SEOUL, Sept. 5 (Korea Bizwire) — South Korea’s financial regulator said Thursday it will soften corporate disclosure rules to make shareholder activism more active.
Under the 1991 rule, if an investor who owns 5 percent or more of shares of a listed firm buys or sells more than 1 percent of stocks in the company, the investor must make a public disclosure within five days from the date of the transaction.
The investor is required to submit a reporting form either for “exercising influence on the management” or “investment only.”
The rule was aimed at raising transparency in stock transactions and allowing listed firms to better cope with a bid for hostile takeover.
But, critics said the rule has undermined shareholder activism by institutional investors since they introduced a so-called stewardship code.
Institutional investors in South Korea have adopted the stewardship code, which refers to a set of principles or guidelines aimed at making them active and engaging in corporate governance in the interests of their beneficiaries.
The revised rule will allow an investor to extend the disclosure deadline and file less-regulated reporting, the Financial Services Commission (FSC) said in a statement.
If an investor makes such a transaction to cope with illegal activities of a listed firm or its executives, the investor will also be subject to the revised rule, the FSC said.
The stewardship code was born out of soul-searching that determined the 2008 global financial crisis resulted from institutional investors’ failure to check the boards and top managers of invested companies.
Following the lead of Britain, the United States and other major advanced economies had introduced the system as of 2017.
South Korea adopted its own version in December, 2016. More than 100 local asset management companies and investment advisory firms adopted the code at the end of June, the FSS said.