Korean exchanges, relax restrictions on share buyback transactions... Looking forward to active shareholder return policies

South Korean exchanges have decided to loosen the sanction standards for violations in the reporting of share repurchases by listed companies. Going forward, minor excess transactions that occur during share repurchase processes carried out for the purpose of rewarding shareholders are very likely to be excluded from the scope of sanctions.

According to news from the securities industry on the 11th, on the 8th the Korea Exchange previewed revised detailed implementation rules for market monitoring regulations, and stated that it will adjust the simplified sanctions fee collection standards related to share repurchase reporting. Share repurchase refers to transactions in which listed companies buy or dispose of their own stock in the market. Previously, the exchange had treated transactions exceeding the pre-reported quantity as violations and imposed sanctions fees.

The core of this revision is to expand the range of exemptions from sanctions for cases involving smaller-scale violations. Even if the actual number of shares repurchased by a listed company exceeds the originally reported amount, if the excess ratio is below 50%, no simplified sanctions fee will be imposed. In addition, even if the ratio of the violation amount to the reported amount is 50% or more but below 80%, if the amount does not reach 25% of that day’s total trading volume and the number of shares involved in the violation is less than 1,000 shares, it will also fall under the exemption category. Ultimately, this means that as long as the impact on the market is small and the scale of the violation is minor, sanctions will not be imposed across the board.

The share repurchase reporting system is designed to prevent listed companies from secretly trading their own shares using information and financial strength that are more favorable than those available to ordinary investors. As a requirement to maintain market fairness and transparency, simplified sanctions fees are levied according to the severity of the violations, with a maximum amount of 2 million South Korean won. However, as share repurchase together with dividends has recently become a representative means of rewarding shareholders, cases in which companies repurchase shares to enhance corporate value and restore investor trust have been increasing.

The exchange’s decision to relax the standards is also being interpreted as reflecting this market shift. The underlying judgment is that while shareholder reward activities that support companies are encouraged, minor violations that do not seriously undermine market order will not be excessively penalized. This trend in the future is expected to align with the direction of more active shareholder reward policies that use share repurchases, and regulatory focus may also shift from purely formal violations to considering actual market impact and the level of investor protection.