The government has threatened to designate companies as bona fide disclosure companies if they take part in a corporate value up program aimed at boosting short-term stock prices, but some point out that this will have little significance as the level of penalty for breach of disclosure. regulations are not strict. If a company is designated as a dishonest disclosure corporation, it can even lead to delisting, but this has never been the case in previous cases.
Graphics = Seohee Jeong
According to the Korea Exchange on the 7th, the number of KOSPI-listed companies designated as bona fide disclosure companies in the past year was 34, of which 19 received 0 penalty points. The average penalty point was 2.25 points, and there was almost no penalty.
If you receive 10 penalty points immediately, trading will be suspended for one day. And in the last year, EID (093230) was the only one to receive more than 10 points at once. In addition, if 15 penalty points have accumulated over the past year, it is designated as a controlled stock, and the resulting sanctions include ▲ 1-day trading suspension ▲ 6-month sales restriction in case of a paid-up capital increase in through a 3rd party. allocation ▲ excluding stocks subject to credit transactions.
The maximum sanction is an additional 15 penalty points for one year after being designated as a controlled item. In this case, it is subject to a substantial review for eligibility listing. This means it could be devalued. However, this is only due to the regulations, and there has been no case where a company has been disqualified simply by being designated as a dishonest disclosure corporation.
Graphics = Seohee Jeong
The average penalty point of 2.25 points is very low considering the standards for reviewing sanctions for disclosure in good faith. The Korea Exchange calculates penalty points based on two axes, including the motive for the offense and the importance of the offense, and then determines the final penalty point by considering the reasons for aggravation or reduction. A score of 2 is at the level of ‘minor negligence + ordinary offence’ or ‘ordinary negligence + minor offence’.
One of the reasons why the penalty points are low is that it is difficult to prove the intentionality of listed companies. The Korea Exchange can only impose high penalty points if it finds circumstances that a listed company has deliberately violated disclosure regulations, but since sanctions are involved, it is difficult to get cooperation from listed companies. In addition, the circumstances are different for each listed company, which makes it difficult to accurately distinguish the motive for the crime.
Reasons for reduction among criteria review sanctions for dishonest disclosure/Korean Exchange
There are also gaps in the reasons for the reduction. Reasons not related to disclosure, such as ‘participating in the classified voluntary compliance program at the general meeting of shareholders and holding the regular shareholder meeting in a classified manner in the most recent financial year’, are included in the reasons for reducing points punishment As various incentives were offered to overcome the build-up of stakeholder meetings in March, an unexpected reason was given for reducing disclosure penalty points.
The Financial Services Commission provided listed companies who want to participate in the Upsell Program with an impregnable shield that allows them to avoid being designated as a dishonest disclosure corporation. In publishing the guidelines for the corporate value improvement plan on the 2nd, the Financial Services Commission said, “Even if the results of corporate management do not match the published predictions, if the disclosure relating to the exclusion of from liability, it is subject to an exception. to the application of good faith disclosure.” This means that if you simply add the investor warning phrase ‘figures may vary depending on future market conditions’ to the disclosure, you will not be subject to sanctions related to disclosure.
Some believe this means one more card that stock price manipulation forces can use. This is because they can raise the stock price by announcing a great corporate value enhancement plan and then use a disclaimer to get out by saying, “We had no choice due to economic fluctuations.” An official in the financial investment industry pointed out, “When the government creates a system, companies somehow create loopholes.”
There are already many cases of misuse of the current disclosure system. The method is to add secondary batteries, artificial intelligence (AI), etc. for new business purposes and publish them, then raise the stock price and make an unfair profit. In fact, at the end of last year, the Financial Supervisory Service investigated 233 listed companies that added 7 theme industries as new business purposes, and revealed that 55% of them were not pursuing related projects at all.
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