INSIGHTS

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Financial Supervisory Service Announces 2025 Business Plan On February 10, 2025, the Financial Supervisory Service (the “FSS”) unveiled its strategic objectives for the coming years, focusing on five key areas: stability, trust, mutual growth, the future and renewal. To address these objectives, the FSS has outlined 14 core initiatives. 1. Stability: Establishing a Robust Financial System (1) Proactive Risk Management: The FSS aims to meticulously manage and proactively address risk factors in the financial market. The FSS will conduct a comprehensive review of real estate financing, project financing, household debt and corporate loans to identify and manage vulnerabilities and refine regulations. In collaboration with the Bank of Korea, the FSS will conduct stress tests to address global economic uncertainties and enhance risk management across the financial system, including foreign exchange risk. (2) Alleviating Debt Burdens in the Financial Sector: The FSS will establish a management framework for household loans, emphasizing capacity-based assessment and structural improvement to gradually reduce the household debt-to-GDP ratio. The FSS will also closely monitor the debt of corporates, particularly in high-risk industries and large conglomerates, to detect early risks and to guide improvements. (3) Improvements in Regulatory Frameworks: The FSS plans to strengthen capital and liquidity management systems of banking groups, and improve capital regulations across various financial sectors to enhance loss-absorbing capacities. The FSS will align supervision and regulatory frameworks for banks, small and medium-sized enterprises, insurance and financial investments with global standards with the intent to modernize the system. 2. Trust: Building a Fair Financial Paradigm (4) Enhancement of Consumer Rights Protection: To protect consumer rights, the FSS will improve customer-centric financial transaction practices and enhance oversight of internal control systems through evaluation of consumer protection practices. (5) Eradication of Illegal and Unethical Practices: The FSS will strengthen supervisory and inspection systems with the aim to proactively prevent unethical and unfair business practices. The FSS will apply a zero-tolerance policy to major financial misconduct, conduct strict inspections, and enhance the monitoring of unfair transactions. (6) Improvement in Business Practices and Internal Control Culture: To prevent misselling, the FSS will improve sales practices for high-risk financial products and encourage the establishment of accountability structures by inspecting their operational status. In addition, the FSS will pursue institutional improvements such as enhancement of performance-based compensation systems and organizational culture by strengthening the internal disciplinary standards of financial companies. 3. Mutual Growth: Establishing a Collaborative Growth Ecosystem with Citizens (7) Mutual Growth of the Capital Market and the National Economy: The FSS will facilitate simultaneous growth of the national economy and financial markets by modernizing the capital markets and restructuring the financial investment industry. Initiatives to be undertaken include encouraging venture capital investments in innovative companies, preparing for new alternative trading platforms, improving systems for the efficient exit of marginal companies, supporting the development of wealth-enhancing products for citizens, and refining regulatory frameworks for systematic risk management. (8) Strengthened Support for Vulnerable Groups: The FSS will promote the enhancement of financial support, such as expanding loan incentives for low-credit individuals and sole proprietors, to increase funding for vulnerable groups. The agency will exert efforts to promote the disclosure and comparison of loans for sole proprietors and to improve the utilization environment for financial services by expanding infrastructure supporting individuals with disabilities and increasing the use of mobile bank branches. (9) Elimination of Financial Crimes Affecting Everyday Life: The FSS will implement measures to prevent financial crimes, such as voice phishing, together with continuing collaboration with related agencies. It will provide support to implement revised laws such as the “Telecommunications Fraud Compensation Act.” 4. Future: Building a Responsible Foundation for Innovation (10) Support for Digital Innovation: The FSS will support the use of pseudonymized information and synthetic data to promote AI application, and assist in establishing an AI platform for small and medium-sized financial institutions. The FSS will also make efforts to legislate for digital assets and promote industry self-regulation to encourage the stable and advanced development of a digital asset regulatory framework. (11) Establishment of a Safe Digital Environment: The FSS will encourage financial companies to self-monitor and improve their IT environments through newly established guidelines, such as those for IT audits, and to bolster their cyber resilience through regular simulated hacking drills, strengthened IT governance and establishment of a safe, trustworthy digital environment. (12) Support for Securing Future Growth Potential: The FSS will explore ways for banks to use their resources and infrastructure in non-financial services, continuously revising sector-specific regulations to support innovation. It will make efforts to support sustainable development in the financial industry, including the introduction of measures for the separate management of settlement funds by payment gateway firms and restoring trust in electronic financial services. 5. Renewal: Sustaining Internal Improvements for Exemplary Supervisory Services (13) Renewal of Supervision Practices: The FSS will refine its processes for inspections, sanctions, terms and conditions of reviews, and dispute resolution. It will also enhance the management of the total volume and progress of inspections to improve the speed and efficiency of inspection operations, and support the efficiency and convenience of financial companies’ operations through automation of systems for procedures such as standardized terms and conditions reviews. To support financial stability and the real economy, the FSS will implement flexible supervisory policies that strengthen the soundness and liquidity capacity of financial companies within global standards. (14) Enhancing Regulatory Competitiveness Through Digitalization: The FSS will establish a data-centric supervisory system to facilitate the digital transformation of supervisory work. By expanding accessibility to supervisory information and gradually implementing a roadmap for digital transformation, the agency will digitalize financial supervision, and will expand the IT workforce to enhance the expertise and capability of supervisory work. The FSS’s 2025 business plan prominently features topics that have been consistently highlighted by the agency, such as enhanced risk management, support for innovation in the financial industry, increased trust in the capital markets, strengthened financial customer protection and improvements in financial supervisory practices. Amid anticipated political and economic uncertainties, the Governor of the FSS placed particular emphasis on “the stability of financial markets and systems,” “zero tolerance policy for major financial misconduct and illegitimate activities driven by self-interest” and “enhancement of fundamental roles of financial institutions, such as strengthening the management of household debt and real estate project financing.” [Korean Version]
2025.02.12

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Regulations on Dark Patterns Take Effect and KFTC Publishes a Q&A on Enforcement of the Regulations On February 14, 2025, statutory amendments strengthening regulations on so-called “dark patterns” took effect, both in the Act on Consumer Protection in Electronic Commerce, Etc. (“E-Commerce Act”) and its enforcement decree and rules (“Enforcement Regulations”). The amended Enforcement Regulations (i) provide additional information on e-commerce providers’ obligations regarding certain types of dark patterns, and (ii) establish detailed criteria for imposing business suspensions and fines for non-compliance with these obligations. The Korea Fair Trade Commission (“KFTC”) has also published a Q&A document regarding the regulations on dark patterns under the amended Enforcement Regulations to provide guidance to market participants. Key aspects of the amended Enforcement Regulations and the Q&A document are as follows. 1. Obligations and Penalties Related to Dark Patterns Under the E-Commerce Act (1) Detailed Regulations on Dark Patterns The amended E-Commerce Act sets forth certain obligations and prohibitions related to six types of dark patterns (hidden renewals, drip pricing, pre-selected options, misleading hierarchies, obstruction of cancellation/withdrawal, and repeated interference). Among them, the amended Enforcement Regulations specify (i) a consent period of 30 days for hidden renewals, and (ii) exceptions for drip pricing and repeated interference (see section on Q&A document below). (2) Detailed Criteria for Business Suspension and Fines The Enforcement Regulations provide for potential business suspension and fines for violations relating to the aforementioned six types of dark patterns. It also establishes criteria regarding the duration of business suspension and the amount of penalties imposed based on the number of violations, as outlined below. First Violation Second Violation Third Violation Business Suspension 3 months 6 months 12 months Administrative Fine KRW 1 million KRW 2 million KRW 5 million 2. Key Details of the Q&A Document The KFTC published the Q&A document on February 13, 2025, including the KFTC’s authoritative interpretations on e-commerce providers’ obligations related to each type of dark pattern. We summarize some practical considerations for e-commerce providers on the key points as follows. Hidden Renewals - Requires consumer consent within 30 days before the payment date when increasing the subscription fee or converting a free service to a paid service. ? Starting point: If a one-month free trial starts on May 1 and will convert to a paid subscription on June 1 under a contract, the e-commerce provider should obtain consumer consent within the 30-day window before the payment date of June 1, which would be from May 2 to May 31. ? Scope of consent: Even if the e-commerce provider already obtained prior consent from consumers at the time of the initial contract, and even if the discount or free trial period is less than 30 days, the provider still must obtain separate consent within the period prescribed by law. ? Method of consent: Explicit consent is required in writing (this may include electronic documents or pop-up notices). If the terms of service provide for “deemed” consent based on the failure to opt-out, this may be construed as invalid under the Standardized Contract Regulation Act. ? Exemptions: The consent requirement does not apply if an e-commerce provider decides to revert to the original price, after providing a one-time discount or free service period as part of a promotion to a consumer who had already been paying a regular subscription fee. Gradual Disclosure of Costs - Requires displaying or advertising the total amount that must be paid on the first screen that refers to the price, and if there are justifiable reasons for not revealing certain costs that would affect the final price, those items and their reasons must be disclosed. ? First screen: This refers to the initial screen that displays information on products and prices to attract purchases (e.g., the search results page when searching for a product, the category page that appears upon clicking a particular category, or when specific product information with prices is displayed on the initial page or a banner). ? Total amount that must be paid: This includes all costs that the consumer must pay to make a purchase or use the service, such as shipping fees, installation fees, and taxes (like VAT). ? Justifiable reasons: This refers to cases where it is difficult at the outset to list the total amount to be paid because the price changes depending on options to be selected (e.g., shipping fees, installation fees). ? Method of disclosure: In principle, all pricing information must be disclosed on the first screen. However, on search results pages with limited space, it is sufficient to indicate only the excluded cost items and provide a direct link to a separate page to provide the justifiable reasons. (Please refer to the example below excerpted from the KFTC’s press release dated February 10, 2025.) ? Grace period: The KFTC will provide a grace period of six months from the effective date of February 14, 2025, intended to encourage voluntary compliance and self-correction. Where There Are No Spatial Constraints Where There Are Spatial Constraints (Using Pop-ups, Etc.) Pre-selection of Purchase Options - When providing an option asking consumers whether they intend to subscribe, e-commerce providers should not induce subscription by pre-selecting “Yes.” ? Providing options: This refers to asking about the intention to purchase, subscribe, or enter into a contract. Pre-selecting the option to (i) purchase recommended items or (ii) apply additional options, constitutes “inducing” subscription. However, pre-selecting merely for consumer convenience (e.g., pre-selecting a past delivery address or allowing consumers to set defaults) does not. False Hierarchies - When presenting options related to purchasing, e-commerce providers should not use visually conspicuous designs to highlight options that are unfavorable to consumers. ? Presenting options: This is limited to options concerning purchasing, subscribing, entering into contracts, or canceling, withdrawing, or terminating, and is distinct from simply displaying ads or providing information. ? Visually conspicuous difference: This is limited to cases where each option is not presented in a uniform or non-discriminatory manner, such as when the color of a specific option appears faded, the font size or checkbox is smaller than the others, or when certain checkboxes are difficult to locate. Obstruction of Cancellation or Withdrawal - Without justifiable reasons, e-commerce providers should not (i) design the procedures for cancellation, withdrawal, or termination to be more complicated than those for purchasing, subscribing, or entering into a contract, or (ii) require a cancellation, withdrawal, or termination process that is different from the one for purchasing, subscribing, or entering into a contract. ? Justifiable reasons: This refers to unavoidable circumstances such as procedures required by law, or procedures for settling accounts after termination. ? The complexity of procedures: This is assessed comprehensively considering the specific circumstances, by comparing (a) the number of steps for purchasing, subscribing, or entering into contract procedures and the number of steps for cancellation, withdrawal, or termination procedures (quantitatively) and (b) the accessibility of links to access each procedure (qualitatively). Repeated Interference - E-commerce providers should not repeatedly request consumers to change a selection or choice they have already made. ? Selection or choice consumers have already made: If the consumer did not select any options and pressed “Close window” or “Notify me later,” nothing has been selected or chosen. However, if only the option to consent is provided and the option to refuse is not available, clicking on “Close window” may be interpreted as a refusal. ? Methods of requesting changes to selections or choices: This includes re-displaying the same selection or confirming intent to change through a pop-up window. Even if the purpose is to confirm consumer choices or providing information, if the consumer is repeatedly asked to confirm their choice, it may be interpreted as requesting consumers to change their selection/choice. ? Exception: E-commerce providers may repeatedly request consumers to change their selection or choice, if the providers enable the consumers to choose not to receive such change requests for at least seven days. 3. Implications In its action plan for 2025, the KFTC included a commitment to monitor and prevent dark patterns; the KFTC’s Q&A document is in line with this commitment. The KFTC has also stated that it will provide a grace period, but only for the “gradual disclosure of costs,” considering the time needed for system development. Therefore, it is essential for businesses to assess their platforms’ user interfaces and design, to immediately identify issues and undertake any necessary corrections, as there is no grace period for the remaining types of dark patterns. Meanwhile, the Korea Communications Commission (“KCC”) is also strengthening enforcement against dark patterns. To that end, on January 22, 2025, the KCC published a “Casebook on Dark Patterns,” identifying ten distinct categories of dark pattern cases related to digital subscription services, digital service ads and notifications, and data collection. The movement to regulate various types of dark patterns spans multiple statutes, including the E-Commerce Act, the Telecommunications Business Act, and the Personal Information Protection Act. Regulatory agencies such as the KFTC and the KCC continue to release their authoritative interpretations and guidelines on dark patterns, and companies will benefit from continuing to monitoring the regulatory trends concerning dark patterns, and proactively addressing potential issues. [Korean Version]
2025.02.19

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Plans to Revamp the IPO and Delisting Systems On January 21, 2025, the Financial Services Commission, the Financial Supervisory Service, the Korea Exchange, and other relevant agencies announced the “IPO System Improvement Plan” and the “Delisting System Improvement Plan” for the value-up of the Korean capital market. Until recently, the Korean capital market has grown significantly in size, with an increase in the number of listed companies and overall market capitalization. However, the qualitative development of individual listed companies, such as their corporate value and growth potential has not kept pace. This situation seems to have led to the financial authorities’ announcement of these improvement plans. The current IPO market has primarily served investments focused on short-term profits, resulting in distortions in both IPO share prices and post-listing share price trends. Rather relaxed delisting rules and procedures have also allowed underperforming companies to remain publicly listed, hindering the enhancement in the quality of the overall capital market. To address these concerns, financial authorities plan to improve both the systems for entry to and exit from the capital market, focusing on the IPO regulations and the delisting rules. IPO System Improvement Plan To promote sound growth in the IPO market, the financial authorities have announced several initiatives aimed at improving pricing and allocation of IPO shares. These plans focus on preventing spoofing trade orders, improving the technology special listing system (i.e., a system that allows promising companies with high technology and growth potential to list on the KOSDAQ market) and revamping the IPO business practice of lead underwriters. Despite these regulatory improvement efforts, there remains a general perception that public-offering prices are still distorted due to excessive demand for IPOs as a means to generate short-term profits. To encourage investments based on corporate value rather than short-term gain, the financial authorities have recently announced their plan that includes: (i) expanding the mandatory holding commitment for institutional investors, (ii) rationalizing the eligibility criteria for institutional investors participating in demand forecasts and adjusting the demand forecasting methods, and (iii) strengthening the roles and responsibilities of lead underwriters. Key details of the IPO System Improvement Plan are as follows: 1. Expansion of Mandatory Holding Commitment for Institutional Investors (1) Introduction of a system to prioritize allocation to mandatory holding commitment institutions, along with strengthening of scoring (scheduled to take effect on July 1, 2025) The financial authorities have decided to introduce a system in which at least 40% of policy funds and other funds allocated to institutional investors will be prioritized for those that have made a mandatory holding commitment. If the total committed amount falls short of this 40% threshold, the lead underwriter will be required to acquire 1% of the public-offering volume (with a ceiling of KRW 3 billion) and hold these shares for six months. Further, the maximum scoring period for the mandatory holding commitment will be extended from three months to six months. The current scoring structure awards points based on the duration of the commitment at the time of IPO share allocation (e.g., five points for three months, four points for one month, and 1.5 points for fifteen days). Under the revised scoring structure, the points will be adjusted to seven points for up to six months, five points for three months, three points for one month, and two points for 15 days. (2) Expansion of mandatory holding commitment for policy funds (scheduled to take effect on July 1, 2025) Currently, 5% to 25% of the public offering volume is allocated specifically to policy funds, such as high-yield funds and KOSDAQ venture funds, to support their development. However, concerns have arisen due to an increasing number of instances in which these policy funds are selling IPO shares on the listing day to achieve short-term gains. In response, the financial authorities have decided to limit the allocation benefits to amounts that come with a mandatory holding commitment of at least 15 days. (3) Strengthening of sanctions against institutional investors in violation of the mandatory holding commitment (scheduled to take effect on April 1, 2025) Current regulations impose sanctions on institutional investors for violations of the mandatory holding commitment and for non-payment, including restrictions on their participation in demand forecasts. However, the impact of such sanctions has been limited, as they can be substituted for penalties or even exempted, and there is no clearly defined criteria for alleviation or reduction. For these reasons, the financial authorities have decided to clearly define the criteria for alleviation or reduction through the improvement of the current systems and focus more on restricting violators’ participation in demand forecasts, rather than solely focusing on imposing sanctions. Additionally, exceptions will be made to allow for substitutions of sanctions with penalties when the severity of the final sanctions is deemed low. 2. Rationalization of the Eligibility Criteria for Institutional Investors Participating in Demand Forecasts and the Demand Forecasting Method The financial authorities have announced measures to strengthen the eligibility criteria for institutional investors, due to the increasingly excessive participation in demand forecasts with the maximum quantity and price without sufficiently assessing corporate value. (1) Strengthening of the eligibility criteria for institutional investors participating in demand forecasts (scheduled to take effect on July 1, 2025) Many small institutional investors are participating in demand forecasts despite lacking the capability to accurately evaluate corporate value, resulting in minimal contribution to establishing reasonable public offering prices based on demand forecasts. Furthermore, there has been criticism regarding the inconsistency of eligibility criteria for the same institutional investor, which can vary depending on the type of assets involved (e.g., its own assets, fund assets, and discretionary assets) with which it participates in demand forecasts. Until now, specific eligibility criteria apply only to institutional investors participating with their own assets (i.e., (i) two years after registration with a minimum of KRW 5 billion in a three-month daily average of total entrusted assets, or (ii) at least KRW 30 billion in a three-month daily average of total entrusted assets). The IPO System Improvement Plan aims to extend this eligibility criteria to institutional investors’ fund assets and other assets under their management. However, if private equity firms or discretionary investment firms commit to a holding period of at least three months, the current eligibility criteria for fund and discretionary asset participation will remain unchanged. As for participation in demand forecasts using funds of funds, both the investing and invested funds participate concurrently by forming the total fund asset amount, leading to potential overlaps that could circumvent the subscription payment capability requirements. To mitigate these unintended effects, the financial authorities have decided to exclude contributions from invested funds when assessing subscription payment capability. For foreign institutional investors, whose substantiality (or legitimacy) may be challenging to verify due to the absence of a transaction history, the default position will be exclusion from the allocation of IPO shares. Nonetheless, if they can provide specific evidence demonstrating their operational status overseas, their substantiality will be recognized. (2) Rationalization of the first-day scoring system (scheduled to take effect on April 1, 2025) The first-day scoring system was introduced to encourage proactive participation in demand forecasts. Contrary to its purpose, however, higher scoring on the first day of demand forecasts has led to excessive focus on the first day, with participants often bidding at the upper limit or beyond the public offering price range to secure a lager allocation, without carefully considering the price. Consequently, the financial authorities have decided to improve the current scoring system by lowering the overall scores awarded based on the timing of participation. 3. Strengthening of the Roles and Responsibilities of Lead Underwriters (1) Introduction of a cornerstone investor system and a pre-demand forecasting system (proposed amendments to the Financial Investment Services and Capital Markets Act (the “FSCMA”) are scheduled to be submitted to the National Assembly in the first half of 2025) The cornerstone investor system aims to foster mid and long-term investment by enabling the pre-allocation of shares to selected institutional investors before they submit registration statements, contingent upon a lock-up period for those shares. Meanwhile, the pre-demand forecasting system allows for preliminary identification of institutional investors’ demand for investment, by incorporating market evaluations during the process of establishing a public-offering price band. To implement these two systems, the financial authorities plan to amend applicable laws and outline necessary details in subordinate legislation, including provisions to prevent unfair trade practices and address potential conflicts of interest. (2) Stipulation of internal allocation standards for lead underwriters (scheduled to take effect on July 1, 2025) Despite the “IPO Business Improvement Plan for Lead Underwriters” announced in May 2024, which requires lead underwriters to establish internal standards for allocation of IPO shares, there has been ambiguity regarding the specific components that should be included in these standards. To address this issue, the financial authorities have outlined the key elements that must be incorporated, including: (i) the prioritization method for allocating shares to institutions with mandatory holding commitments, (ii) the criteria for defining groups (or tiers) and the allocation process within each group, (iii) the criteria for weighting allocations, (iv) the criteria for exceptions, (v) the internal approval system, and (vi) the protocols for data retention. (3) Strengthening of the requirements of mandatory holding of pre-acquired shares by lead underwriters (scheduled to take effect on July 1, 2025) Under the current framework for the FSCMA, lead underwriters are restricted from transferring shares for a period of thirty days if they acquire those shares within two years of the listing date. Currently, in the KOSDAQ market, the mandatory holding period for lead underwriters is extended if shares are acquired within six months from the listing date, particularly if there is significant price deviation (calculated as the public offering price minus the pre-acquisition price). However, criticisms have arisen regarding the leniency of the price deviation criteria and mandatory holding periods, which are seen as insufficient for ensuring the accountability of lead underwriters. In response to these concerns, the IPO System Improvement Plan aims to strengthen the accountability of lead underwriters by lowering the price deviation threshold from 50% to 30% and extending the mandatory holding period from one month to three months. Delisting System Improvement Plan The current delisting system has primarily focused on providing rehabilitation opportunities for companies and protecting investors. However, this approach has resulted in delays in the efficient delisting of underperforming companies, undermining the effectiveness of the delisting rules and prolonging the delisting process. To enhance the value of the capital market by promptly and appropriately removing underperforming companies, the financial authorities plan to (i) strengthen the delisting rules, (ii) improve the efficiency of the delisting process, and (iii) improve the systems related to unlisted share trading and disclosure requirements to better protect investors. Key details of the Delisting System Improvement Plan are as follows: 1. Strengthening of the Delisting Rules (1) Financial requirements ? The requirements of market capitalization and sales revenue are to be tightened (scheduled to take effect in a phased manner starting from January 1, 2026) There has been criticism regarding the lax requirements for market capitalization and sales revenue, which allow companies with low growth potential to remain listed on the capital market. This situation not only undermines the competitiveness of the capital market but also raises concerns about its overall health. Therefore, the financial authorities plan to tighten these requirements to enhance their effectiveness. To ensure a smooth transition, this implementation will be carried out in a phased manner, allowing for an orderly adjustment within the market. Market capitalization: KOSPI (KRW 5 billion → KRW 50 billion), KOSDAQ (KRW 4 billion → KRW 30 billion) Sales revenue: KOSPI (KRW 5 billion → KRW 30 billion), KOSDAQ (KRW 3 billion → KRW 10 billion) (2) Non-financial requirements ? the criteria for “modified opinions” are to be tightened (scheduled to take effect on July 1, 2025) When a company receives a modified opinion (i.e., qualified opinion, adverse opinion, or disclaimer of opinion), it triggers a potential delisting event. In such cases, the company has the right to file an objection to contest the delisting decision and may subsequently be granted a designated improvement period. However, some companies may deliberately seek modified opinions to avoid delisting and to delay the delisting review process, despite having their delisting based on other criteria. To counteract this practice, companies that receive modified opinions for two consecutive fiscal years (including failure to submit annual reports) will face immediate delisting. Nonetheless, in consideration of their impact on the Korean economy, companies undergoing rehabilitation or workout procedures may be given an exceptional extension of one additional year to improve their situation. (3) Strengthening of the delisting review of a surviving entity in the case of relisting of a spun-off entity (scheduled to take effect on July 1, 2025) When a new company is created through a spin-off and subsequently relisted on the KOSPI market (i.e., relisting of a spun-off entity), the surviving entity is not held to separate requirements or reviews. However, this lack of scrutiny may weaken the surviving entity, so failing to meet the minimum criteria will be considered a reason to require a substantive review in the relisting process of the spun-off entity on the KOSPI market. This substantive review will evaluate factors such as equity capital, sales revenue, net income, etc., with the thresholds for these criteria set higher than those of the KOSDAQ market. 2. Streamlining of Delisting Procedures (scheduled to take effect in March 2025 or on July 1, 2025) The duration of the delisting process (i.e., the time from the occurrence of delisting reasons to the final delisting decision) will be shortened to prevent unnecessary delays. This includes a maximum reduction of improvement periods, set to take effect in March 2025, and the streamlining of the delisting review process scheduled to take effect on July 1, 2025. When both technical and substantive reasons for delisting arise simultaneously, the current rules mandate a suspension of the substantive review procedure. This procedure resumes only after the completion of a technical review and the allocation of an improvement period. In contract, the Delisting System Improvement Plan seeks to streamline this process by enabling technical and substantive reviews to occur concurrently. As a result, whichever review reaches a “delisting decision” first stands as the final decision (scheduled to take effect in March 2025). 3. Strengthening of Investor Protection (support for delisted share trading scheduled to take effect on January 1, 2026; and expansion of the application of disclosure requirements scheduled to take effect on July 1, 2025) As the number of delisted companies increases due to stricter delisting rules and more streamlined delisting procedures, there is a pressing need to enhance investor protection measures. To support continued trading of delisted shares and strengthen investors’ right to information, the Delisting System Improvement Plan sets out two key initiatives: (i) the utilization of K-OTC, the trading platform for unlisted shares, to facilitate the trading of delisted shares for a specified duration, and (ii) a requirement for companies to disclose the main contents of their “improvement plans” submitted to the Korea Exchange. Implications The current IPO market is heavily influenced by short-term profit-seeking investors, leading to distortions in IPO pricing and significant fluctuations in share prices following the IPO. The IPO System Improvement Plan aims to enhance the fairness and credibility of the IPO market. The implementation of the Delisting System Improvement Plan is poised to transform the capital market by focusing on blue-chip companies. It seeks to facilitate the efficient delisting of underperforming companies, ultimately enhancing the overall value of the capital market. However, many listed companies may struggle to comply with the stricter delisting rules or may need to realign their financial structures to retain their listed status. Consequently, it is advisable for businesses to proactively prepare for these strengthened regulations in consultation with their advisors. [Korean Version]
2025.02.11

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MOEL Issues Revised Labor-Management Guidance on Ordinary Wage On February 6, 2025, the Ministry of Employment and Labor (“MOEL”) released updated labor-management guidance on ordinary wage (the “Guidance”) in response to the recent Supreme Court en banc decisions overruling its previous position on ordinary wage. The Guidance aims to clarify the newly established legal principle on ordinary wage and mitigate potential disputes and confusion surrounding its application. To facilitate the seamless application of the new legal principle and the updated guidelines under the Guidance, the MOEL announced that it will (i) conduct labor-management explanatory sessions and meetings, (ii) provide guidance on updating collective bargaining agreements, rules of employment, and employment agreements, and (iii) assist businesses in restructuring their compensation structures. The Guidance also summarizes the MOEL’s response to some of the most frequently raised questions surrounding the Supreme Court’s en banc decisions in a Q&A format. We highlight some of the key clarifications below. No. Question Response 1 Does a wage that is conditioned on current employment (i.e., employed on the day of payment) constitute ordinary wage? If the wage is pre-determined in consideration for the prescribed work and is paid on a “regular” and “uniform” basis, it will fall under the scope of ordinary wage even if it is conditioned on current employment. Case example: Regular bonuses paid quarterly to current employees constitute ordinary wage. 2 For a new employee who has not yet become eligible to receive regular bonus due to short tenure, would the regular bonus still fall under ordinary wage? If the regular bonus meets the requisite criteria and is thus treated as ordinary wage, it should be included in the calculation of ordinary wage even if the employee has not yet become eligible to receive it. Case example: Even if an employee joins the company after the bonus payment date and is thus not yet eligible to receive the bonus, the annual regular bonus should nonetheless be included in the ordinary wage for the calculation of overtime work allowance. 3 How should regular bonus be factored into the calculation of ordinary wage? Pursuant to Article 6, Paragraph 2, Items 5 and 7 of the Enforcement Decree of the Labor Standards Act, ordinary hourly wage shall be calculated by dividing the annual aggregate regular bonus by annual total hours for the calculation of ordinary wage. 4 Should wages conditioned on “current employment” or “number of completed working days” be paid in proportion to the completed service period? In line with the Supreme Court decision, the validity of the conditions attached to the “payment” of regular bonus, etc., should be reviewed separately from the question of whether it should be included in ordinary wage. Therefore, unless there is a reason to determine otherwise, such “payment” conditions are valid and employers are not obliged to pay such regular bonus if its conditions are not satisfied. [Korean Version]
2025.02.10

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Proposed Amendment to the Personal Information Protection Act: Introducing Special Provisions for AI On Friday, January 31, 2025, a bill proposing an amendment to the Personal Information Protection Act (“PIPA”) was introduced (the “Proposed Amendment”) to the National Assembly. The Proposed Amendment primarily aims to establish a legal basis for utilizing personal information beyond its original collection purpose when deemed necessary for AI technology development or performance enhancement, subject to the review and approval of the Personal Information Protection Commission (“PIPC”). To achieve this purpose, the Proposed Amendment sets out the requirements, procedures, and the PIPC’s ex-post supervisory authority to ensure the safe processing of personal data, among others. 1. Requirements for Utilizing Personal Information Beyond Its Original Collection Purpose for AI Technology Development Article 28-12(1) of the Proposed Amendment states that data controllers may process lawfully collected personal information beyond its original purpose for the development of AI technology, provided all of the following requirements are met: When processing information, such as video, audio, images, symbols, and text, anonymization or pseudonymization would make AI technology development significantly difficult due to the inherent characteristics of the data and its relevance to AI and technological advancements; When appropriate safeguards, as outlined by Presidential Degree, are in place, such as processing personal data in a secure environment with technical, administrative, and physical protective measures; and When the purpose of AI technology development includes one of the following, and the risk of unjustly infringing on the interests of data subjects or third parties is significantly low: ? Advancing public interest; or ? Protecting the rights and interests of data subjects or third parties, or contributing to broader social benefits (e.g., fostering AI innovation). Under Article 28-12(2) of the Proposed Amendment, data controllers must obtain a review and approval from the PIPC on whether these requirements are satisfied. The PIPC may impose conditions necessary to ensure the protection of data subjects’ rights and the safe processing of personal information. Meanwhile, Article 28-12(3) of the Proposed Amendment requires that if the processing involves personal information that includes sensitive information or unique identification information exceeding a certain threshold or if it affects the rights and interests of data subjects, which will be both further specified in the Presidential Decree, data controllers must conduct an assessment to propose necessary safeguard measures and required improvements based on the impact of processing beyond the original collection purpose on the interests of data subjects or third parties, as well as the identification of potential risks (the “Risk Assessment”). The results of the Risk Assessment must be submitted to the PIPC. 2. Privacy Policy Disclosure Requirement and Matters Related to Ex-post Supervisory Authority of the PIPC Under Article 28-12(4) of the Proposed Amendment, data controllers who wish to process personal information in accordance with Article 28-12(2) must disclose the following information in their privacy policy: (i) the specific purpose for which the personal information is processed and the types of personal information being processed; and (ii) key findings from the Risk Assessment, if it was conducted. Furthermore, in accordance with Article 28-13(1) and (2), the PIPC must regularly monitor and oversee compliance with its decisions regarding the processing of personal information beyond its original collection purpose for AI technology development. The PIPC may also request relevant documents from the data controllers and related parties as needed for this purpose. If any of the following conditions are met, subject to its review and approval, the PIPC may, under Article 28-13(3), impose partial or complete restrictions on personal information processing: If the review and approval for personal data processing beyond its original collection purpose was obtained through false or otherwise fraudulent means; If the requirements under Article 28-12(1) of the Proposed Amendment or the conditions imposed through conditional approval are not met; If, due to significant changes in circumstances, it is determined that achieving the purpose of personal information processing (such as AI technology development) is clearly impossible; If the processing of personal information for AI technology development does not commence within six months from the date of the PIPC’s approval without a valid reason; or If a required Risk Assessment is not conducted or if the results of the Risk Assessment are not submitted to the PIPC. The Proposed Amendment aligns with the “Revolutionizing the Personal Data Regulatory Framework in the AI Era” initiative included in the PIPC’s Key Policy and Enforcement Plan for 2025 text,[1] announced on January 13, 2025. If enacted, the Proposed Amendment would ease current regulations by making it easier to secure training data for AI development and improvement. However, companies looking to utilize personal information would still be subject to stringent requirements, including strict compliance procedures, disclosure obligations, and ongoing regulatory oversight. These regulatory requirements could pose practical challenges. Given that in-depth discussions during the legislative process are anticipated, companies doing business in or planning to enter the AI sector should closely monitor developments in the legislative process. [1] Please refer to the “Personal Information Protection Commission Announced Key Policy and Enforcement Plan for 2025” for further information (Link). [Korean Version]
2025.02.06

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Ranked “Band 1” in All Nine Areas, 41 “Leading Individuals” Recognized

In the 2025 edition of Chambers Global, Kim & Chang was once again the only Korean law firm ranked “Band 1” in all nine practice areas that were surveyed for Korea. In the individual categories, 41 of our attorneys and patent attorneys were recognized as “Leading Individuals.”
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“Tier 1” in All 17 Practice Areas

In the 2025 edition of The Legal 500 Asia Pacific, Kim & Chang was the only Korean law firm to be recognized as “Tier 1” in all 17 areas surveyed for Korea. Moreover, 57 of our attorneys, patent attorneys, and tax attorneys/CPAs were recognized in the individual categories.
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Ranked “Band 1” in 18 Areas, 90 “Leading Individuals”

Kim & Chang obtained a “Band 1” ranking in 18 practice areas in the 2025 edition of Chambers Asia-Pacific, once again receiving the most “Band 1” rankings among Korean law firms.
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