This content is from: Local Insights

New rules on South Korea disclosure

The Financial Supervisory Service (FSS) of South Korea has announced a new corporate disclosure system under which there will be an introduction of computerisation of the entire disclosure process and the follow-on examination procedure as well as different review standards for both top-ranking and struggling companies.

The FSS anticipates greater efficiency in the examination process through selective concentration and enhancement of the predictability of standard criteria. It is envisaged that these changes will allow greater levels of transparency and investor protection.

Under the revised system, company management information are collected automatically through the computerised system in the form of a paperless corporate management information report with which companies are rated in accordance with their default risk. They are given one of five level ratings in three separate areas: financial, non-financial and comprehensive. An initial rating is given at the time the relevant report is submitted and subsequently updated on a monthly or quarterly basis.

As part of the new paperless examination of the corporate management information report, the FSS is authorised to collect seven items of information items: the company background, default risk ratings, ownership changes, funding and operation status, legal compliance status, main financial information and miscellaneous information (change of name, and so on), the inspection of which would enable the FSS officials to accurately and comprehensively ascertain the true state of a given company's affairs.

The examination history is then saved in a company-specific database, with the standards for the review to be maintained by the FSS.

The FSS will concentrate its functions to review lower-rated companies (with a higher risk of default) by way of cross-check examinations. Higher-rated companies, on the other hand, will be subject to a simplified review.

Ji Yeoun Kim and Steven Lee

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