FSC vows to ease listing rules for 3rd bourse, rejuvenate SME investment

South Korea’s chief regulator said Wednesday that it plans to ease listing rules for the nation’s tertiary bourse, focused on startups and small and medium-sized firms, to reform the capital market and support the growth of the Korean economy.

The Financial Services Commission will lower the bar for the size of the deposit that regular investors need to participate in the Konex market, FSC Chairman Choi Jong-ku said at an event in central Seoul. 

The required deposit will be 30 million won ($26,641) instead of the current 100 million won.

This is the second time the government has decided to lower the bar, as it was initially 300 million won when the bourse first opened in 2013. The deposit exists to protect investors from the volatile nature of the Konex market, which comprises high-risk startups and SMEs.

Institutional investors, meanwhile, are not required to submit deposits.

The FSC added that it had decided to allow venture capitals and SMEs to raise funds more easily by facilitating crowdfunding and by waiving the obligation to file registration statements in order to conduct public offerings.

Crowdfunding opportunities have been limited to unlisted SMEs, but under the new standards, Konex-listed firms that did not raise funds through public offerings will be able to crowdfund for as long as three years.

Exempting firms from filing registration statements when conducting “small-scale public offerings” will also allow SMEs and startups to raise capital more smoothly. Documents are still required, but the process is expected to be much simpler, the FSC said.

A “small-scale public offering” is one where the firm’s annual offering cap stands at 1 billion won, but the government now plans to raise the cap to the 10 billion won range.

It also plans to ease the general financial audit for Konex-listed firms, to help the relocation of the companies from the nation’s third-tier bourse to its second-tier and tech-heavy Kosdaq.

“Following its establishment in 2015, the Konex market has grown as a financing platform for SMEs and venture companies, but longstanding criticism exists about its limited role as a market for financing innovative firms and aiding investor recovery,” Choi said at the event held to open up discussion and debate on the Konex.

“Thus, we have prepared measures to recover the bourse’s identity as a steppingstone to foster ventures and SMEs, and to create a virtuous cycle of return on investment for ventures,” he added.

By Jung Min-kyung (mkjung@heraldcorp.com)