The Financial Services Commission introduced a revision proposal for the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) and subordinate regulation on the issuance of securities and disclosure on July 30. The proposed rules change is intended to establish specific details regarding the introduction of preliminary book building and cornerstone investor under the revised FSCMA, which is expected to go into effect from November 13, 2026.
Preliminary book building allows bookrunners to survey market demand before a price band for IPO is determined through the disclosure of a securities registration statement. Allowing preliminary book building will help to more accurately reflect market demand and arrive at a more optimal price in IPO valuation. The cornerstone investor system allows the pre-allocation of shares from the portion of IPO shares allocated for institutional investors to those who have agreed to a lockup of at least six months. Introducing the cornerstone investor system will help to foment investor confidence in the IPO market by ensuring a steady engagement of institutional investors in advance for the medium- to long-term, while effectively addressing the problem of excessive price declines in publicly offered shares shortly after their IPOs.
Key Details
a) Preliminary book building
(Eligibility) The asset requirement for institutional investors qualified to take part in preliminary book building will be set at KRW30 billion or more in entrusted assets for private equity funds and discretionary investment business entities. At the same time, they will be required to have a minimum level of capacity for carrying out corporate valuation and for handling the internal management of undisclosed information.
(Process) After preparing an IPO due diligence report, IPO lead managers will be able to provide relevant information (which will be disclosed in a securities registration statement at a later date) to qualified institutional investors to survey demand (price, quantity, etc.). Since the information being provided is not publicly disclosed at this stage, IPO lead managers will need to sign a non-disclosure (confidentiality) agreement with each counterpart and maintain a record of details regarding the time, the counterpart, and the content of information provided. In this regard, it should be noted that facilitating a third party to use undisclosed information in breach of the non-disclosure agreement may qualify as an act of using material nonpublic information.
b) Cornerstone investors
(Eligibility) On top of the aforementioned eligibility requirements for taking part in preliminary book building, cornerstone investors will be subject to an additional equity capital or asset requirement to make sure that they can absorb the risk of price volatility during the lockup period. More specifically, cornerstone investors will need to have equity capital or entrusted assets in the size of at least twenty times more than the value of IPO shares to which they intend to subscribe. Proposing this relative value (20x) instead of an absolute value takes into account the fact that IPOs vary in size and that small- and medium-sized institutional investors also need to have the opportunity to participate as cornerstone investors.
(Lockup period and allocation cap) Cornerstone investors will need to observe the lockup period of six months for 50 percent of allocated shares, eight months for 30 percent of allocated shares, and ten months for 20 percent of allocated shares. The spreading out of lockup periods will help to prevent the occurrence of excessive concentration of share sales on a particular day.
The maximum cap of IPO shares pre-allocated to cornerstone investors will be set differently for KOSPI IPOs and KOSDAQ IPOs considering the need to provide an extra incentive to encourage cornerstone investors to participate in KOSDAQ IPOs due to their relatively smaller size of deals. Currently, 50 percent of KOSPI IPO shares and 15 to 35 percent of KOSDAQ IPO shares are allocated to institutional investors (excluding high-yield funds and KOSDAQ venture funds). From these allocated IPO shares, the maximum level of share allocation for cornerstone investors will be up to 20 percent in total and up to 10 percent for each cornerstone investor for KOSPI IPOs and up to 30 percent in total and up to 20 percent for each cornerstone investor. This will mean that from the total volume of IPO shares allocated to investors in their entirety, the maximum level of pre-allocation shares available for cornerstone investors will be up to 10 percent in total and up to 5 percent for each cornerstone investor for KOSPI IPOs and up to 4.5 to 10.5 percent in total and up to 3 to 7 percent for each cornerstone investor for KOSDAQ IPOs.
(Preventing conflicts of interest) To make sure to effectively manage the potential of conflicts of interest, it will be prohibited to sign a cornerstone investor agreement with an institutional investor that has special interests involved in business relationship (e.g. major shareholder, specially affiliated entity). Additionally, the act of exchanging direct or indirect benefits from cornerstone investor agreement will be prohibited.
Further Schedule
The revision proposal for the Enforcement Decree of the FSCMA and subordinate regulation on the issuance of securities and disclosure will enter a comment period from July 30 to September 8. The updated rules will go into effect along with the revised FSCMA from November 13, 2026.
* Please refer to the attached PDF for details.