthermore, Korean investment banks are subject to a net operating capital ratio (NOCR) requirement of at least 150 percent and are required to have less than 400 percent leverage in the hedge fund business. As Goldman Sachs pointed out in their discussion, both of these requirements are significantly more restrictive than the capital requirements for global investment banks and make it challenging for a globally competitive industry to develop in Korea. 800 700 500

618

578

7.4

537 4.7

400

470 6.3

499

5.6

5.0

4.6

425

6 4

300 200

2

100 0

8 Ratio (%)

Ratio (%)

600

10

KIH

Samsung

Hyundai

Kiwoom

Net Operating Capital Ratio

Daewoo

Woori

0

Total Asset/Equity

Figure 4  Capital Ratios of Domestic Securities, FY 2011 Source: FISIS, CapIQ.

Because of these higher capital requirements, Korean investment banks have generated lower returns on equity than their U.S. and global counterparts and have not expanded their business models, which rely heavily on simple brokerage and unprofitable agency businesses. Thus, while there undoubtedly has been less risk, the high capital requirements have also served as a barrier to expansion and have made industry consolidation much more challenging. In order to achieve its stated objective of nurturing a strong and globally competitive investment banking industry, the Korean government must permit Korean investment banks to operate with capital ratios more in line with U.S. and global standards. This will

8

14

12 Ratio (%)

14

12.9x 10.7x

11.3x

10.8x

12

10

10

8

8

6

6

4

4

2

2

0

Goldman Sachs

Morgan Stanley

Merrill Lynch

Nomura

0

United States Japan

Figure 5  Capital Ratios of Foreign Investments Banks, FY 2011 Source: FISIS, CapIQ.

enable investment banks to grow their invested capital base and pursue more lucrative businesses, which in turn will attract additional capital and lead to industry expansion and ultimately facilitate consolidation. In addition to imposing less conservative capital requirements, the regulatory environment should be simplified as it is viewed as overly and unnecessarily restrictive, making it even more burdensome for investment banks to expand and grow their business. Areas where simplification of the regulatory process by the FSC and/or the Ministry of Strategy and Finance, as applicable, would enhance greater market efficiency include: • Granting of advance approval for foreign exchange (FX) issuances so that market opportunities can be capitalized on more efficiently than under the current system; • Automation of the approval process for issuance of foreign currency debt so that the government does not have any discretionary role in the approval process; • Overall, changing the regulatory approach to a negative system which permits all actions unless specifically identified as not permitted, rather than the current approach which assumes that actions are not permitted unless specifically identified as permissible. Most of these types of regulatory changes would have little impact on the level of protection for retail investors but would be beneficial to investment banks’ ability to streamline costs and thereby improve the efficiency and profitability of their operations.

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The Asset Management Industry Another important aspect of the development of the capital markets is the asset management industry. A well-developed and functioning asset management industry promotes efficiency in capital markets by providing domestic retail investors, who have limited access to the capital markets, with a broad range of investment options, offering institutional investors access to global investment products, and enabling international investors to access Korean investment products. As set forth in the Shinhan BNP Paribas presentation “Perspectives from the Mutual Fund Manager,” the Korean asset management industry is characterized by: • Relatively low percentage of Korean households holding investment securities compared to the United States (54 percent of GDP in Korea versus 165 percent in the United States); • Growth of assets under management (AUM) being driven by institutional investors with significant outflow in retail AUM since 2007 (retail AUM down from 42 percent of total AUM in 2007 to 23 percent in 2011); • 52 percent of investments in fixed income and money market funds and only 26 percent in equity products; • High fragmentation, with over 8,687 funds managing US$266 billion of assets (average AUM of $31 million) compared to 7,581 funds managing US$11,821 billion of assets in the United States (average AUM of $1.559 billion); • High concentration, with the top ten asset management firms controlling 63 percent of total AUM and only five firms generating operating income of over US$40 million in 2010. 1,559

USD (millions)

1500

1000 553

500 269

208

401 360

301 201

175

158

31

355 87

Figure 6  Average assets under management (AUM), 12/31/2010 Source: Presentation by Shinhan BNP Paribas Asset Management Co., Ltd. [ICI]

10

Global

Spain

Italy

Switzerland

Korea

Germany

China

Canada

Japan

United Kingdom

Brazil

Ireland

France

Luxembourg

United States

0

388

350

Due to the high fragmentation and low profitability of the industry, asset management companies have had limited success in globalizing their businesses. While local products have been made available to local investors, the global products that have been developed for local investors since 2007, when a capital gains tax exemption for overseas equities served as a catalyst for a major expansion into overseas funds, have largely produced losses. The development of Korean products for foreign institutional investors has experienced some growth given the strong performance of the Korean stock markets but penetration into the foreign retail investor base is just commencing. Finally, Korean asset management companies have yet to expand meaningfully into global markets, with limited capabilities to develop and sell global products to global customers. Thus, the Korean asset management industry is still in its nascent stages, with significant opportunities to improve efficiency, grow further domestically, and expand operations globally. In this respect, areas where regulatory reform and policy changes could significantly help improve the growth and development of the industry include: • Reversal of the FSC’s current policy of refusing to accept applications for fund distribution licenses from asset management companies; • Removal of the requirement for affiliate asset management companies to set up their own middle office functions rather than sharing their parent companies’ capabilities; • Introduction of various tax incentives to promote holding domestic securities for more than one year and to encourage investments in socially desirable investment vehicles, such as tuition funds and retirement pension funds. Current industry structure. While the current regulatory policy preventing asset management companies from sales and distribution of their products was introduced to protect retail investors, the practical outcome has not in fact worked in consumers’ favor. According to survey results covering more than 94 percent of fund sales, salespeople at the banks and securities companies that are now the distribution channels for retail investors are inevitably biased and recommend products with higher distribution fees or from affiliated management companies, rather than products that are best suited for their retail investor clients. In addition, the salespeople themselves are poorly trained with limited understanding of the products that they are selling and not fully informed of the investment horizons and risk appetites of their clients. Hence, many retail investors suffered significant losses from the push into overseas (predominantly emerging markets) investments in 2007, lacking proper advice on the risks and volatility associated with such investments. In order for retail investors to be better advised and protected, the current regulatory policy separating sales and distribution from product development needs to be reversed and new distribution channels need to be established. The FSC’s role should be limited to implementing existing regulations that currently permit asset management companies to distribute their products to retail investors. Thus, asset management firms should be allowed to apply for and be issued licenses to distribute the products that they have developed. A regulatory regime for independent financial advisors (IFA) with fiduciary duties and investor suitability tests should be introduced so that the salespeople, whether

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within asset management firms or banks and securities companies, are fully trained and knowledgeable about all products and rewarded for client loyalty, not just compensated through commission sales. Not only would this kind of structure reduce asset management firms’ operating and distribution inefficiencies but it would also ensure that retail investors are advised by qualified IFAs who have the necessary training and skill sets to identify and recommend appropriate products according to the profile of the retail investor. Particularly as products become more sophisticated and global products are developed, the quality of the sales force and an incentive system that ensures that the sales force remains productneutral are increasingly important for retail investors’ protection. The industry structure in the United States, where IFAs are rewarded for client loyalty, rather than compensated through commissions on products sold, provides a better regulatory regime for ensuring that clients are sold products that meet their investment objectives and suit their financial capacity. Industry consolidation among asset management companies is also necessary, reducing the number of companies from the current eighty-four firms to a more manageable group that can operate more efficiently and expand more effectively. In this respect, creating a regulatory environment that enhances the profitability of asset management companies and encourages industry consolidation is a critical step to developing a globally-competitive industry in which investors are well served and well protected. Independent middle office function requirement. As discussed above with respect to the investment banking industry, duplication of middle and back office functions creates operating inefficiencies, the cost of which ultimately gets passed on to retail and institutional customers. Allowing asset managers to share middle office functions (risk, compliance, and operations) among affiliates does not in itself result in any harm to investors and instead can encourage the establishment of specialized asset management companies, which would improve transparency and investment capabilities. Tax incentives. An important and effective tool for shaping investor behavior is tax incentives. Currently, there is no incentive for investors to hold domestic securities for the longterm (longer than one year) and insufficient policy support for encouraging investment in retirement pension funds and tuition funds. One possibility would be to introduce a nominal short-term capital gains tax to create a more stable investment environment that benefits both retail and institutional investors. Furthermore, expanding the demand base for funds through the creation of specific tax-driven funds would enable the asset management industry to create specialized investment vehicles that can help achieve desired policy goals (such as encouraging savings for retirement).

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Private Equity/Venture Capital Industry Through a combination of government-sponsored funds and the development of private sources of equity and debt, the private equity and venture capital industry in Korea has generally made significant progress over the past decade. As presented by KCMI in its paper “Private Equity for Corporate Restructuring and Innovative SME Financing,” Korea ranks third in venture capital investment/GDP, behind Israel and the United States. Private equity funds were introduced under the FSCMA in 2004 to promote corporate restructuring and currently have US$28 billion in limited partnership commitments as of February 2012. In order for the industry to develop further, the following areas must be addressed: • Move away from the high dependence on government-sponsored capital that has limited the development of a self-sustaining venture capital industry; • Develop and encourage exit routes other than listing on KOSDAQ, which has had limited success to date; • Promote the development of a more active angel ecosystem involving entrepreneurs and angel investors through tax breaks, matching funds, and other incentives; • Provide access to international networks, both in terms of skill sets and funding. From a policy perspective, a key question is when the Korean government should start phasing out support. Clearly, there needs to be sufficient private sector capital to take the place of the various sources of government-sponsored financing so that the venture capital industry does not suffer a shortage of funding. Some form of tax or other regulatory incentive is needed to ensure that private sector capital would fill the gap left by the gradual withdrawal of government sponsored capital. Similarly, the low level of M&A as an exit route for both venture capital and private equity could be addressed through policy measures, such as a government-sponsored matching fund to co-invest in acquisitions of venture-funded companies or tax incentives to encourage such acquisitions. The FSC’s announcement earlier this year of creating KONEX, the new stock exchange specifically designed for young and early-stage companies, could provide an additional exit route for early stage and venture capital investors. However, the viability of KONEX as a source of capital for early stage companies as well as an exit route for venture capital and angel investors has yet to be proven. In order to become a successful exchange, KONEX must provide liquidity, maintain transparency, and ensure adequate disclosure without over-burdening fledgling companies that have limited capabilities. Policies to ensure the long-term success of the KONEX will need to be determined given the challenges that the Alternative Investment Market (AIM) faced in the United Kingdom.

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Korea’s Stock Exchanges In order for Korea to become a regional financial center, the Korea Stock Exchange (KRX) needs to develop further into a truly international trading platform. As set forth in Hana Institute of Finance’s presentation on “Enhancing the Competitiveness of Korea’s Securities Exchanges,” recommendations for Korea’s exchange sector include: • Invest in and jointly develop with Asian partners IT systems and trading platforms that provide faster and more sophisticated trading technology; • Continue to export KRX’s trading platform to less-developed Asian countries and establish stock exchanges in such countries (as was done with Vietnam, Cambodia, and Laos); • Revise the FSCMA so that alternative trading systems can be established in Korea; • Encourage the cross-listing of securities by, for example, exempting foreign companies from having to use Korean as their primary language when listing on the KRX, and encourage the trading of a range of new products across Asia; • Offer a variety of services to participants, such as accepting various types of orders from large participants and services aimed at enhancing the speed of order execution; • Revise the FSCMA to enable the introduction of the central counterparty (CCP) for the standardization and centralization of OTC derivatives and their trading platforms, and improve clearing and settlement systems; • Strengthen strategic alliances with the United States and Europe through cross listings, cross trading, and the construction of twenty-four-hour trading systems; • Encourage consolidation within the Asia-Pacific region, initially through strategic alliances and eventually through acquisitions.

Corporate Governance In a country where the top corporate conglomerates (chaebol) are still family-controlled and shareholder activism is as yet largely undeveloped, corporate governance continues to be a key area of policy and regulatory attention. In order for Korea’s capital markets to become internationally competitive, transparency and strong corporate governance are critical for gaining investor confidence. The “Korea Discount,” which refers to the lower valuation of Korean companies relative to their international counterparts, is attributed to the perception of generally poor governance of companies in Korea.

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While extensive research has been conducted in the area of how to improve corporate governance, as presented in Professor Hwa-Jin Kim’s paper, “How to Improve Corporate Governance and Transparency,” legal reforms, expected to become effective in 2013, have been proposed for the governance of financial institutions: • Requirement for independent directors; • Establishment of a risk management committee; • Creation of the role of compliance officer and risk manager; • Strengthening of minority shareholder rights. However, legal reforms in themselves are not sufficient to bring about significant improvements where social culture and crony capitalism issues remain largely unsolved. The rule of law is still viewed as ineffective, whereas political power, money, and relationships are considered key to resolving problems. The recent emergence of hostile takeovers should help encourage shareholder activism, which is a key instrument for keeping management working for the best interest of shareholders. Activist foreign investors bring into Korea international standards of management as well as legal tools for opposing incumbent managers who are not acting in the best interest of shareholders. Combined with continued internationalization of the financial sector, which must increasingly embrace global operating standards, gradual improvements in transparency and disclosure should invariably lead to better corporate governance standards among Korean companies. In this regard, it is critical for the Korean government to provide a benign environment for activist foreign investors to invest in and potentially take over Korean companies without hindering their the ability to generate high returns on their investment. While the complex ownership structures of the chaebol deter takeover attempts of these major conglomerates, shareholder activism can still benefit the large number of nonchaebol companies in Korea, and domestic shareholder activism needs to become more prevalent. Shareholders in Korea must feel empowered to remove incumbent management when they believe that the management is not acting in their best interests. While some activist shareholders have emerged in Korea, shareholder activism needs to become more widespread and sophisticated in form in order for management to feel the pressure to improve corporate governance.

Conclusion Korea’s capital markets are significantly lagging in sophistication and competitiveness relative to the overall development of the Korean economy. The investment banking, asset management and venture capital/private equity industries, all critical components of efficiently functioning capital markets, are as yet immature in their development and need significant structural changes to evolve into global industries that can effectively compete at an international level. Korean corporations and consumers are poorly served in the current marketplace, which does not offer the breadth or depth of products and services to address their financial needs or meet their long-term objectives.

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The Korean government must pursue more proactive policies to promote industry consolidation, reduce burdensome regulation, and provide financial and regulatory incentives to enable these industries to expand internationally. Korean investment banks should not be required to adhere to more stringent capital requirements than their global counterparts if they are expected to compete on a global basis. The role of the regulator should be minimized to implementing regulations rather than establishing policies, and regulations that increase operating costs without any clear rationale should be eliminated. Tax incentives should be offered to domestic and foreign firms willing to pursue consolidation. Finally, the Korean government should pursue an open market policy in the financial services industry so that globally competitive operating standards can be established in Korea.

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Appendix: Workshop Agenda Friday, April 20, 2012 9:00 a.m.

introduction and outline of workshop format and objectives Gi-Wook Shin

9:10 a.m. 9:25 a.m.

9:45 a.m.

Professor, Sociology; Director, Shorenstein APARC, Stanford University

Sung-Hoon Cho Vice President, Korea Capital Market Institute Role of the Financial Services Commission as Regulator and Policy Maker Sung-Hoon Cho Vice President, Korea Capital Market Institute Current Status and Tasks for Future Development of the Korean Capital Markets: Perspectives from a Global Investment Bank John Kim Managing Director, Goldman Sachs Korea Current Status and Tasks for Future Development of the Korean Capital Markets: Perspectives from a Korean Investment Bank Yu Cheol Seong

Executive Director & Chief Representative,Tong Yang Securities Inc., NY

10:05 a.m. Status of the Korean Investment Banking Industry: Importance of Strong Investment Banks for the Korean Economy Bosung Shin Senior Research Fellow, Korea Capital Market Institute 10:40 a.m. discussion Moderator Darrell Duffie Professor, Graduate School of Business, Stanford University Discussants Jay H. Eum Managing Director, TransLink Michael Keyoung Managing Director, Burrill & Company Taek-Geun Kwon Founder, Toro Investment Partners 12:10 p.m. Lunch and keynote speech: “Replumbing Our Financial System: Uneven Progress” Darrell Duffie Professor, Graduate School of Business, Stanford University 1:50 p.m. Perspectives from the Mutual Fund Manager Bhang Gil Choi President & CEO, Shinhan BNP Paribas Asset Management, Ltd. 2:10 p.m. Enhancing the Competitiveness of Korea’s Securities Exchanges Heung Sik Choe President, Hana Financial Group 2:30 p.m. Private Equity as an Important Tool for Corporate Restructuring and Innovative SME Financing Yong-Rin Park Research Fellow, Korea Capital Market Institute 2:50 p.m. Corporate Governance: How to Improve Corporate Governance and Transparency Hwa-Jin Kim Professor, Seoul National University Law School 3:30 p.m. discussion Moderator Michael S. Wishart (retired) Partner, Goldman Sachs Discussants Jay H. Eum Managing Director, TransLink Michael Keyoung Managing Director, Burrill & Company Taek-Geun Kwon Founder, Toro Investment Partners 5:00 p.m. policy recommendations and wrap-up Gi-Wook Shin Professor, Sociology; Director, Shorenstein APARC, Stanford University Sung-Hoon Cho Vice President, Korea Capital Market Institute Euni Valentine Former Managing Director of UBS Investment Bank 6:30 p.m.

dinner & speaker Andrew J. Malik

Chairman, Needham & Company, LLC

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