The FSC/FSS and the Ministry of Finance and Economy hereby issue a correction to March 31 Financial Times article entitled “Seoul’s new rules anger overseas investors.” The article misinterprets the recently amended “5% rule,” labeling it a “draconian” requirement and a move designed to tighten controls on foreign investors. In particular, the article stretches the 5% rule to suggest that it was connected to the equity investment in SK Corp. by Sovereign Asset Management and the gains recently achieved by Newbridge Capital after selling its stakes in Korea First Bank.

The 5% rule was first established with an amendment to the Securities and Exchange Act in 1991. The newly amended 5% rule was passed by the National Assembly on December 31, 2004, promulgated on January 17, 2005, and took effect on March 29, 2005.

It is important to note that the 5% rule is widely adopted and enforced in many countries—particularly stringently in the U.S.—and Korea’s 5% rule is modest with respect to the kinds of disclosure compliance it requires from investors. Thus, the assertion made in the FT article that Korea’s 5% rule is “draconian” is a hyperbole and a mischaracterization that can only be expected from uninformed or misinformed observers.

Moreover, as the FSC/FSS has pointed out on numerous occasions, the changes adopted to the 5% rule were intended only to replace broadly worded provisions with more specific and unequivocal rules. It was never intended to control the “pernicious” effects of foreign capital as the article falsely asserted.

The FSC/FSS and the Ministry of Finance and Economy further note that the amended 5% rule is part of the ongoing effort to raise Korea’s corporate governance to the highest global standards. It is not related in any way to particular foreign investors and is applied equally and fairly to all investors, domestic and foreign. It is certainly not intended to tighten controls on foreign investors.

The FSC/FSS and the Ministry of Finance and Economy would like to take this opportunity to reiterate and reaffirm Korea’s commitment to a level playing field and an equal treatment for all investors.

* Please refer to the attached PDF for details.