Financial Services Commission: "From Next Month, Call Option and Conversion Price Adjustment Regulations for Convertible Preferred Shares to be Applied"

Published 03 Apr.2023 12:00(KST)

The Financial Services Commission announced on the 3rd that from the 1st of next month, call option and conversion price adjustment (refixing) regulations, which apply to convertible bonds (CBs), will also be applied to convertible preferred shares and redeemable convertible preferred shares issued by listed companies.

On the 9th, officials were busy moving in the corridor of the Financial Services Commission at the Government Seoul Office in Jongno-gu, Seoul, where financial authorities decided to include mortgage loans (Judaemdae) in the 'debt refinancing' infrastructure scheduled to be launched in May by the end of the year. Financial authorities explained that they aim to reduce the interest burden on mortgage loans by establishing a debt refinancing platform that allows users to compare financial sector loan interest rates at a glance and switch loans easily. Photo by Dongju Yoon doso7@

This is a follow-up measure to the "Convertible Bond Market Inspection and Additional Supplementary Measures" announced in September last year. The revised regulations include call option rules that limit the exercise limit of call options granted to major shareholders, etc., on redeemable convertible preferred shares to within the shareholding ratio at the time of issuance, and impose disclosure obligations if call options are exercised by third parties. A call option refers to the right to purchase the underlying asset at a predetermined exercise price on or before the maturity date.

The FSC stated, "Following the improvement of the convertible bond system in December 2021, the improvement of the redeemable convertible preferred share system has been completed, preventing these bonds and shares from being used as a means for major shareholders to expand their shareholding through loopholes, thereby contributing to the sound development of the market."

This system will apply to redeemable convertible preferred shares whose issuance is decided by the board of directors on or after the 1st of next month. The FSC added, "We will continue to monitor market conditions for convertible bonds and redeemable convertible preferred shares and seek additional system improvement measures."