Kumyang has been designated as a dishonest reporting corporation after it announced and subsequently withdrew a capital increase plan. Due to this sanction, Kumyang accumulated point penalties and was designated a managed item, resulting in its transactions being suspended for a day on the 5th. Some point out that the excessive regulation by financial authorities is ultimately causing harm to investors. The withdrawal of Kumyang’s capital increase plan was due to an intervention by the Financial Supervisory Service and was a decision reflecting the opinions of shareholders, but it was punished as dishonest reporting.
In cases like that of Kumyang, the Financial Supervisory Service intervenes in the capital increase plans of listed companies, and if the company withdraws it, it is classified as a reversal/change in disclosure and designated as a dishonest reporting corporation. While some acknowledge that the intervention by the Financial Supervisory Service in Kumyang's case was a reasonable judgment, there are concerns that the excessive interference in corporate capital increases will not only block funding avenues for listed companies but also increase transaction expenses.
Kumyang decided on a shareholder allocation capital increase amounting to 450 billion won last year. However, minority shareholders strongly protested. Ultimately, Kumyang withdrew the capital increase on January 17.
Kumyang has been designated as a dishonest reporting corporation and has received a penalty of 7 points along with a reporting violation sanction of 70 million won. The accumulated points received by Kumyang over the past year have increased to 17 points, resulting in its designation as a managed item. Consequently, Kumyang's transaction was suspended on the 5th, and it was automatically removed from the KOSPI 200.
Kumyang's reversal regarding disclosure has an unfair aspect. The company's decision to withdraw its capital increase was not arbitrary but was due to pressure from the Financial Supervisory Service. The Financial Supervisory Service repeatedly requested the submission of corrected reports citing insufficiencies in Kumyang's securities registration statement.
This is similar to cases like ISU PETASYS and Korea Zinc, which have also faced sanctions from the exchange.
ISU PETASYS decided on a shareholder allocation capital increase of 550 billion won last November to raise funds for acquiring the carbon nanotube (CNT) manufacturing firm JEIO. However, as minority shareholders protested that the decision had little relevance to existing business, the Financial Supervisory Service intervened in ISU PETASYS's capital increase.
Ultimately, ISU PETASYS withdrew its plan to acquire JEIO and reduced the originally planned capital increase amount from 550 billion won to 250 billion won. The Korea Exchange deemed this as dishonest reporting. On the 27th of last month, the exchange designated ISU PETASYS as a dishonest reporting corporation, imposing a penalty of 6 points and a reporting violation sanction of 60 million won. The exchange explained, "To determine the level of sanctions, we verified whether the company adequately informed investors of the risks of reversals or changes when it initially disclosed the information."
The exchange also designated Korea Zinc, which is in a management dispute with MBK Partners and Young Poong, as a dishonest reporting corporation. The reasons included the withdrawal of the public offering capital increase decision and delays in disclosing information related to litigation.
To prevent such situations, corporations must thoroughly review their capital increase plans. The stance of the Korea Exchange and the Financial Supervisory Service is that securities registration statements should have been properly reviewed from the outset to avoid scenarios where companies withdraw or change their capital increases.
However, there are voices saying that if a company reflects shareholders' opinions in the process of changing its original plan, it should not be considered dishonest reporting.
A financial investment industry official noted, "While I fully understand the reasoning behind the sanctions for reversals or changes in reporting as a measure to protect investors, if companies are penalized for changing their original plans due to the influence of financial authorities or reflecting shareholders' positions, it will bring about significant side effects," adding, "There seems to be a need to review system improvements."
In relation to this, a Financial Supervisory Service official stated, "In the case of ISU PETASYS, the company made a relatively positive judgment by reflecting shareholders' opinions and altering its original plan, but the result is a designation as a dishonest reporting corporation, which raises points for consideration," and added, "It seems necessary to discuss with the Korea Exchange."