When Is Subscribing on Pre-Offering Information Not Insider Trading? Five Questions on the Draft Enforcement Decree on Pre-Filing Demand Assessment and Cornerstone Investors

Materials Read and Stages Confirmed

This article reads the advance legislative notice of a draft partial amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act, issued by the Financial Services Commission on July 30, 2026 as Financial Services Commission Public Notice No. 2026-561. The department in charge is the Capital Markets Bureau of the Financial Services Commission, and the comment submission period ran from July 30, 2026 to September 8, 2026. At the time of confirmation, the screen showed that submission had closed, and the number of legislative comments was displayed as 101. The content of the submitted comments was not read.

On October 16, 2026, the corresponding entry under the Government Legislation Status of the National Participatory Legislation Center displayed only the advance legislative notice (July 30, 2026 – September 8, 2026), and the stages after review by the Ministry of Government Legislation were not displayed. On the same day, in the current Enforcement Decree (Presidential Decree No. 36756, effective October 13, 2026) at the National Law Information Center, Articles 129-3 and 201-2, which the draft seeks to newly insert, could not be found. Accordingly, the text read in this article is the draft at the advance legislative notice stage.

The underlying statute is the amended Act that passed the plenary session of the National Assembly on April 23, 2026 as an alternative bill proposed by the Chair of the National Assembly Policy Committee (Bill No. 2218519) and was promulgated on May 12, 2026 as Act No. 21647. The National Assembly Legislation Status screen of the National Participatory Legislation Center states that the Legislation and Judiciary Committee passed this alternative bill with amendments; accordingly, this article is based on the provisions of the promulgated Act as published in the National Law Information Center rather than on the original text of the alternative bill.

Sources for this section: National Participatory Legislation Center, Advance Notice of Legislation: Advance Notice of the Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (Financial Services Commission Public Notice No. 2026-561) · National Participatory Legislation Center, Government Legislation Status: Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · National Participatory Legislation Center, National Assembly Legislation Status: Partial Amendment Bill to the Financial Investment Services and Capital Markets Act (Alternative) (No. 2218519) · Korea Law Information Center, Financial Investment Services and Capital Markets Act (Act No. 21647, effective November 13, 2026) · Korea Law Information Center, Current Enforcement Decree of the Financial Investment Services and Capital Markets Act (Presidential Decree No. 36756, effective October 13, 2026)

What the Amended Act Has Already Provided

Article 119-3 of the amended Act enables an issuer, underwriter, and arranger, before filing a securities registration statement for shares to be newly listed on the securities market, to solicit offers to subscribe from professional investors prescribed by Presidential Decree by means of ascertaining demand conditions such as the desired purchase price and quantity (limited to cases conducted by a method prescribed by Presidential Decree), and in such a case Article 119, paragraph (1) does not apply. Article 119, paragraph (1) is the provision stipulating that no public offering or sale may be made unless the registration statement has been accepted.

Article 119-4 of the amended Act enables, at the same point in time, solicitation of offers to subscribe for a portion of the quantity of shares from professional investors prescribed by Presidential Decree (paragraph (1)), and, notwithstanding Article 121, paragraph (1), acceptance of such offers (paragraph (2)). Issuers, etc. must maintain a conflict-of-interest prevention system when selecting professional investors (paragraph (3)), and a person who has acquired shares must place them in protective custody for a period of not less than six months as prescribed by Presidential Decree (paragraph (4)). The cap on quantity, the standards for the conflict-of-interest prevention system, and the method of protective custody are left to Presidential Decree (paragraph (5)). Article 119-5 requires that, where information has been provided before the filing of the registration statement, materials such as the list of professional investors who received it be recorded and retained and managed.

The main text of Article 174, paragraph (1) of the amended Act prohibits the use of material nonpublic information relating to the business, etc. of a listed company (including a corporation scheduled to be listed, such as a corporation to be listed within six months) in the trading of specific securities, etc. or in other transactions, or causing another person to use it. The newly added proviso provides that cases where information is provided pursuant to Article 119-3 and Article 119-4, paragraph (1) or paragraph (2) and which are prescribed by Presidential Decree are excluded. A violation of Article 174, paragraph (1) is punished, under Article 443, paragraph (1), subparagraph 1, by imprisonment with labor for not less than one year or a fine of not less than four times and not more than six times the profit gained or the loss avoided through the violating act. The Presidential Decree under the proviso thus sets the boundary of criminal punishment.

Sources for this section: Korea Law Information Center, Financial Investment Services and Capital Markets Act (Act No. 21647, effective November 13, 2026) · National Participatory Legislation Center, National Assembly Legislation Status: Partial Amendment Bill to the Financial Investment Services and Capital Markets Act (Alternative) (No. 2218519)

What the Draft Enforcement Decree Seeks to Fill In

Draft Article 129-3 defines professional investors eligible to participate in preliminary demand forecasting as financial institutions and certain other categories of professional investors provided in Article 10 of the Enforcement Decree and foreign financial institutions and the like equivalent thereto, and adds an asset-size standard to be prescribed by public notice for general private collective investment business operators and investment discretionary business operators. As to method, it requires that the forecasting be conducted after completion of the preparation of the issuer due diligence results report; that investor eligibility be confirmed by a method prescribed by public notice; that information be provided, within the scope of the statement of matters to be stated in the registration statement and the scope of attached documents under Article 125 of the Enforcement Decree, without falsity or exaggeration and without discrimination among professional investors; that a non-disclosure agreement be concluded for the prohibition of the use of material nonpublic information and the like under Article 174 of the Act and for sound transaction order; and that demand conditions be ascertained from multiple professional investors (subject to exceptions prescribed by public notice).

Draft Article 129-4 requires preliminary subscription investors to meet the preliminary demand forecasting requirements together with an asset-size standard to be prescribed by public notice. The protective custody period is to be prescribed by public notice within the range of not less than six months and not more than twelve months; the cap on the quantity of preliminary subscriptions is set at not more than 30/100 of the total public offering quantity (not more than 20/100 per investor) as prescribed by public notice; and protective custody is to be taken with the Korea Securities Depository. As a conflict-of-interest prevention system, it excludes from the eligible scope the major shareholders or specially related persons of the issuer, underwriter, and arranger, and collective investment business operators for which the underwriter acts as the related underwriter; prohibits the provision of benefits conditioned on preliminary subscription; and requires standards and procedures for the selection of investors and the determination of quantity. The acquisition price is the public offering price finally determined after the preliminary subscription.

Draft Article 129-5 requires records of the time of information provision, the provider, the counterparty, the method and the information provided, the non-disclosure agreement, the desired purchase prices and quantities returned, the details of the preliminary subscriptions, and the like to be retained and managed for ten years. Draft Article 201-2 defines the cases prescribed by Presidential Decree under the proviso to Article 174, paragraph (1) of the Act as cases satisfying both of two criteria. First, compliance with the non-disclosure agreement in relation to the information received; second, use of the information received solely for the purpose of preliminary demand forecasting or preliminary subscription. In addition, subparagraphs 13-7 and 13-8 of Article 68, paragraph (5) designate operations that violate the requirements and methods as unfair business practices of financial investment business operators, and a new item of fine for violation of protective custody is inserted into Attached Table 22. The article-by-article reasons explain that the standard for such fine is set at KRW 100 million. The Supplementary Provisions provide that it shall enter into force on November 13, 2026.

Sources for this section: Draft Legislation PDF: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · Article-by-Article Statement of Reasons for Enactment and Amendment: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (hwpx) · Korea Law Information Center, Financial Investment Services and Capital Markets Act (Act No. 21647, effective November 13, 2026)

If the Issuer Side Violates the Method, Does the Exception for the Investor Who Received the Information Also Disappear?

The proviso to Article 174, paragraph (1) of the Act is structured in two stages. First, the provision of information must have been made pursuant to Article 119-3 and Article 119-4, paragraph (1) or paragraph (2); next, it must be a case prescribed by Presidential Decree. Draft Article 201-2 fills only the second stage, and its criteria consist of the conduct of the investor who received the information, namely compliance with the non-disclosure agreement and use limited to the purpose.

However, the words "pursuant to" in the first stage bring in the method under draft Article 129-3, paragraph (2). Where the issuer or underwriter side violates the method, as where information was provided before the due diligence results report was completed, information beyond the scope of Article 125 was provided, or more information was given to only one investor, it becomes an issue whether that provision of information can be regarded as having been made pursuant to Article 119-3. The draft deals with such violation as an unfair business practice under Article 68, paragraph (5), but does not state what effect it has on the exception of the investor who received the information.

Investors find it difficult to verify on their own when the due diligence report was completed or whether other investors received the same information. Conversely, if the exception is recognized regardless of method violations, the method provisions will be used only for sanctions against financial investment business operators. Does a method violation on the issuer side affect the determination of the criminal liability of the investor who received the information, and if so, what must the investor verify in order to remain within the exception?

Sources for this section: Korea Law Information Center, Financial Investment Services and Capital Markets Act (Act No. 21647, effective November 13, 2026) · Draft Legislation PDF: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act

May the Threshold for the Exception Be Left to a Non-Disclosure Agreement Alone?

Draft Article 201-2, subparagraph 1 requires compliance with the non-disclosure agreement in relation to the information received. All that the draft provides as to that contract is the statement of purpose alone: a non-disclosure agreement for the prohibition of the use of material nonpublic information and the like under Article 174 of the Act and for sound transaction order. The parties to the contract, the scope of the confidential information, its duration, the personnel permitted to share it internally, and the measures upon breach are stated neither in the draft nor in the reasons.

Under this structure, the wording of a private contract sets the boundary of criminal punishment. Even for the same conduct, if the contract states a broad scope of internal sharing, it may be compliance, and if it states a narrow scope, it may be a breach. In addition, the word "compliance" does not distinguish the gravity of a breach, so it is also unclear whether a case of passing the information to a third party and a case of failing to observe part of the security procedures lead equally to the loss of the exception. The only example given in the reasons is a case where the non-disclosure agreement was breached by providing the information to a third party for use.

Should the minimum content of the non-disclosure agreement be prescribed in the Enforcement Decree or a public notice, and should the breach of contract that causes the loss of the exception be narrowed to breaches that reach the protective purpose of Article 174 of the Act, such as external leakage of the information or its use in trading?

Sources for this section: Draft Legislation PDF: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · Article-by-Article Statement of Reasons for Enactment and Amendment: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (hwpx) · Korea Law Information Center, Financial Investment Services and Capital Markets Act (Act No. 21647, effective November 13, 2026)

Who Proves, and with What, That the Information Was Used Solely for the Purpose?

Draft Article 201-2, subparagraph 2 requires that the information received be used solely for the purpose of ascertaining demand conditions or of preliminary subscription. The reasons explain that the exception does not apply where the professional investor who received the information uses it for other stock trading and the like. The question is what those other transactions are and how it is determined whether the information was used for them.

A professional investor is generally an institution with multiple management departments. Where information received by the person in charge of preliminary demand forecasting overlaps with trading in listed companies of the same industry managed by another department of the same institution, or with trading in shares of the issuer's listed affiliates, whether an information barrier existed may be important to the determination. However, the recordkeeping obligation under draft Article 129-5 rests only on the issuer, underwriter, and arranger that provided the information, and there is no provision in the draft concerning the internal controls or records of the investor who received the information.

The determination of use outside the purpose will ultimately be contested in subsequent investigation and trial through transaction records and the circumstances of access to the information. Should records of information accessors or information barriers also be required on the investor side, and should means of demonstrating that the use was not outside the purpose be prepared in the Enforcement Decree or a public notice?

Sources for this section: Draft Legislation PDF: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · Article-by-Article Statement of Reasons for Enactment and Amendment: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (hwpx)

Does Equality Among Professional Investors Close the Gap with General Investors?

Draft Article 129-3, paragraph (2), subparagraph 3 requires that information be provided within the scope of the statement of matters to be stated in the registration statement and the scope of the attached documents under Article 125, and that there be no discrimination among professional investors. The prohibition of discrimination is a rule among the professional investors who receive the information. General investors see the information only after the securities registration statement has been filed, and meanwhile professional investors return their demand and some are allocated quantities in advance.

The criterion "within the scope" may also be read in two ways. The text is not clear whether it means the scope of the items to be stated in the registration statement or that the content must be the same as the actual content of the registration statement to be filed later. Because the content is not fixed before the filing of the registration statement, the draft does not provide who must correct what where the information given to professional investors differs from the registration statement later disclosed.

Further, the draft does not prevent a professional investor that returned prices and quantities in the preliminary demand forecast from becoming a preliminary subscription investor in the same shares. Because the preliminary subscription price is the final public offering price, a structure may arise in which the investor that gave its price opinion secures a quantity at that price. Where participation in preliminary demand forecasting and allocation in preliminary subscription overlap, where should the criteria be provided, and in what manner should that fact be announced to general investors in the securities registration statement?

Sources for this section: Draft Legislation PDF: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · Korea Law Information Center, Financial Investment Services and Capital Markets Act (Act No. 21647, effective November 13, 2026)

Is the Scope in Which Quantity and Period Are Again Left to Public Notice Sufficiently Narrow?

Article 119-4, paragraph (4) of the amended Act set the protective custody period as a period of not less than six months as prescribed by Presidential Decree, and paragraph (5) left the quantity cap to Presidential Decree. The draft provides that the protective custody period shall be not less than six months and not more than twelve months, and that the quantity cap shall be not more than 30/100 of the public offering quantity (not more than 20/100 per investor), as prescribed by the Financial Services Commission. For the figures that the Act left to Presidential Decree, the Enforcement Decree sets only ranges and passes the specific figures to public notice.

The reasons explain that the Enforcement Decree sets the limits and delegates the specific levels to public notice. In addition, the professional investor asset-size standard, the method of confirming requirements, exceptions to the multiple investor principle, and the other methods all pass to public notice. Because a draft public notice is not included in the materials of this notice, the period, quantity, and asset standard that will actually apply at the time of implementation on November 13 cannot be confirmed at present.

There is also something to check in the notation. Draft Article 129-4, paragraph (1) is written as citing "Article 119 je-ui 4, paragraph (1)" of the Act, and there appears to be a typographical error intending to refer to Article 119-4, paragraph (1) of the Act. How far should the scope of passing to public notice again the figures that the Act left to Presidential Decree extend, and should the draft public notice be disclosed together before implementation?

Sources for this section: Korea Law Information Center, Financial Investment Services and Capital Markets Act (Act No. 21647, effective November 13, 2026) · Draft Legislation PDF: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · Article-by-Article Statement of Reasons for Enactment and Amendment: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (hwpx)

Commencement and Remaining Issues

The Supplementary Provisions of the draft provide for entry into force on November 13, 2026, matching the effective date of the amended Act. On the Government Legislation Status screen as of the reference date of confirmation, October 16, no stage after the advance legislative notice was displayed, and the provisions of the draft were not found in the current Enforcement Decree at the National Law Information Center. This article does not predict the progress of the procedure up to the effective date.

The remaining issues are the subordinate public notices. The asset-size standard, the protective custody period, the quantity cap, and the exceptions to the multiple investor principle are to be set by public notice, and if the minimum content of the non-disclosure agreement or the investor-side information barriers are to be provided, they too are likely to enter a public notice or other regulation. However, because this notice carries only the draft Enforcement Decree, which of the foregoing questions will be answered in a public notice cannot be known from the present materials.

Sources for this section: Draft Legislation PDF: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · National Participatory Legislation Center, Government Legislation Status: Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · Korea Law Information Center, Current Enforcement Decree of the Financial Investment Services and Capital Markets Act (Presidential Decree No. 36756, effective October 13, 2026)

What This Entry Did Not Verify

The regulatory impact analysis, the 101 submitted legislative comments, the subordinate public notice and the Regulations on the Issuance and Disclosure of Securities, etc., the Financial Services Commission press release, the review report of the National Assembly Policy Committee, and the amendments of the Legislation and Judiciary Committee were not read. The provisions of the amended Act were verified against the original text of Act No. 21647 at the National Law Information Center, and the reasons for proposal of the National Assembly alternative bill were read only in the summary on the National Assembly Legislation Status screen. The interpuncts in the text of the statutes were corrected in rendering.

This article neither supports nor opposes the introduction of the system and does not substitute for the submission of comments. The questions note the vacancies that arise between the wording of the public draft and the amended Act.

Sources for this section: National Participatory Legislation Center, Advance Notice of Legislation: Advance Notice of the Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (Financial Services Commission Public Notice No. 2026-561) · Draft Legislation PDF: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act · Article-by-Article Statement of Reasons for Enactment and Amendment: Draft Partial Amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (hwpx) · Korea Law Information Center, Financial Investment Services and Capital Markets Act (Act No. 21647, effective November 13, 2026) · National Participatory Legislation Center, National Assembly Legislation Status: Partial Amendment Bill to the Financial Investment Services and Capital Markets Act (Alternative) (No. 2218519)