Unlisted Companies' Adoption Rate of Electronic Securities System Stands at 18%

Three Years Since Implementation for Safety and Tax Evasion Prevention
Low Adoption Due to Lack of Mandatory Enforcement

[Asia Economy Reporter Oh Ju-yeon] It has been revealed that fewer than 2 out of 10 unlisted companies have adopted the electronic securities system, which allows securities trading through computerized systems. The electronic securities system was extensively introduced in September 2019 to reduce the costs of issuing physical securities, enhance transaction security, and prevent tax evasion. However, even after three years, the adoption rate among unlisted companies remains in the 10% range, falling short of expectations.

Kang Byung-won, Member of the Democratic Party of Korea./Photo by Yoon Dong-joo doso7@

According to data received on the 22nd by Kang Byung-won, a member of the National Assembly’s Political Affairs Committee from the Democratic Party of Korea, from the Financial Services Commission, as of August, 2,524 listed companies and 575 unlisted companies have adopted the electronic securities system, totaling 3,099 companies. This represents a 25.2% increase from 2,475 companies in the system’s first year. The assets managed under the electronic securities system (based on stocks) have also increased from 1,787 trillion won in 2019 to 2,395 trillion won as of the end of August this year.

On the other hand, the adoption rate among unlisted companies is only 18.4%, indicating that it remains low even after three years since implementation. The number of unlisted companies that have not adopted the electronic securities system has changed little, from 2,321 in 2019 to 2,561 last year, and 2,545 as of the end of August this year, the third year since the system’s introduction.

This is because, under the Electronic Securities Act, listed companies are required to adopt the electronic securities system, but unlisted companies are not mandated to do so. However, at the time of the system’s introduction, the Korea Securities Depository optimistically projected that the cumulative economic effect of transitioning to electronic securities would reach 904.5 billion won over five years. This expectation is based on the fact that investors can prevent forgery, alteration, and theft of physical securities by trading securities electronically, and companies can handle operations more efficiently by shortening the fundraising period.

Assemblyman Kang Byung-won pointed out, “Although the Korea Securities Depository has presented policies such as fee reduction benefits related to electronic securities for unlisted companies, the adoption rate not yet exceeding 20% is a significant problem,” and added, “A detailed plan for surveys targeting unlisted companies that have not converted to electronic securities and for promoting the system should be established to achieve visible results.”

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