As shared in our previous newsletter, in 2019, the Financial Services Commission (“FSC”) permitted the trading of fractional shares of foreign-listed stocks by designating such trading as an innovative financial service. Thereafter, in 2022, the FSC permitted the fractional trading of Korean-listed stocks by its similar designation as an innovative financial service (Link).
Under fractional trading for domestic stocks, upon receiving fractional trading orders from individual investors, a securities company completes the order to its own account in whole shares. The Korea Securities Depository (“KSD”) is then entrusted with the whole shares for issuance of beneficiary certificates representing fractional shares to the securities company, who in turn distributes such certificates back to the individual investor.
Since the promulgation of fractional trading services for domestic stocks, eight securities companies have launched such services for approximately 171,000 cumulative users, KRW 122.8 billion cumulative purchase orders and KRW 7.83 billion in entrusted shares as of the end of the first quarter of 2025. The services have shown to promote more efficient portfolio diversification, by facilitating smaller denomination investments even in more expensive blue-chip stocks, which stocks reportedly make up the balance of entrusted shares.
The FSC announced plans to codify fractional trading of domestic shares into law, which practice had previously been permissioned as an innovative financial service under its financial regulatory sandbox program. Its proposed amendments to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (the “Amendments”) underwent a notice and comment period, was passed by the State Council on September 16, 2025, and went into effect on September 23, 2025.
The provisions of the Amendments are as follows:
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The codification of fractional shares trading and resulting changes in shareholder composition to include smaller ticket investors may require consideration by companies in the conduct of IR activities and shareholder meetings.
While regulatory direction is yet to be announced, minority shareholder protections may be applied, or other policy efforts made for the protection of the rights of fractional share investors, such that it would be advisable to keep informed of developments.
