The Korean National Assembly has approved the revision of the 5% rule in the Securities and Exchange Act.
The revised regulation includes a five-day cooling off period when the purpose for investment is changed to ‘management participation/acquisition’ from ‘simple investment’, the concerned investors should report the change within five days and will be banned from exercising voting rights and buying additional shares for five days from the reporting date. The cooling off period will be applied to all investors reporting the purpose of investment as management participation/acquisition.
Investors falling in one of the following categories – where investors fail to file the 5% report (currently provided in the Act) or where investors state false information or omit required information in the 5% repo – shall be banned from exercising voting rights, and, in addition, can be punished by imprisonment for maximum one year, or fined a maximum of KRW 5million.
The revised rule shall come into force on and after 70 days from the day of promulgation. As the official promulgation is expected to be within the month of January 2005, the revised rule is expected to be effective from mid-March 2005.