Presidential Candidates' Stock Investment Pledges: "Improvement and Fairness Needed Over Short Selling Ban"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Attention is focused on the stock investment-related pledges put forward by major presidential candidates. In particular, regarding the short-selling system, which has recently been embroiled in controversy over its full resumption, the atmosphere leans more toward improvement rather than abolition.

According to political circles on the 6th, candidates Lee Jae-myung of the Democratic Party, Yoon Seok-youl of the People Power Party, Ahn Cheol-soo of the People’s Party, and Sim Sang-jung of the Justice Party all agree on the need for measures to protect minority shareholders in relation to listed companies physically splitting business divisions and then separately listing them.

This is a solution to the growing criticism that the rights and interests of existing minority shareholders are being infringed upon due to cases such as LG Chem’s LG Energy Solution listing and Kakao’s “split listing.”

Candidate Lee of the Democratic Party stated at a forum hosted last month by Democratic Party lawmaker Lee Yong-woo, “While the controlling shareholders of the parent company will gain increased control and profits through physical division, minority shareholders inevitably suffer,” adding, “When a subsidiary is listed after a physical division, reasonable protection for the parent company’s shareholders should be provided to guarantee the rights and interests of minority shareholders.”

Candidate Yoon of the People Power Party pledged to revise related regulations to allow parent company shareholders to receive preemptive rights when new shares are issued in cases where new businesses are split off and separately listed, saying, “Recently, some companies have decided to split off core new industries, causing stock prices to fall and many investors to feel disheartened.”

Candidate Ahn of the People’s Party also appeared on the YouTube channel “Kimjakga TV” recently and mentioned that measures such as granting shareholders opposing a company’s physical division the right to request stock purchase could be considered.

Candidate Sim of the Justice Party also expressed the need for supplementary measures to protect minority shareholders in this regard.

The candidates raised their voices that unfair trading practices such as stock price manipulation in the market must also be corrected. To this end, Candidate Lee promised to introduce a penalty system to recover profits gained from stock price manipulation, while Candidate Yoon pledged to reform the investigation and punishment process for securities crimes to strengthen the effectiveness of sanctions.

Candidate Ahn announced plans to establish an integrated organization involving the Financial Services Commission, Korea Exchange, Seoul Southern District Prosecutors’ Office, and Financial Supervisory Service to continuously monitor unfair trading, and to build a system that uses artificial intelligence to monitor illegal transactions.

Other measures proposed to protect small investors include restrictions on the exercise period of stock options for executives of newly listed companies (Candidate Lee) and limits on unlimited insider share sales (Candidate Yoon).

Regarding the “hot potato” short-selling system, major candidates emphasize improvement. Candidate Lee of the Democratic Party said, “Completely abolishing the short-selling system goes against the policy direction of inclusion in the Morgan Stanley Capital International (MSCI) developed market index and could lead to the withdrawal of foreign investors,” promising improvement rather than abolition. He stated that fairness will be ensured by correcting differences such as the borrowing period for stocks for foreign investors and individuals engaging in short selling.

Candidate Yoon of the People Power Party also promised to improve the system so that individuals are not disadvantaged compared to foreign and institutional investors in short selling. He said, “We will reasonably adjust excessive collateral ratios compared to institutions and actively consider introducing a circuit breaker that automatically bans short selling if stock price declines are excessive.”

Candidate Ahn of the People’s Party opposed abolishing short selling but emphasized that issues such as information asymmetry must be resolved as a prerequisite for “full allowance of short selling.” Currently, short selling is only allowed for stocks included in the KOSPI 200 and KOSDAQ 150 indices.

Candidate Sim of the Justice Party leans toward flexibly operating the short-selling system according to market conditions, as is currently the case.