[Edaily Marketin Reporter Ji Young] It has been confirmed that the Korea Exchange (KRX) advised that the approximately 100 billion won in tax and customs risks arising from #Seojin Systems’ major production subsidiary in Vietnam did not constitute a disclosure requirement. However, the Financial Supervisory Service (FSS) determined that the same matter could be subject to disclosure in the regular report and has begun verifying the specific facts to review potential amendments to the report and sanctions. It appears that the Korea Exchange, by limiting itself to a formalistic judgment, has failed to fulfill its role in monitoring listed companies’ disclosures and is out of step with the regulatory authorities.

KRX at Odds with FSS...Standing Idly By Despite Risk Awareness

According to an exclusive report by Edaily on the 16th and sources in the investment banking (IB) industry, it has been determined that the Korea Exchange (KRX) advised Seojin System that a 100 billion won tax assessment imposed on its Vietnamese subsidiary was not subject to disclosure. The reason given was that fines, penalties, or value-added tax (VAT) assessments incurred by subsidiaries are not listed as items subject to ad hoc disclosure under the KOSDAQ Market Disclosure Regulations.

An official from the Korea Exchange told Edaily in a phone interview, “While fines and penalties imposed on the parent company are subject to disclosure, those imposed on subsidiaries are not covered under current KOSDAQ disclosure regulations. Taxes are also not listed.” The official added, “We simply explained that it is not subject to ad hoc disclosure under current regulations.”

The issue is that the exchange’s judgment and disclosure guidance were limited to whether the matter fell under the items listed in the ad hoc disclosure regulations. Seojin Vietnam is Seojin System’s core production subsidiary and a major subsidiary. The tax payment order in the range of 100 billion won issued to Seojin Vietnam and the travel ban on its management are matters that could directly impact the parent company’s liquidity, business operations, and fundraising. This is why critics argue that the exchange should not have merely informed the company that the matter was not directly listed as an item requiring ad hoc disclosure, but should have also guided the company to review the necessity of disclosure in terms of inclusion in periodic reports, voluntary disclosure, and fair disclosure.

The KOSDAQ disclosure system is not limited to enumerative ad hoc disclosures. Even if a matter does not directly fall under “major management issues,” if it could affect the company’s management, assets, or investor judgment, it can be disclosed to the market through voluntary disclosure. Furthermore, if important information is selectively provided only to specific investors or related parties, there is a possibility that it could be subject to fair disclosure. Related Article ☞ Seojin System Allegedly Disclosed 100 Billion Won Tax Risk Only to Capital Increase Investors [Only Edaily]

The Financial Supervisory Service’s (FSS) assessment differs from that of the stock exchange. The FSS’s Disclosure Review Bureau determined that since Seojin System received a VAT assessment notice in the range of 100 billion won last February, this matter should have been reflected in its first-quarter report. The FSS determined that the tax payment order issued to Seojin Vietnam, a major subsidiary, constitutes a tax-related administrative measure that could influence investor judgment, and that the fact that an appeal is pending is not a valid reason for exclusion but rather a developing situation that should be explained alongside the disclosure.

According to the FSS’s guidelines for preparing corporate disclosure forms, disclosure documents must include all matters essential to investor decision-making, and must not omit any information that could lead to adverse outcomes or unfavorable results. Furthermore, if a company has received administrative sanctions for violating domestic or international laws and regulations, including tax laws, it is required to disclose in its periodic reports the sanctioning authority, details of the measures, financial penalties or the amount of the sanctions, the reasons and applicable laws, and the status of compliance.

Moreover, Seojin Systems already has a history of repeated disclosure violations. In 2024, Seojin Systems was designated as a company with inadequate disclosure due to a retraction of a disclosure regarding the withdrawal of a corporate spin-off decision, and last year, it was designated again for delayed disclosure of a stock pledge agreement involving a change in the largest shareholder. Given that a listed company with a history of repeated disclosure violations has once again faced issues regarding the non-disclosure of major risks, critics argue that the exchange should not have limited itself to merely making a formal determination of whether the matter fell under the category of ad hoc disclosures.

Previously, it was revealed that Seojin Vietnam, Seojin Systems’ main production subsidiary in Vietnam, received an order from Vietnamese customs authorities in February to pay approximately 100 billion won in value-added tax. The company maintains that it is currently in the process of filing an appeal.