KOSDAQ Venture Funds to Receive Increased Priority Allocation of Public Offering Shares

The Korea Financial Investment Association announced on October 31 that it will pre-announce a draft amendment to the "Regulations on Securities Underwriting Work, etc."

The amendment expands and extends the priority allocation of public offering shares to policy funds, and partially supplements regulatory changes in accordance with the "Measures to Improve IPO and Delisting Systems." Starting from the first securities registration statement submitted after January 1 next year, the priority allocation ratio of KOSDAQ public offering shares to venture investment trusts will be raised from the current minimum of 25% to at least 30%.

This measure reflects the policy direction to revitalize venture investment trusts, as indicated by the pre-announced amendment to the Restriction of Special Taxation Act. High-risk, high-return investment trusts will maintain the current allocation ratio, as they absorb a significant portion of domestic non-investment grade corporate bonds (rated BBB or below) and serve as a major demand base.

The priority allocation period for public offering shares to venture investment trusts and high-risk, high-return investment trusts will be extended by three years, until the end of 2028. This takes into account that the tax benefits for venture investment trusts under the amendment to the Restriction of Special Taxation Act are also expected to be extended by three years.

The amendment also includes improvements to the "priority allocation for mandatory holding commitment" and "strengthened sanctions against unfaithful demand forecasting participants" systems, which were introduced in line with the "Measures to Improve IPO and Delisting Systems."

The draft amendment will be open for public comment from today until November 19, after which it will be resolved by the Self-Regulatory Committee in December. Once the regulatory amendment is finalized, the extension of priority allocation of public offering shares to policy funds will be implemented immediately. Supplementary measures to the system will be applied sequentially, starting from the first securities registration statement submitted after the effective date.

A representative from the Korea Financial Investment Association explained, "We expect that the amendment will lay the foundation for the healthy growth of both the secondary market and the IPO market through the revitalization of the KOSDAQ market and support for policy funds."