Disclosure violations uncovered ahead of IPOs...Many unlisted firms failed to file securities registration statements

[Financial News] The Financial Supervisory Service (FSS) announced on the 19th that it took a total of 143 actions last year against 88 companies that violated disclosure obligations under the Financial Investment Services and Capital Markets Act. A key reason cited was that unlisted companies preparing for an initial public offering (IPO) were found, during pre-listing due diligence, to have failed in the past to file securities registration statements, leading to a wave of sanctions. In particular, medium-level sanctions such as fines accounted for more than 55% of all actions.
According to the "Status of Disclosure Violation Actions in 2025" released by the FSS, unlisted corporations overwhelmingly outnumbered listed ones, with 57 unlisted firms (64.8%) out of the total 88 violators, compared with 31 listed companies. Many violations by unlisted firms were uncovered when underwriters conducted due diligence for IPOs and identified past disclosure breaches.
The most common type of violation was "issuance disclosure violations," such as failing to file a securities registration statement. There were 98 actions related to issuance disclosure violations last year, a 180% increase from 35 cases the previous year. In most cases, companies raised funds without realizing that they were required to file a securities registration statement when soliciting subscriptions from 50 or more investors and the total offering amount was at least 1 billion won, and were later caught after the fact.
The severity of sanctions has also been significantly strengthened compared with the past. From 2021 to 2023, minor measures such as cautions and warnings accounted for 70–80% of actions, but last year medium-level sanctions, including fines (50 cases) and restrictions on securities issuance (25 cases), rose to 55.2% (79 cases).
Among listed companies, violations were particularly notable on the KOSDAQ market. The number of actions against KOSDAQ-listed firms doubled from 15 in 2024 to 30 in 2025. For listed companies, violations were spread relatively evenly across small public offering disclosure documents (12 cases), periodic reports (11 cases), and material event reports (10 cases), rather than securities registration statements.
The FSS plans to focus its disclosure review and investigation resources on issues directly linked to investor protection, such as false statements in securities registration statements for large-scale fundraising and violations of filing obligations.
An FSS official stated, "Some companies preparing for listing are experiencing delays in their IPO schedules due to past disclosure violations," and emphasized, "Corporations that have issued securities to many investors or have a track record of offerings must exercise particular caution when issuing securities to fewer than 50 investors without any resale restrictions in place."

elikim@fnnews.com Kim Mi-hee Reporter