Panel Tightens Regulations on Reporting Changes in Stakes of Major Investors

The Financial Supervisory Service said Sunday it plans to tighten sanctions on corporations and investors who violate or ignore a regulation that requires a holder of a 5 percent or larger stake in a firm to report changes in that stake to the financial watchdog.

When an investor's stake exceeds 5 percent or an investor with a stake of 5 percent or larger faces a change to the stake of more than 1 percentage point, the investor should report the change to the Financial Supervisory Service within five days after the change. If an investor violates the rule, a ban will be placed on exercising voting rights on shares in excess of the 5 percent stake for six months or criminal punishment may be meted out.

The rule exists to prevent an ordinary investor from suffering losses due to ignorance of the fact that a trade of shares in heavy volume occurred. The rule also aims at preventing hostile takeovers.

According to the financial watchdog, among the 1,644 reports on such changes of stakes in the companies listed on the Korea Stock Exchange or on the Kosdaq market, made from January to April, 190 reports, or 11.6 percent, were delayed or included errors.

by Huh Kui-sik