The Financial Services Commission issued a preliminary notice of rule changes regarding the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) and subordinate regulations on September 25. The proposed rule changes are intended to strengthen the disclosure duty of listed companies with regard to their acquisition and disposal of treasury stocks to promote the use of treasury stocks for the purpose of enhancing shareholder value. The revision proposal will enter a 40-day public comment period from September 26 to November 5.
In 2024, a relevant rule change was made requiring listed companies to disclose their treasury stock holding status and future plan when the proportion of treasury stock holding is five percent or more of the total volume of stocks issued. Since then, the volume of treasury stocks being acquired or cancelled has increased significantly. In 2025, the volume of treasury stocks that have been cancelled in the January-August period (KRW18.8 trillion) has already surpassed the level (KRW13.9 trillion) seen in the twelve-month period a year ago.
However, additional rule changes are deemed to be necessary as some listed companies fail to indicate their treasury stock holding status or merely resort to perfunctory reporting practices.
Thus, the proposed rule changes will strengthen relevant rules on the disclosure of treasury stocks and establish a regulatory ground to impose aggravated penalties for recurrent rule-breaking to help promote the use of treasury stocks for the purpose of enhancing shareholder value for ordinary shareholders.
Key Revision Details
First, when the proportion of treasury stock holding is one percent or more of the total volume of stocks issued, listed companies will be required to disclose their treasury stock holding status and future plan twice a year.
Under the current rules, the minimum threshold is set at five percent of the total volume of stocks issued, and companies are subject to the treasury stock disclosure requirement once a year.
However, a review of treasury stock disclosure practices for 2024 revealed that a considerable number of companies resorted to perfunctory disclosure practices lacking detailed information.
Thus, the minimum threshold for treasury stock disclosure will be tightened to one percent of the total volume of stocks issued, so that more listed companies will become subject to the treasury stock disclosure duty for their annual and semi-annual business report filing.
Second, listed companies will be required to provide in their treasury stock disclosure reports a comparison between their previously announced plans and actual implementation status.
Under the current rules, companies disclose their treasury stock acquisition, disposal, and cancellation plans in their annual business reports but often deviate from their original plans to the surprise of investors, raising problems for market predictability.
Thus, the proposed rule changes will require listed companies to provide a comparison between their previously announced plans and their actual implementation status for the six-month period thereafter in their annual and semi-annual business reports. If the level of deviation is deemed to be considerable (30 percent or more from the original plan), specific reasons need to be also provided.
Third, there will be a regulatory ground established for imposing aggravated penalties against recurrent rule-breakers.
Under the current regulatory system, various forms of violations in treasury stock disclosure practices are not sufficiently and effectively sanctioned.
Thus, the proposed rule changes will allow authorities to make use of diverse sanctions mechanisms, such as recommendation for removing company executives, restriction from issuing securities, penalty surcharge, and criminal punishment, and to bring aggravated penalties against recurrent rule-breakers to boost the effectiveness of sanctions.
Expectation and Futher Plan
This revision proposal is expected to help promote the use of treasury stocks for the purpose of enhancing shareholder value for ordinary shareholders.
The rule changes will enter a 40-day public comment period from September 26 to November 5 and go through a successive legislative review and government approval process before entering into effect in the fourth quarter of this year.
* Please refer to the attached PDF for details.