South Korea Considers How To Structure Its Securities Class Action System

The South Korean legislature is still debating over legislation that would permit investors to bring securities class actions. The Korea Times reports that conservative lawmakers are seeking to limit the scope of the planned class action system to companies with more than 2 trillion won in assets (i.e., very large companies). Opponents argue that most of companies investigated for stock price manipulation and accounting fraud, based on a sample from 1998 to 2001, do not meet this test.

The 10b-5 Daily has been following this story intently (see posts here and here for details on the legislative proposals). Not surprisingly, South Korea appears interested in learning from the U.S. experience with securities class actions — the Korea Times describes a a public hearing hosted by the Korea Development Institute (KDI) that included a discussion of the pros and cons of a U.S.-style system.

Quote of note: “The system entails considerable cost, so it is imperative for South Korea to consider its economic reality before taking this step, [Professor Stephen Choi of U. of Cal., Berkeley] added. However, Choi said though there were problems related to class action suits, the experience of the U.S. following the passage of its Private Securities Litigation Reform Act in 1995 offered some reference for reform measures that could be carried out here.”

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