Financial Services Commission to Increase Penalties for Repeated Violations of the 5% Rule and Long-Term Reporting Delays

[Asia Economy Reporter Park Jihwan] Financial authorities have decided to increase fines for those who repeatedly violate the 5% large-scale reporting obligation or delay reporting for more than one year.

The Financial Services Commission announced on the 12th that it has approved the "Amendment to the Capital Market Investigation Work Regulations" containing these details and will implement it from today.

Currently, when acquiring 5% or more of shares in a listed company or when there is a subsequent change of 1% or more in shareholding, or when there are changes in the purpose of holding or major contract details, the relevant information must be reported and disclosed within 5 days.

The FSC plans to revise the criteria for imposing fines for violations to enhance the effectiveness and fairness of sanctions. First, fines will be increased for repeated violations of the 5% rule and long-term reporting delays. If there are three or more violations within two years or a reporting delay of more than one year, it will be reflected as a reason for increasing fines.

If violations of change reporting (shareholding change of 1% or more) and change reporting (change in holding purpose, etc.) under a single contract occur simultaneously, the heavier fine will be imposed.

Also, if the violation ratio of the largest (major) shareholder is 5% or more, the importance will be classified as "high." The violation ratio is calculated by subtracting 5% from the holding ratio. For example, if the largest shareholder holds 12% but fails to report, the violation ratio becomes 7%.

The FSC has stipulated that habitual violations of the obligation to submit regular reports (four or more times within two years) will, in principle, result in fines. The FSC explained that this measure is in response to the recent increase in unlisted companies habitually violating submission obligations.

Previously, for failure to submit or delayed submission of regular reports, fines or lower warning/caution measures could be imposed depending on the "motive" and "result" of the violation. However, unlisted companies tend to receive only warnings or cautions because their trading volume is negligible and the violation "result" is minor, unlike listed companies.

At the same time, a basis has been established to reduce fines if monetary sanctions (fines, penalties, etc.) have already been imposed by the FSC for the same act. In the case of crowdfunding, considering fairness with small-scale public offerings of similar investment size, fines can be reduced if the impact on investors and the market is minimal.

The criteria for imposing fines have also been improved for violations of the obligation to submit securities registration statements related to collective investment securities. A fine rate (0.1?0.5%) applicable when securities registration statements are not submitted (including false or omitted important information) has been newly established. When imposing fines on directors or business executors, a standard linked to remuneration has been prepared considering unjust gains from legal violations.

An FSC official stated, "For acts subject to fines or penalties committed before the enforcement of the amended regulations, the regulations at the time of the act will be applied to calculate the amount. However, if the amount calculated under the amended regulations is lighter, the amended regulations will be applied."

This content was produced with the assistance of AI translation services.