[Q&A]"We Should Have Delisted Penny Stocks Much Earlier... We Will Clean Up the Market"

FSC Reform Plan for Delisting Insolvent Companies
"Cleaning Up Insolvent Listed Firms to Enhance Market Soundness"
"We Will Also Communicate with Companies on How They Will Be Affected"

"The delisting of penny stocks should have been done much earlier, so there is a sense that this comes late."

Kwon Daeyoung, Vice Chairman of the Financial Services Commission, is delivering opening remarks at the 'Financial Sector Agreement to Support Industrial Structural Innovation' ceremony held at Bankers' Hall in Jung-gu, Seoul on the 30th. 2025.9.30 Photo by Kang Jinhyung

On the 12th, Vice Chairman of the Financial Services Commission Kwon Daeyoung announced the "Reform Plan for Delisting to Facilitate Swift and Strict Exit of Insolvent Companies," stating, "Twenty-five years ago, when I was a deputy director in charge of KOSDAQ work, I first learned about penny stocks, and only now are we introducing international standards such as the delisting of penny stocks."

Vice Chairman Kwon said, "The delisting requirements for penny stocks will take effect from July 1, effectively giving companies more than six months to adjust," adding, "If this plan increases confidence in the market, stock indices will rise further from where they are now."

The plan includes the introduction of a new delisting requirement for penny stocks with share prices below 1,000 won. The final implementation date for strengthening the market capitalization standard will be moved up from January 2028 to January next year, and a semiannual basis will be added to the full capital impairment requirement. The delisting standard for disclosure violations will also be tightened by lowering the threshold for disclosure penalty points over the most recent one-year period from 15 points to 10 points.

The following is a Q&A between Vice Chairman Kwon and reporters.

-There are concerns that pushing for the delisting of penny stocks could dry up funding for companies that are fundamentally sound but undervalued.

▲In operating the system, we will look carefully at such companies. In the past, companies were assessed only by indicators such as market capitalization and sales, but now, like the Nasdaq in the United States, we intend to make a balanced judgment by also looking at the share price level. Penny stocks often have no trading in normal times, then suddenly see a surge in demand, causing high share price volatility. Through this plan, we intend to clean up insolvent listed companies, enhance the soundness of the market, and at the same time strengthen investor protection.

-This seems to be a stronger measure than in the United States, where a grace period is granted before delisting penny stocks.

▲Rather than a mechanical comparison, you can view this as setting standards with reference to foreign cases in order to swiftly sort out insolvent companies. We are adopting global standards, but the specific details differ from country to country. In comparison, there are areas where our regulations are stronger than those of the Nasdaq in the United States and areas where they are weaker. In our case, once a penny stock is designated as an issue under management, we are pushing for a requirement that it must trade at 1,000 won or more for 45 consecutive days within a 90-day period; on the Nasdaq, the relevant period is shorter than this.

Kwon Daeyoung, Vice Chairman of the Financial Services Commission, is holding a joint briefing by the Ministry of Science and ICT and the Financial Services Commission on responses to hacking at the Government Complex Seoul in Jongno-gu, Seoul on Sept. 19, 2025. Officials from Lotte Card and KT attended the briefing and answered reporters' questions. Photo by Jo Yongjun

-You said you will prevent companies from avoiding delisting through temporary share-price boosting. How will this work in practice?

▲We intend to extend the period for maintaining the market capitalization standard in order to block purely formal circumvention. After designation as an issue under management, a company will have to exceed the market capitalization threshold for 45 consecutive days within a 90-day period to avoid delisting. This has been tightened from the current requirement of 10 consecutive days or 30 cumulative days. Because the market capitalization standard must be maintained for 45 consecutive days, we plan to fundamentally block the possibility of temporary share-price boosting. In this process, for stocks where there may be organized illegal activity, we will strengthen market surveillance.

-How will you respond to investor losses that arise during the process of determining which companies are insolvent?

▲It is already too late to talk about ex post remedies for consumer losses. For a long time, the public has been fully aware of penny stocks and so-called "operation stocks" involved in manipulation schemes. Investors continue to suffer losses due to problems such as a sudden surge in trading volume of a particular company's shares or the involvement of share-price manipulation groups. I believe that dealing with this decisively now will help the capital market. Companies, too, once designated as issues under management, should change their business plans or otherwise show active efforts to transform themselves, explain these efforts to shareholders, and subject themselves to evaluation.

-What impact do you expect from moving up the schedule for raising the market capitalization standard for listed companies?

▲In light of investors' expectations for the capital market and companies' funding needs, we decided, as a matter of policy judgment, that it was necessary to accelerate the pace of reform, and therefore brought the timeline forward. First of all, the delisting requirements for penny stocks will take effect from July 1. We will give companies a period during which they can take action and will design the detailed criteria during that time. We also plan to communicate with companies on how this plan will affect them so that the system can be designed in a way that is both acceptable to them and sophisticated.

-Why were revenue-based criteria for delisting not included in this plan?

▲Sales revenue is difficult to improve in the short term through companies' own efforts, so we decided to maintain the existing approach. Instead, we have strengthened evaluation through market capitalization and share price.

Kwon Daeyoung, Vice Chair of the Financial Services Commission (center), and Ryu Jemyung, Second Vice Minister of the Ministry of Science and ICT (left), held a joint briefing on measures to respond to hacking on the 19th at Government Complex Seoul in Jongno-gu, Seoul. Representatives from Lotte Card and Korea Telecom were present and answered questions from the press. 2025.9.19 Photo by Cho Yongjun

-You mentioned coordinating to ensure that applications for preliminary injunctions against delisting decisions are handled quickly. What do you mean by that?

▲We are not asking the courts to make any specific substantive judgment; what we mean is that we will communicate so that lawsuits can proceed swiftly. Once this plan is introduced, the number of applications for preliminary injunctions is likely to increase, which could add to the courts' workload. In this situation, the idea is to enable lawsuits to move forward quickly in order to protect investors.

-What avenues will be available for companies that have been delisted to relist after recovering their corporate value in the future?

▲We plan to make use of the over-the-counter (OTC) market for unlisted stocks operated by the Korea Financial Investment Association (K-OTC). A delisted companies board has been newly created within K-OTC, and the shares of delisted companies will be tradable through K-OTC. This will provide liquidity to investors and give companies an opportunity to be re-evaluated. Once they meet the necessary conditions, companies will be able to move from the delisted companies board to become regular listed issues on K-OTC, and if they then deliver solid performance, a ladder will be in place for them to return to KOSDAQ.