Two-Year Curb On Selling Out Applied to Back Door Listings

Large shareholders of companies that get a "back door listing" on the Kosdaq market will be prohibited from disposing of their shareholdings for two years, the Financial Supervisory Service and the Korea Securities Dealers Association said Friday.

A "back door listing" describes cases in which a company fails to meet criteria for a stock listing but acquires an already-listed firm to get on the board. The two-year restriction on large shareholders already applies to newly listed companies. But the Kosdaq decided to extend it to include the indirectly listed firms because the practice is on the rise.

The move is designed to protect the smaller shareholders of the back door listed companies. "We will apply the Securities Dealers Association's regulation so that it also covers the shareholders of back door listed companies," a source from the supervisory agency said. The regulator will reportedly revise the securities association's regulations around the middle of this month.

Last month, the financial regulator ordered six Kosdaq-listed companies, including Dowon Telecom, Boyang Industry and IHIC, to revise financial statements and merger reports that were prepared in order to carry out back door listings.

by Lee Hee-sung