Investor Protection in Korean Capital Market through Disclosures and Litigation

Abstract

The Korean securities market faces an ever-increasing demand from investors for transparent and legitimate operation. As a result of legislative, administrative, and judicial endeavors to protect investors in the securities market, both disclosure schemes and substantive grounds for claims are in place, producing a significant number of administrative sanctions and court judgments of civil liability for defective disclosures. It is noteworthy that electronic disclosures have significantly contributed to the transparency of the market, which was made possible by Koreas highly-developed broadband Internet environment. Furthermore, an increasing number of lawsuits against gatekeepers such as accounting firms and underwriters are requiring far more due diligence on their side, which is another positive step in investor protection. Still, insufficient incentive to sue remains one of the biggest hurdles for remedies through litigation. Proposals to revitalize class actions, such as lifting procedural barriers and offering pecuniary incentives to the lead plaintiff and its counsel, should be seriously considered.