Intensive Investigation on Convertible Bond Disclosure Violations This Year
On the 1st, the Financial Supervisory Service (FSS) announced that it took action on a total of 88 cases of violations of disclosure obligations under the Capital Markets Act by listed companies and others last year.
By category, the number of moderate sanctions imposed on companies with intentional or gross negligence violations that have a significant impact on the market totaled 22 cases. Among them, 18 companies received fines, and 4 cases involved restrictions on securities issuance. Minor sanctions were issued in 66 cases, mainly warnings for minor violations such as failure to submit business reports by unlisted companies with relatively fewer investors. The ratio of moderate to minor sanctions was about 1 to 3, showing a similar level since 2020.
Regarding types of disclosure violations, violations of regular disclosure such as failure to submit or delayed submission of periodic reports and false statements of important matters accounted for the largest portion with 35 cases (39.8%). This was followed by issuance disclosure violations with 28 cases (31.8%) and major event disclosure violations with 18 cases (20.4%). The proportion of issuance disclosure violations, including failure to submit securities registration statements, increased from 20.7% last year to 31.8%. The FSS explained, “As the number of IPO cases by unlisted companies increased, many past public offering violations were discovered during the due diligence process by underwriters.”
Major event disclosures included 8 cases of non-disclosure or delayed disclosure of securities issuance decisions and 4 cases of omission of major agreements such as collateral provision. Additionally, there were 2 cases of delayed disclosure of asset acquisition and disposal, and 1 case each of delayed disclosure related to business suspension, commencement of rehabilitation, capital reduction, and omission of external evaluation opinions.
By company type, unlisted companies accounted for the majority with 48 cases (73.8%), while listed companies accounted for 17 cases (26.2%), including 15 KOSDAQ companies and 2 KONEX companies. The proportion of listed companies among all sanctioned companies has been decreasing, from 40.4% in 2020 to 30.1% in 2021 and 26.2% in 2022. For unlisted companies, repeated violations were attributed to lack of knowledge of regulations, absence and frequent changes of disclosure personnel, and insufficient recognition of the importance of disclosure by management.
The FSS stated, “We will strictly sanction serious disclosure violations that undermine disclosure reliability and continuously provide guidance on violation cases and precautions to prevent disclosure violations.” It added, “This year, we will focus on investigating omissions and false statements of important matters related to convertible bonds and violations of periodic disclosures to improve the efficiency of our investigation work.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
