S. Korea to ease 5% disclosure rule to support shareholder activism

S. Korea to ease 5% disclosure rule to support shareholder activism


South Korea’s ruling party and the government
agreed Thursday… to revise several statutes as part of efforts to create a fair economy,…
one of the Moon administration’s key economic policies. Kim Hyesung reports. The government will ease the so-called ‘five-percent
disclosure rule’,… to help increase shareholder activism in the country. The five percent rule mandates that an investor
who owns five percent or more of the shares in a listed firm… needs to provide a detailed report to the
country’s financial watchdog… when selling or buying more than one percent of the stocks
within five days. Critics have said the measure limits shareholders
rights,… as it exposed their investment strategies. The revision would enable an extension of
the reporting period and filing of simpler reports… for investors whose purpose of
buying or selling of stocks is not intended to exercise influence over management decisions. This is just one of the 23 legislative changes
the Korean government and the ruling party announced Thursday… to help improve corporate
governance and address unfair market practices. “We will revise the laws so corporate board
of directors and shareholder’s meetings are run competitively. We will strengthen rules related to corporate
disclosure and circular shareholding structures.” A so-called ten percent rule will be also
be eased. The rule mandates… that an investor who
owns more than 10 percent of a listed company needs to return the profit gained from short-term
trading to the company. Regulators will provide exemptions to this
rule for the National Pension Fund,… if it comes up with guidelines to prevent the
misuse of confidential information or insider trading. In addition, the employment period of external
board members… will be cut from a maximum nine years to six years to enhance independence. Other revisions include consumer rights protection
in e-commerce and finance and stronger regulations for holding companies,
The ruling Democratic Party said it will work closely with the government to pass the revisions
by the second quarter of 2020. Kim Hyesung, Arirang News.

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