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Finance

[Legal Alerts] Strengthened Sanctions against Untruthful Disclosure

2017-11-01

In order to strengthen the responsibility for corporate disclosure, the maximum fines to be imposed against violation of disclosure to Korea Exchange ("KRX") were increased to KRW 1 billion for KOSPI Market and KRW 500 million for KOSDAQ Market on April 3, 2017. The former maximum fines to be imposed against violation of disclosure were KRW 200 million for KOSPI Market and KRW 100 million, which were increased by five times following the latest amendments to the applicable regulations and rules.

This increase is the follow-up measure of the Plan for Improvement of Short Selling and Disclosure System announced by the Financial Services Commission on November 11, 2016. The applicable regulations and rules themselves have been enforced since January 2, 2017 but the increase of such fines was supposed to be enforced as of April 3, 2017 in consideration of the burden on business entities. The amended KOSPI Market Disclosure Regulation and KOSDAQ Market Disclosure Regulation include the following amendments:

1. Increase of the Maximum Fines

Market	Before Amendment	After Amendment
KOSPI Market	Up to KRW 200 million	Up to KRW 1 billion
KOSDAQ Market	Up to KRW 100 million	Up to KRW 500 million

2. Increase by Event

Market

Before Amendment

After Amendment

KOSPI Market

(1) In the case of intentional or habitual violation or by negligence: KRW 10 million

(2) If the demerit points are lower than 5: KRW 4 million

(1) If the demerit points are 10 or higher and intentional or habitual violation or by negligence: KRW 30 million

(2) If the demerit points are 5 or higher but lower than 10: KRW 10 million

(3) If the demerit points are lower than 5: KRW 4 million

KOSDAQ Market

The criteria for imposition of fines shall be based on the demerit points of 10 (if the demerit points are 10 or higher, the additional fine shall be imposed; and if the demerit points are lower than 10, the fine shall be imposed in replacement of the demerit points):

(1) Additional imposition of fine: Demerit points x KRW 4 million

(2) Replacement of demerit point
with fine: Demerit points that will be replaced with the fine x KRW 4 million

The criteria for imposition of fines shall be decreased to be the demer

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