Korea Exchange to enhance transparency of listed overseas firms

SEOUL, Oct. 5 (Yonhap) -- South Korea's bourse operator said Wednesday it will unveil a set of measures aimed at enhancing accounting transparency of overseas-based firms listed on the local exchange, thus better protecting local investors.
The move comes after the Korea Exchange (KRX) halted trading of shares of China Gaoxian Fibre Fabric Holdings Ltd. in March, after the firm's dubious accounting triggered a spate of lawsuits by angry investors.
Under the planned rules, the KRX will ask all foreign firms traded here to set up an internal accounting management system, which is currently only mandatory for local firms, the bourse operator said.
The measure will not be retroactive but the KRX may consider giving a grace period for firms already listed on the Seoul bourse to adopt such a system.
The bourse operator said it will also push to put more responsibility on local brokerages that manage the listings. A securities firm may be subject to investing a certain amount in a foreign firm' shares or submit corporate reports, it said.
Companies will also be banned from selling stakes in affiliates for a certain period following their initial public offerings, the KRX said.
The bourse operator aims to complete its revisions of the rules by the end of this year and implement the new measures starting next year.
There are currently 19 overseas firms listed on the local exchange, including 16 companies from China.