Korea Exchange (KRX) will move to improve its disclosure process following an error in lifting SCM Lifescience from its watchlist. To build a swift and accurate disclosure system, it plans to operate a market action consultative body, among other steps, to minimize the possibility of mistakes.
The exchange said on the 18th it will introduce a cross-verification system for key disclosures and improve the overall disclosure process, including using artificial intelligence (AI), to respond to the growing volume of disclosure filings and market actions.
According to the exchange, as the number of companies listed on the KOSDAQ market recently surpassed 1,800, the number of disclosure filings and market actions has been increasing. In particular, in March, when settlement of account-related disclosures by December fiscal-year companies are concentrated, the number of disclosures published after exchange approval accounts for 30% of annual disclosures.
First, as a short-term measure, the exchange will immediately operate a tentative "market action consultative body" under the supervision of the executive in charge of disclosures. The consultative body will consist of one deputy head of division, one department head, and six Heads of Team. Disclosures with major impact on investors—such as designation and removal of watchlist status and the occurrence of delisting reasons—will be carefully cross-verified within this body before being processed.
An exchange official said, "We will reduce the possibility of processing errors that can occur when disclosure filings concentrate at specific times and in specific teams, and improve the accuracy of disclosures on important matters."
It also laid out mid- to long-term measures. It will comprehensively review the existing disclosure system to identify risk factors and, if necessary, reflect system overhauls after outsourcing. In next-generation listing and disclosure systems currently being revamped, it will increase the use of AI to minimize "human risk."
Going forward, when determining major market actions such as watchlist designation and delisting, AI will make an initial determination based on submitted supporting documents, and the person in charge will confirm and take final action.
In addition, the exchange said it will take full responsibility, as needed, for compensation related to investor losses raised in connection with the recent market action error.
On the 16th after the regular session closed, the exchange lifted SCM Lifescience from its watchlist. It determined that the reasons for watchlist designation had been resolved, citing factors such as a reduction in the size of loss from continuing operations before income taxes and a turnaround to a net profit in the company's annual report submitted for last year.
However, the next day it confirmed there was a problem with the lifting because no profit had been generated, and it belatedly reversed the action during trading. The share price of SCM Lifescience, which had jumped to the daily upper price limit earlier on the 17th, plunged.
An exchange official said, "We will promptly review and pursue necessary measures with investor protection as the top priority," adding, "We will make every effort to ensure trading stability and protect investors so that the same thing does not happen again."