Cracking Down on Illegal "Delisting Evasion" Activities Such as Price Manipulation... Financial Supervisory Service Launches Joint Response

Company A was caught by the financial authorities after attempting to avoid delisting due to insufficient trading volume by placing price manipulation orders using accounts under its own name and those of family members to lure investor buying. Company B, facing the risk of being designated as an administrative issue due to insufficient sales, was found to have fabricated evidence to make it appear as though it had sold products to related parties without any actual transactions.

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On April 19, the Financial Supervisory Service announced that it would establish a joint response system among its investigation, disclosure, and accounting departments to strictly crack down on illegal activities by companies attempting to evade delisting. This measure is based on the judgment that, as delisting requirements have been strengthened since the beginning of the year, the likelihood of illegal activities by marginal companies seeking to avoid delisting has increased.

Since January, the financial authorities have significantly tightened delisting requirements to address issues such as the 'Korea Discount' by promptly removing marginal companies. Measures include raising the minimum market capitalization for KOSPI delisting from 5 billion won to 20 billion won. Starting in July, even stricter criteria will be implemented, such as further raising the market capitalization threshold, introducing new criteria for penny stocks with share prices below 1,000 won, and strengthening the requirements for complete capital impairment.

The Financial Supervisory Service also introduced representative cases of illegal activities detected so far. These include cases of companies overstating sales or equity capital, using undisclosed negative information, or engaging in short-term price manipulation.

The CEO of Company C managed to avoid a substantive review of listing eligibility by carrying out a paid-in capital increase as initially disclosed, even though he failed to attract investors due to a deteriorating financial structure. He also falsely increased capital by having an acquaintance participate in the capital increase and providing them with embezzled company funds. Company D avoided delisting due to complete capital impairment by fabricating evidence to make it appear that related parties were holding false inventory assets, thereby understating the cost of goods sold and overstating both operating profit and equity capital.

Accordingly, the Financial Supervisory Service plans to closely monitor high-risk groups for delisting and major types of short-term price manipulation, and to immediately launch investigations upon detecting any suspicious activities. The agency will also strengthen its review of disclosure documents, carefully examining the background, use of funds, and investment risk factors whenever marginal companies submit securities reports for a paid-in capital increase in an attempt to avoid delisting requirements. Additionally, the scale of companies subject to accounting oversight for signs of insolvency will be increased by more than 30% compared to last year.

A representative from the Financial Supervisory Service emphasized, "Through joint monitoring and strict enforcement by the investigation, disclosure, and accounting departments, we will focus on illegal activities aimed at evading delisting, thereby enhancing trust in the stock market and protecting investors."

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