On the 26th, the Financial Supervisory Service (FSS) announced that it held a meeting with the Korea Exchange, the Korea Financial Investment Association, lead managers, and the KOSDAQ Association to enhance fairness and trust in the initial public offering (IPO) market.
The meeting, held on the 24th, was organized for related organizations to gather and discuss the issues in the current listing process and improvement measures, particularly in light of the trust controversy triggered by the 'Pado incident.' Pado, which was listed as a technology-specialized company in August, is under suspicion of an 'inflated listing.' Pado disclosed sales of 320.81 million KRW for the third quarter of this year, but its stock price plummeted after an 'earnings shock.' The IPO price was 31,000 KRW at the time of listing, but it dropped to 22,850 KRW as of the closing price on the 24th.
At the meeting, the FSS decided to enhance the IPO securities registration statement review system to maintain a balance between supporting innovative and venture companies and protecting investors, including the method of disclosure and correction requests. While maintaining the principle of rapid review within one week, face-to-face consultations, and focused review on cases with investor protection issues, the FSS plans to verify whether sales and operating profit (including provisional figures) up to the month immediately before submission are appropriately disclosed as 'investment risk factors' during the IPO securities registration statement review, considering recent cases of insufficient financial performance information provision.
Furthermore, the FSS will ensure that information necessary for investment decisions is fully disclosed and will actively conduct investigations into unfair trading in cases of significant omission or false statements.
The FSS will also reorganize the securities registration statement review system and significantly improve the IT infrastructure related to the review to ensure compliance with review principles. The FSS stated, "We plan to standardize the method of disclosing the IPO price calculation and underwriter due diligence opinions so that essential information is not omitted and is easily understood. Deficient disclosures will, in principle, have their effectiveness recalculated through official correction requests, and changes to the schedule for minor voluntary corrections will be minimized to enhance the transparency of the review work."
It also added, "To maximize review efficiency, we will expand the DART review system functions to enable a multidimensional analysis of past review details by submitting companies and lead managers."
In addition, the listing lead management system will be reorganized to prioritize investor protection. Specific internal control standards related to lead management, compliance requirements during company due diligence, a standard model for IPO price calculation companies, and the fee system will be established to maintain consistency in IPO price calculation by lead managers, including evaluation methods, comparison indicators, and discount rates. If calculated by a different method, necessary internal approval procedures will be stipulated. A task force (TF) will be jointly formed with the industry and related organizations next year to develop detailed improvement plans.
The FSS will also strengthen cooperation systems among listing-related institutions, including establishing and developing an information-sharing system with the Korea Exchange, and will regularize meetings among the FSS, lead managers, and associations.
The Korea Exchange will promote measures such as strengthening post-management of technology-specialized companies, enhancing monitoring of IPO price appropriateness, alleviating blind spots in performance disclosures, providing grounds for expected sales judgments, and advancing listing reviews and technology evaluations. The Korea Financial Investment Association plans to review improvements in IPO lead management, including strengthening internal controls for company due diligence, extending the minimum due diligence period for technology-specialized companies, and enhancing the independence of lead managers.
Kim Jeong-tae, Deputy Director of Disclosure and Investigation at the FSS, said in his opening remarks at the meeting, "Unfortunately, recently, the stock prices of companies that disclosed poor performance immediately after listing have plummeted, damaging market trust. In cases where investors are deliberately deceived, seriously undermining market trust, the FSS will mobilize all investigative capabilities to verify violations such as unfair trading and take strict measures."
An FSS official stated, "We will promptly materialize and implement the discussed improvement measures and continue efforts to enhance transparency in the IPO market and restore investor confidence."
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