Going forward, even if corporations repeatedly violate disclosure obligations just once, fines will be increased by 10%. For a second repeat violation, the increase is 30%, and for three or more repeat violations, 50% will be added in each case.
The Korea Fair Trade Commission said on the 7th that it prepared revisions to the "criteria for imposing fines for cases of violations of disclosure obligations for important matters by companies belonging to business groups subject to disclosure" and the "criteria for imposing fines for cases of violations of board resolution and disclosure obligations for large-scale internal transactions," and will give administrative notice from Aug. 8 to 28.
The Korea Fair Trade Commission (FTC) explained that it prepared the revisions because it judged that, under the current system, the effectiveness of sanctions for disclosure obligation violations is limited. Under the current fines notice, if disclosure obligations are violated between four and six times, a 10% increase applies, and if violated seven or more times, a 20% increase applies.
Fines for violating disclosure obligations are calculated per case based on the type of disclosure violated, the form of the violation, and the scale of the transaction. If the most frequently occurring large-scale internal transaction disclosure obligation is violated, a fine of up to 70 million won per case will be imposed.
The Korea Fair Trade Commission (FTC) also said it will delete the mitigation provision. Under the current fines notice, reductions range from 20% to 75% depending on the number of days the disclosure is delayed. The FTC viewed this provision as conflicting with the rule that adds to the base amount according to the number of days of delay when calculating the base fine.
For example, if a large-scale internal transaction is disclosed 30 days late, the base amount is increased by 100,000 won per day for 29 days, but then a further 20% is reduced, so the increase based on the number of delayed days can effectively be offset. Accordingly, the Korea Fair Trade Commission (FTC) will delete the reduction rule based on the number of delayed days in this revision.