Providing Information One Week Before CB Issuance... Financial Services Commission Minimizes Disclosure Blind Spots

Approval of Amendment at Cabinet Meeting on the 20th
"Increase Penalty Levels for Listed Companies Violating Disclosure Obligations"

[Asia Economy Reporter Minji Lee] The Financial Services Commission announced on the 20th that it has approved the amendment to the "Act on Capital Markets and Financial Investment Business" through the Cabinet meeting.

This bill strengthens the obligation to provide information to investors when a corporation goes public or issues private convertible bonds (CB) or bonds with warrants (BW), and includes provisions to increase fines to ensure the effectiveness of information disclosure regarding corporate stock holdings.

The main amendments include imposing an obligation on newly listed companies to submit the most recent quarterly or semi-annual reports, similar to the obligation to submit the first annual business report. This measure considers the increased investor interest immediately after listing and addresses the issue that newly listed companies only have an annual reporting obligation without disclosing recent quarterly or semi-annual financial information, resulting in a period during which regular reports are omitted.

When issuing private convertible bonds (CB) or bonds with warrants (BW), related information must be provided to investors one week in advance. Under the current standards, information was provided just before the payment date, meaning key information was not sufficiently disclosed to investors in advance.

The upper limit for fines imposed for violations of the "5% rule" reporting obligation has been increased tenfold to enhance the effectiveness of sanctions. Accordingly, the fine limit has been adjusted from one ten-thousandth to one one-thousandth of the market capitalization. Additionally, by reducing mitigation criteria and applying a minimum market capitalization of 100 billion KRW even to companies with low market capitalization, the average fine, which was around 350,000 KRW, has been raised to approximately 15 million KRW.

Finally, even for small listed companies, the maximum fine for violations of disclosure obligations such as business reports has been raised to 10% of the average daily trading volume, with a minimum of 1 billion KRW. For unlisted companies, the limit has been lowered from 2 billion KRW to 1 billion KRW. Previously, small listed companies with low average daily trading volumes were fined less than unlisted companies, but going forward, more fines will be imposed on listed companies.

The Financial Services Commission stated, "This amendment is scheduled to take effect six months after promulgation upon approval by the National Assembly," and added, "We will closely cooperate with the National Assembly to ensure its approval and passage."

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