In June 2006, the government made a pre-announcement of the Financial Investment Services and Capital Markets Act. This act intends to increase intermediary functions of the capital market, strengthen investor protection, and promote competition and financial innovation of the finance investment industry. In pursuit of the purpose, the legislation has four basic principles. First, positive list system will be abolished and a comprehensive system will be introduced. This system will improve market efficiency and give more flexibility to the capital market. In the current positive list system, only the enumerated financial products can be devised and traded in the market. On the other hand, the comprehensive system allows all financial products, except for deposit and insurance products, to be developed and traded. This system introduces the concept of ``contract for differences`from the FSMA (Financial Services and Markets Act) of the United Kingdom, and the concept of ``investment contract`` from the Securities Act of the United States of America. Second, a functional regulation system will be introduced. This system applies same regulations for financial functions of same nature. Financial services will be reclassified into 6 financial investment services of dealing service, arranging service, collective investment service, discretionary investment advisory service, non-discretionary investment advisory service, and trust service, and regulations will be placed by service functions. Financial products and investors will also be categorized, and regulations will be applied based on its category. Financial products will be classified into securities, exchange traded derivatives, and otc derivatives, and investors will be divided into non-professional investor and professional investor. This measure will eliminate regulatory arbitrage and deficiencies of investor protection. Third, investor protection will be intensified through advanced investor protection vehicles. An internal control system, which includes product guidance, suitability principle, regulations on unsolicited calls, and conflict of interest prevention, will be introduced. Fourth, barriers among 6 financial investment services in the capital market will be removed. Companies will be able to cover all financial investment services. This removal process is expected to bring big size financial investment companies in the Korean capital market. This act is currently in the screening process under the Ministry of Government Legislation, and will be submitted to the National Assembly around the end of 2006. This act will take effect after one year and a half from its official announcement.