Financial Services Commission Launches KOSDAQ Overhaul... Strengthening Independence and Attracting Institutional Investors

Financial Services Commission Announces "KOSDAQ Market Trust and Innovation Enhancement Plan"

The Financial Services Commission is launching a comprehensive overhaul to restore trust and strengthen the competitiveness of the KOSDAQ market. The plan includes enhancing the independence and autonomy of the KOSDAQ division, revising listing and delisting systems, and expanding institutional investor participation.

On December 19, the Financial Services Commission announced the "KOSDAQ Market Trust and Innovation Enhancement Plan," which contains these measures.

The KOSDAQ market is primarily led by individual investors, with institutional investors accounting for only about 4.5% of trading value. The Financial Services Commission analyzed that expanding the institutional investor base is a key challenge to ensure the stability and credibility of the KOSDAQ market.

To address this, the commission plans to increase incentives for major pension funds, such as the National Pension Service and the Government Employees Pension Service, to participate in the KOSDAQ market. When evaluating fund management, the KOSDAQ index will be reflected at a certain ratio in addition to the KOSPI index, encouraging pension funds to consider KOSDAQ investments in their domestic equity portfolios. These details will be specified when the 2026 fund management evaluation guidelines are established.

In addition, the tax benefit limit for KOSDAQ venture funds will be expanded, and tax support for Business Development Companies (BDC), which are scheduled to be introduced next year, is also under review. The preferential allocation ratio of public offerings for KOSDAQ venture funds will be increased from 25% to 30%, and regulations on BDC management by asset management companies and venture capital firms will be eased to accelerate product launches.

The publication of research reports by securities firms on KOSDAQ companies and disclosures of value enhancement plans by KOSDAQ companies will also be expanded. Five comprehensive financial investment firms that recently received approval for issuance notes and Integrated Managed Accounts (IMA) plan to increase the number of dedicated staff for KOSDAQ research reports from an average of 4.6 to 9.2, and the number of reports issued from an average of 396 to 621 by 2028, as part of efforts to expand venture capital.

The Financial Services Commission intends to strengthen the independence and competitiveness of the KOSDAQ division within the Korea Exchange to establish an internal competitive structure with the KOSPI market. Currently, the KOSDAQ Market Committee, mainly composed of external members, is responsible for final decisions on listing and delisting. In addition, new requirements for the experience and expertise of committee members will be introduced to enhance professionalism and objectivity.

The KOSDAQ division will also be independently evaluated in the exchange's management assessment. The evaluation system will be revised to provide additional incentives based on performance. An organizational and workforce assessment of the KOSDAQ division will be conducted, with plans to expand or reallocate resources as needed.

The Financial Services Commission will redesign the listing and delisting systems to create a "high birth, high death" structure that facilitates the smooth listing of innovative companies and the prompt exit of underperforming firms.

Currently, only the bio industry has customized listing review standards for technological capability and growth potential. By the end of this year, customized technology exception listing systems will be fully introduced for other key national technology sectors, such as artificial intelligence (AI), space industry, and energy (ESS and renewable energy). The scope of industries will be gradually expanded starting next year.

On the other hand, delisting standards will become stricter. In July of this year, the delisting process and period were significantly shortened, and requirements for audit opinions, market capitalization, and revenue-based delisting were strengthened. In addition, if a company listed under the technology exception system changes its main business to one unrelated to its original technology after listing, it will become subject to delisting review. The number of delisting review teams within the exchange will also be increased from three to four to accelerate the early exit of underperforming companies.

Furthermore, the criteria for reviewing duplicate listings between parent and subsidiary companies will be clarified. Currently, only duplicate listings through spin-offs are subject to stricter standards. Going forward, detailed review criteria will be established for duplicate listings not involving spin-offs to enhance predictability.

To strengthen the accountability of lead managers in IPO price determination, the use of put-back options will be increased. Additionally, when a lead manager sets the IPO price based on projected earnings, the discrepancy rate between projections and actual results will be disclosed by each manager for comparison. This is intended to prevent lead managers from overestimating projected earnings when determining IPO prices.

Finally, the Financial Services Commission will actively support legislative discussions on amendments to the Capital Markets Act, which have been submitted to the National Assembly to introduce the cornerstone investor and pre-demand forecasting systems. These measures aim to enhance the appropriateness of IPO pricing and expand the base of medium- and long-term investors.

Lee Eogweon, Vice Chairman of the Financial Services Commission, emphasized, "For Korea to properly foster an ecosystem for innovative industries such as AI, the role of the KOSDAQ market is crucial," adding, "As the KOSDAQ market is the cradle of innovative and venture companies, we will pursue fundamental structural reforms to ensure it becomes a growth platform for our companies."