Notice of Legislative Proposal for Amendment to Subordinate Legislation of the Capital Markets Act
Exemption Provisions... Specification of Disclosure Procedures
The financial authorities have decided to exempt financial investors (FIs), including pension funds, from the pre-disclosure obligation imposed on insider stock trading starting from July. In the National Assembly, there have also been calls for exemptions in cases where the likelihood of using undisclosed material information is low and where there is a risk of exposing investment strategies.
Regulations on Exemption from Disclosure Obligations
On the 28th, the Financial Services Commission announced the legislative notice of a subordinate regulation amendment to the "Capital Markets and Financial Investment Business Act" containing these details. The amended Capital Markets Act, effective from July, imposes a pre-disclosure obligation when insiders of listed companies trade a certain scale or more of the issuing company's shares.
However, it was stipulated that exceptions to the disclosure obligation would be governed by subordinate laws such as enforcement ordinances and notifications. Accordingly, the amendment to the enforcement ordinance and regulations decided to exempt financial investors, including pension funds, who are judged to have relatively high internal control levels and low likelihood of using undisclosed information, from the pre-disclosure obligation. During the National Assembly discussions, it was also pointed out that financial investors with low likelihood of using undisclosed material information and risk of exposing investment strategies should be exempted.
Additionally, transactions where the total quantity and amount of specific securities traded over the past six months are less than 1% of the total issued shares of the listed company in the same year and less than 5 billion KRW are defined as transactions exempt from reporting obligations.
Details on Disclosure Procedures and Methods
Specific disclosure procedures and methods were also included. The expected trading price, quantity, and trading period of the specific securities planned for trading must be recorded in the trading plan report, and the transaction must be completed within 30 days from the scheduled start date of the trade.
The range of amounts that can be traded differently from the trading plan is set at the maximum scale of 30%, as delegated by law. This is to allow those subject to pre-reporting obligations to respond flexibly according to market conditions.
To prevent the pre-disclosure system from becoming an excessive burden, it allows the withdrawal of the trading plan if unforeseeable reasons arise in advance. Withdrawal is permitted in cases of unavoidable reasons such as death, bankruptcy, delisting, or suspension of trading.
This legislative notice period runs until April 11, after which it will go through procedures such as review by the Office of Legislation and Policy and approval by the State Council, and will be enforced from the law’s effective date on July 24.
The Financial Services Commission stated, "Transparency and predictability of large-scale insider trading will be enhanced, contributing to the prevention of unfair trading and protection of investors," and added, "Information on insider shareholding changes will be provided to general investors in a timely manner, minimizing market shocks caused by unexpected large-scale share sales."
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