1.

Persons Exempt from Disclosure Obligations

The Proposed Amendment exempts from the new disclosure obligations professional investors who are domestic financial investors expected to have a relatively high level of internal control standards and be less likely to misuse undisclosed information (e.g., pension funds, collective investment vehicles such as private equity funds (including special purpose companies), banks, insurance companies, specialized credit finance companies, financial investment businesses, venture capital firms, and the Korea SMEs and Startups Agency) and similarly situated foreign investors.
 

2.

Transactions Subject to Disclosure Obligations and Exceptions

The Proposed Amendment and related regulations provide that the disclosure obligations should apply only in cases where the trading volume and amount of shares and equity-linked securities (including convertible bonds, bonds with warrants and related depository receipts) aggregated over the past six months are 1% or more of the total number of issued and outstanding shares of a listed company or where the total value of transactions is KRW 5 billion or more. However, the types of transactions listed below, viewed as being unavoidable, are exempt from the disclosure obligations. In particular, exceptions to disclosure are recognized in a transfer of shares that entails a change of the largest shareholder (including any transfer or acquisition accompanied by or subsequent to such a transaction), M&A transactions involving control interests, and a sale of equity securities of other shareholders as a part of or subsequent to such transaction. In addition, an exception to disclosure is granted even where a major shareholder sells its shares in a block trade to raise funds for inheritance and gift taxes, enabling flexible trading.
 

(1)

Where the sale or purchase of shares is inevitable due to a statutory requirement;

(2)

Where specific securities publicly offered, privately placed, or sold are acquired through an underwriting process or where specific underwritten securities are disposed;

(3)

Where shares are acquired through the exercise of stock options;

(4)

Where stock is acquired through the exercise of rights to equity securities already owned (such as through preemptive rights, convertible bonds or bonds with warrants);

(5)

Where securities are acquired or disposed through the exercise of other rights or the issuance of exchangeable bonds;

(6)

Where newly issued specific securities are acquired;

(7)

Where specific securities publicly offered or sold are acquired by subscription;

(8)

Where a member of an employee stock ownership association acquires shares of the relevant company through such employee stock ownership association;

(9)

Where shares are disposed through the exercise of appraisal rights;

(10)

Where stock is disposed through a tender offer;

(11)

Where stock is acquired by means of a tender offer;

(12)

Where securities are acquired through stock dividends;

(13)

Where securities are acquired by inheritance;

(14)

Where specific securities are acquired or transferred through a share transfer agreement that entails a change of the largest shareholder (including acquisition or transfer of specific securities as a part of or subsequent to such transaction);

(15)

Where specific securities are disposed as a result of a creditor’s enforcement of its security interest;

(16)

Where certain securities are acquired, transferred, or otherwise disposed as a result of a merger, acquisition or transfer of a material business or asset, comprehensive exchange or comprehensive transfer of shares, split-up or split-merger;

(17)

Where a major shareholder sells specific securities to raise funds for the payment of tax by annual installments permitted under the Inheritance Tax and Gift Tax Act; and

(18)

Other cases where the Securities and Futures Commission recognizes that no material undisclosed information is likely to be used.
 

3.

Details of and Procedures for Disclosures

The Proposed Amendment and related regulations require executives and major shareholders to report their transaction plans 30 days prior to the commencement of the relevant transaction. Transaction plan reports should include the expected trading price and volume of the shares to be traded, and the trading period (limited to up to 30 days). In addition, the Proposed Amendment allows the flexibility of up to 30% of the amount set out in the transaction plan, if deemed necessary to reflect the market situation at the time of the transaction.
 

4.

Grounds for Withdrawal

The Proposed Amendment and related regulations allow withdrawal of transaction plans in unavoidable circumstances such as the death or bankruptcy of the filing party, delisting of the company, suspension of trading, etc., or where the market situation changes rapidly, such as when the relevant stock price exceeds 30% of the closing price of the day before the reporting date of the transaction plan.
 

5.

Standards for Imposing Administrative Fines for Violations of Disclosure Obligations

Under the amended FSCMA, failure to disclose transaction plans, providing false disclosures, failure to perform transaction plans and any other violations of disclosure obligations may result in an administrative fine of up to 2/10,000 of the market capitalization (but not exceeding KRW 2 billion), with the standards for imposing such fines set forth in detail in the Proposed Amendment and related regulations.