"Preventing Stock Option Abuse After Listing"... Exchange Implements Amendment to Listing Regulations

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] From now on, so-called 'meoktwi'?selling stocks immediately after exercising stock options following a company's listing?will be prohibited.

The Korea Exchange announced on the 16th that it will implement the revised listing regulations regarding the improvement of the mandatory holding system starting from the 18th, following approval from the Financial Services Commission.

The main points of the revision include ▲mandatory holding of stocks acquired through exercising stock options ▲extension of the mandatory holding period and expansion of the subjects. The revision will apply to corporations applying for preliminary listing review on or after the implementation date, the 18th.

First, stocks acquired by exercising stock options after listing will also be subject to mandatory holding. Previously, the mandatory holding system did not apply to stocks acquired through exercising stock options after listing, which led to cases where all stocks were sold immediately after exercising stock options right after listing. According to the revision, stocks acquired by exercising stock options during the mandatory holding period will be restricted from disposal from the acquisition date until the remaining mandatory holding period ends. This system will be newly introduced in both the KOSPI and KOSDAQ markets.

Additionally, the scope of mandatory holding subjects for executives of newly listed companies will be expanded to include persons with business execution instructions under the Commercial Act. A business execution instruction person refers to someone who is not a director but executes business using a title recognized as having company authority, such as chairman, president, or vice president. This system is already applied in the KOSDAQ listing regulations and will be newly applied to KOSPI.

Furthermore, a basis will be established to allow extension of the mandatory holding period upon request by mandatory holding subjects of KOSPI-listed companies. Accordingly, the mandatory holding period can be differentially designed by adding up to 2 years to the basic 6 months for each subject. For example, the CEO’s held stocks may be subject to 1 year (basic 6 months + additional 6 months), while stocks held by business execution instruction persons may be subject to 6 months, allowing different mandatory holding periods.

Lastly, grounds for imposing mandatory holding on shareholders, etc., of corporations subject to substantive delisting review will be specified.

An official from the Exchange stated, "With the enforcement of these regulations, we expect to contribute to investor protection by supporting responsible management of newly listed companies and early formation of fair stock prices."

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