The Democratic Party of Korea has placed tailored policies for domestic investors, including the introduction of a fair fund and measures to address low price-to-book ratio (PBR) listed companies, at the forefront of its central party pledges for the June 3 local elections.
Most of these are bills pending at the National Assembly's National Policy Committee. The move is interpreted as signaling that, once post-election negotiations on parliamentary committee composition conclude in the second half of the year, the party intends to reclaim the chairmanship of the National Policy Committee — currently held by the opposition — and aggressively push the agenda alongside the government.
According to the local election pledge book released by the Democratic Party on the 26th, the party promised to introduce a fair fund (fair compensation fund).
A fair fund refers to a fund that imposes fines on wrongdoers responsible for misconduct such as mis-selling and uses those funds to compensate investors who have suffered damages. In Korea, its introduction has been under review following incidents such as the Lime Asset Management scandal and the derivative-linked fund (DLF) crisis. The U.S. Securities and Exchange Commission (SEC) first introduced the system to address the reality that small-scale retail investors, even when harmed by unfair trading or mis-selling, find it difficult to file lawsuits due to a lack of information and the burden of costs.
The Democratic Party also said it would mandate that listed corporations file claims to recover short-swing trading profits when executives, employees, or major shareholders obtain such profits, and would establish supervisory mechanisms to strengthen the accountability and soundness of private equity fund management. The party said it would "eradicate hit-and-run schemes and price manipulation, and establish fair market order."
Detailed pledges to revitalize the domestic capital market followed. They include: △applying a fair value that takes into account stock price, asset value, and earnings value when determining merger and acquisition prices for listed corporations; △introducing a mandatory tender offer system so that minority shareholders can share in the management premium received by controlling shareholders during changes of control at listed companies; △granting general shareholders of parent companies preemptive rights for a certain volume of new shares when subsidiaries are listed following a physical division; and △resolving the issue of low-PBR listed companies that intentionally keep their stock prices low for extended periods.
The Democratic Party also announced cryptocurrency-related pledges, including the issuance of won-denominated stablecoins and the enactment of a Digital Asset Basic Act. The party promised to lay the foundation for a sound market by establishing a regulatory framework for digital assets such as stablecoins. To this end, the party plans to enact the Digital Asset Basic Act and push for the introduction of spot ETFs based on digital assets as underlying assets.
