Lee So-young Signals Need to Pace Tougher Kosdaq Delisting Rules, Tiered System, Says She’d Debate FSC Chief

Lee So-young, nominee for SMEs minister, visits Korea Venture Business Association

Lee So-young, South Korea’s nominee for minister of SMEs and Startups, signaled the need to adjust the pace of tighter delisting rules for the Kosdaq market and the introduction of a tiered market system being pushed by financial authorities. While backing the broad direction of the overhaul, she said policymakers need to determine whether small and venture companies — and existing investors — can absorb the changes. She also said she would debate the chairman of the Financial Services Commission directly if needed.

After a tea meeting with industry officials at the Korea Venture Business Association in Seoul’s Guro district on Sept. 10, Lee told reporters that stock- and capital-market policy requires careful calibration even when the overall direction is right. She said there were issues to review, including whether the pace and method of tougher standards introduced in January were manageable for the market and whether protections for existing shareholders had been sufficiently considered.

Financial authorities are tightening delisting standards to speed the removal of troubled companies from the Kosdaq market in a bid to bolster the bourse’s credibility. Lee said she agrees with that broader goal. But unlike large corporations, small and mid-sized companies cannot easily raise their enterprise value or market capitalization over a short period, she said, meaning even healthy firms could be pushed out if the policy shift moves too quickly.

Lee said tougher delisting standards and a tiered Kosdaq system would directly affect small and venture companies and also raise issues around protecting current shareholders. The Financial Services Commission may have prepared the policy from the standpoint of overseeing financial markets, she said, but the Ministry of SMEs and Startups should also actively present its views on the concerns of smaller companies and on what is needed to protect investors in already listed firms. She added that she would not treat it as another ministry’s issue and would debate the FSC chairman if necessary.

She also underscored what she sees as a longstanding problem: capital-market policy, including policy for Kosdaq, has largely been designed from the perspective of financial-market stability and investor protection. Lee said Kosdaq is also a funding channel for small and venture companies and a core exit market for venture investment, and policy should reflect the goal of corporate growth as well.

“The Kosdaq market is absolutely central to the growth of small and venture companies,” Lee said. “I will be a minister who speaks up on the Kosdaq market and a minister of SMEs and Startups who makes her voice heard on capital-market policy.” She added that it would probably be the first time. Her remarks suggest she intends to move beyond the ministry’s traditional hands-off approach to what has effectively been treated as the financial authorities’ domain and play an active role in the Kosdaq overhaul process.

Lee also laid out a plan to draw more private capital into the venture market. Venture-investment figures may look strong on the surface, with investment reaching a record high, but government-led fiscal spending has in fact driven a substantial share of the activity, she said. More private risk capital needs to flow in at a fundamental level. To that end, she said, institutional reforms are needed to encourage private money into venture investment.

She pushed back on industry concerns that revisions to the Commercial Act could weaken fundraising by venture companies. Lee said restoring trust in the Kosdaq market by improving transparency in corporate decision-making structures would help attract more long-term money, including from institutional investors. At the same time, she said any mandatory cancellation of treasury shares should take into account the specific needs of venture companies, which often hold such shares for employee compensation, and that she would review whether exception provisions could be refined.

On calls from the venture industry to ease working-hour regulations, Lee said she would review with an open mind whether the rules could be rationalized in light of the nature of the work.

Lee Kwang-sik, Hankyung.com reporter bumeran@hankyung.com