South Korea’s Financial Services Commission (FSC) plans to let securities analysts withhold their names from published research and introduce minimum coverage requirements for smaller companies. The proposals aim to make sell recommendations easier to issue, strengthen research independence and expand information available to investors beyond large-cap stocks.
The regulator announced the measures Thursday alongside plans to encourage major investment banks to direct more capital toward small and venture companies.
Domestic brokerage research remains heavily concentrated in larger stocks and positive recommendations. Among 85,030 reports issued over the past three years, companies outside the largest 300 by market capitalization received 17.2% of coverage, compared with 48.5% for the top 100. Meanwhile, Sell calls represented less than 1% of reports.
Under the proposed anonymity framework, analysts could decide whether their names appear on published reports. Brokerages would still need compliance-officer approval before publication and would have to retain internal records identifying the author, report content and approval process.
Brokerages would also face additional disclosure obligations. These include periodically reporting research output and identifying the five analysts whose target prices most closely matched actual prices. Firms ending coverage of a stock would have to explain why. Any subsequent resumption would require disclosure of the earlier suspension and the reasons for both decisions.
For comprehensive financial investment business operators, the FSC plans a minimum smaller-company research ratio. Coverage plans would also inform decisions on granting that designation or approving promissory-note issuance.
One proposed framework would require at least 25% of annual reports to address companies outside the Kospi’s largest 300 or the Kosdaq’s largest 150 by market value. More than half of that allocation would cover stocks outside the Kosdaq’s top 150.
Additional incentives could reward firms exceeding the minimum. Under one example, a smaller-company coverage ratio above 40% in the previous year would earn a five-percentage-point bonus in calculating current-year compliance with capital-supply obligations for small and venture businesses.
The proposals come as the combined venture-capital supply balance of seven operators subject to mandatory requirements reached 11.6 trillion won ($8.56 billion) at the end of the second quarter, a quarterly increase of 20.4%. That calculation applied a 30% recognition cap to investments in A-rated bonds and mid-sized companies and excluded Samsung Securities and Meritz Securities.
