The Financial Services Commission introduced measures to boost confidence and innovation in the KOSDAQ market at the government work report session held on December 19. The measures are intended to bring about fundamental improvements in the KOSDAQ market by restoring public confidence in the market and reinvigorating it as a platform of growth for innovative companies, thereby spreading the momentum of KOSPI 4,000 throughout all segments of capital markets.

Over the years, the KOSDAQ market has grown in terms of the number of listed companies and the value of market capitalization. In comparison to 2005, market capitalization rose 15 times (from KRW32 trillion to KRW489 trillion) and the number of listed firms grew 1.9 times (from 917 companies to 1,731 companies) However, the market has not been able to fully spring back from the lost confidence seen in the post dot-com bubble. As a result, the KOSDAQ index now stands lower than when it was first launched in July 1996 (1,000 pts). Moreover, non-viable companies are not getting delisted in a timely manner, and institutional investors have shown a tendency to avoid investing in the KOSDAQ market. As a key infrastructure for Korea’s innovation and its venture ecosystem, the KOSDAQ market is in urgent need of an overhaul to make sure that it can properly function as it should.

In this regard, the FSC held a series of meetings with market participants (venture capital firms, startup and venture businesses, institutional investors, and underwriters), academia, and related organizations to gather a variety of opinions before drawing up a set of measures intended to boost confidence and innovation in the KOSDAQ market. The measures consist of the following four key policy directions and seventeen specific tasks—(a) strengthening the independence, autonomy, and competitiveness of the KOSDAQ market division, (b) redesigning the listing/delisting system to make the KOSDAQ market more dynamic with easy entry and exit, (c) fostering stable conditions for institutional investors to enter the market, and (d) strengthening protection for investors to bolster market confidence.

Key Measures

a) Strengthen the independence, autonomy, and competitiveness of the KOSDAQ market division at the Korea Exchange (KRX) to promote internal competition with the KOSPI market and facilitate own efforts for innovation

Currently, there is a certain level of independence and autonomy granted to the KOSDAQ market separately from the KOSPI market as it has its own KOSDAQ market committee (made up with mostly external committee members) making decisions on listing/delisting and with regard to revisions to its operating rules. To help strengthen the expertise and impartiality of the KOSDAQ market committee, a new set of career and professional requirements will be established for its committee members. In addition, the KRX’s performance evaluation system will be revamped significantly to facilitate the KOSDAQ market division’s own efforts for innovation. When evaluating the management performance of the KRX, the KOSDAQ market division’s business operation will be evaluated independently separated from other divisions, and there will be additional incentive pays distributed according to evaluation outcomes. In addition, an overarching examination will be carried out on the KOSDAQ market division’s organizational and staffing structure to seek expansion and adjustment accordingly. These measures will help to more firmly establish a competition-driven operating system internally at the KRX between the KOSPI market division and the KOSDAQ market division.

b) Redesign the listing/delisting system to make the KOSDAQ market more dynamic with easy entry of innovative companies and prompt exit of non-viable companies

Currently, there exists a special listing review process for businesses in the biotech industry only, offering them more tailored listing review criteria based on their technological prowess and potential for growth. This technology-tailored special listing process will be made available to the artificial intelligence (AI), aerospace, and energy (energy storage systems and new/renewable energies) sectors, which are considered to be nationally critical technologies, to facilitate innovative companies from these industries to list on the KOSDAQ market. The special listing criteria for these three industries will be prepared within this year, and this tech-tailored special listing process will be opened up to more industries next year. Moreover, there will be a new expert group of tech advisors (about 60 experts in key strategic tech sectors) to be utilized in the KRX’s tech-tailored special listing review process to ensure a sufficient level of expertise and speed up the review process. In addition, for companies receiving early-stage investments from venture capital (venture investment funds and new technology investment funds), there will be regulatory improvement to prevent unintended violation of public offering rules (e.g. duty to file and disclose securities registration when soliciting share subscription from 50 or more individuals), which may become known at a later stage and turn into a source of delay in the listing process.

There will be a “strict-and-prompt-exit” principle established in the market for delisting. In July this year, relevant rules were upgraded streamlining the procedures and the period it takes for delisting, while strengthening the requirements (audit opinion, market capitalization, and revenue) needed to be maintained to avoid delisting. Based on this, the number of delisted cases this year (38) went up 2.5 times more than the recent three-year average (15). If a tech special listed company changes its core business area to an irrelevant field of business within five years from the time of listing, it will become subject to a delisting review. Additionally, the number of delisting review teams at the KRX will be expanded from three teams (with 16 staff) previously to four teams (with about 20 staff) in the future to speed up the review process and ensure an early exit of non-viable companies. As part of the upgraded rules, from January 2026, the market capitalization requirement to stay listed will be adjusted upward to KRW15 billion from KRW4 billion previously. According to a simulated test, there are 14 KOSDAQ-listed companies in 2026 that will be subject to delisting review based on their market capitalization and revenue standards. By 2029, which is when the upward adjustments will be completed, 165 companies (or 9.5 percent of all KOSDAQ-listed companies) are expected to be subject to delisting review. Thus, authorities will make sure to thoroughly prepare and make support available for a seamless transition.

c) Foster conditions for institutional investors to enter the market, thereby boosting market confidence and promoting more participation from retail investors

Currently, the KOSDAQ market is predominantly led by retail investors, and institutional investors make up only 4.5 percent (in terms of transactions amount), which is less than one-third of the KOSPI market. Thus, to boost the stability and confidence in the KOSDAQ market, it is crucial to broaden the base of institutional investors and incentivize their participation. To this end, there will be increased tax benefit (KRW30 million currently) for KOSDAQ venture funds, and the creation of a tax benefit will be considered for newly introduced business development companies (BDCs, effective from March 2026). In addition, the preferential allotment of public offering shares for KOSDAQ venture funds will be expanded to 30 percent from 25 percent previously. Asset management companies (42 businesses) will be able to manage BDCs without going through a separate approval process. Venture capital firms will also be allowed to manage BDCs by flexibly applying the authorization requirements. Moreover, large investment banks are encouraged to invest in KOSDAQ venture funds and BDCs in their duty to supply venture capital in the market. Specific details of tax support will be unveiled early next year. Along this line, major institutional investors, such as National Pension Service and Government Employees Pension Corporation, will be encouraged to invest in the KOSDAQ market. Their fund management performance evaluation, which is currently based on KOSPI index only, will begin to take into account KOSDAQ index to a certain degree. More specific details regarding this will be prepared early next year. In the meantime, there will be measures to expand the availability of equity research reports on KOSDAQ-listed companies provided by securities firms. In this regard, the five securities companies (comprehensive financial investment business entities) that have been recently approved or designated for the provision of promissory notes or investment management account (IMA) services have announced plans to bolster their KOSDAQ research analysis capacities by increasing the size of research staff from 4.6 individuals on average previously to 9.2 individuals on average. The number of research reports being issued will also be increased from 396 reports on average to 621. Moreover, tech special listed companies will need to disclose corporate value enhancement plans in order to be qualified for delisting exemptions. This disclosure requirement for corporate value enhancement plans will begin to apply to companies that are newly applying for IPO after relevant KRX rule changes take effect in the second quarter of 2026.

d) Provide clearer standards on dual listing of parent-subsidiary companies and overvaluation of IPO prices while strengthening protection for investors

With regard to the dual listing of a parent company and its subsidiary, it has been pointed out that the standards for determining a dual listing have remained unclear so far, raising problems for predictability and investor protection. To address this problem, specific review criteria for dual listing will be incorporated into the listing rules. Under the current rules, stronger standards are in place only for dual listings involving IPOs of split-off subsidiaries. However, in the future, there will also be clear standards incorporated into the rules regarding dual listings involving methods other than split-offs, such as a takeover or an establishment of subsidiary, to bolster predictability. Moreover, to help increase the responsibility of IPO bookrunners in determining issue prices, put-back option will be more widely utilized, under which retail investors have a right to sell back IPO shares to bookrunners at a set price (90 percent of issue price) within a certain period of time. To make sure that investors understand and are aware that they have this option, there will be enhanced efforts to disseminate information to investors in stages. In a similar vein, when bookrunners determine issue prices using estimated performance of IPO companies, a comparative disclosure will be provided demonstrating the disparity between an estimate and actual performance to discourage bookrunners from overvaluing estimated performance in determining issue prices. Lastly, there will be efforts to actively support parliamentary discussions for amending the Financial Investment Services and Capital Markets Act (FSCMA), which aims to introduce the cornerstone investor system and the preliminary bookbuilding process to help improve the appropriateness of IPO issue prices and broaden the base of mid-to-long-term investors.

* Please refer to the attached PDF for details.