[Work Report] FSC to Introduce 'Ad Hoc Dividend' System... "Preparing Measures for Leveraged ETF Volatility"

Interest Payments on IPO Subscription Deposits Planned; Irrational Practices to Be Addressed

Three Structural Innovation Programs for KOSDAQ to Launch in Full Swing

"Korea Premium Week" Set for September

Financial authorities are pushing to introduce the "as-needed dividend" system, allowing listed companies to pay dividends whenever necessary, regardless of the quarter or half-year period. Regarding the recent surge in market volatility triggered by the launch of leveraged ETFs consisting solely of Samsung Electronics and SK hynix, the authorities stated they are currently preparing response measures.

On the morning of July 15, the Financial Services Commission, during a joint work report with the Ministry of Economy and Finance and others, unveiled these plans for strengthening the capital market. Commissioner Lee Eogwon emphasized, "We have laid the foundation for transforming our capital market into a 'Korea Premium'," and added, "We will establish a globally leading capital market that the public can tangibly feel."

Accordingly, the Financial Services Commission plans to focus on revitalizing the KOSDAQ market, which has been underperforming compared to the KOSPI, as well as creating better conditions for long-term investment. In addition, the commission will accelerate practical and impactful reforms by improving irrational structures in the capital market and enhancing convenience for market participants.

First, the commission will introduce the as-needed dividend system by revising the Capital Markets Act in the first half of next year. This initiative aims to encourage increased dividends by enabling companies to design more flexible payout schedules, unconstrained by quarterly or semiannual periods. Companies will be encouraged to disclose dividend decisions prior to the window for shareholder proposals (six weeks before the annual general meeting). In the fourth quarter, an electronic shareholders’ meeting platform operated by the Korea Securities Depository will be opened to further facilitate the exercise of voting rights by shareholders.

The commission will also address unfair practices that investors have experienced. Measures include requiring securities firms to pay interest on subscription deposits during public offerings, and lowering the credit interest rates currently applied to proceeds-secured margin loans, which are about 9% per annum. Detailed implementation plans for these reforms are expected to be finalized within this year.

The transition to a T+1 settlement cycle, whereby investors receive their proceeds the day after selling stocks, is anticipated as early as the second half of next year. Monitoring and sanctions against the spread of false information and exaggerated disclosures will be strengthened, and measures to block illegal activities by so-called "finfluencers" will be pushed forward within the year.

The Financial Services Commission will also implement a "three-pronged structural innovation program" for the undervalued KOSDAQ. At the listing stage, customized exceptional listings will be expanded to support innovative companies. At the delisting stage, requirements for delisting will be strengthened to facilitate swift removal of underperforming firms. Starting in January next year, the commission will introduce a segmented market system that distinguishes between excellent and ordinary companies.

The commission will also actively work to attract overseas investors and companies. From September 28 to October 16, it will host the "Korea Premium Week," during which investment relations events targeting global pension funds, investment banks, and asset managers will be held to promote investment in the Korean capital market. The commission also plans to conduct international IR sessions to attract KOSDAQ listings from global unicorns, including those based in Silicon Valley in the United States, in addition to KOSDAQ, KONEX, and pre-IPO company IR events. Recently, it has been reported that some U.S. companies have expressed interest in listing on KOSDAQ.

Regarding the growing concerns over investor losses and market volatility caused by leveraged ETFs focusing solely on Samsung Electronics and SK hynix, the government has stated that separate countermeasures are currently being devised at the state level. Although there is a growing chorus for urgent safeguards as all related ETFs have recently hit their lowest prices since listing, clear solutions have yet to emerge.

Shin Jinchang, Secretary General of the Financial Services Commission, said, "The market review meeting, involving the Ministry of Economy and Finance, the Financial Services Commission, the Financial Supervisory Service, and the Bank of Korea, will take into account the impact on the market and explore measures accordingly. We will announce the outcomes once finalized." In this context, on the previous afternoon, the Korea Financial Investment Association and the CEOs of the top 10 securities firms held an emergency meeting and agreed to implement self-regulatory investor protection measures, including raising the minimum basic deposit (currently 10 million won) and distributing rebalancing trades.

This content was produced with the assistance of AI translation services.