South Korea Enacts Cornerstone Investor Rules and Preliminary Book Building for IPOs

South Korea’s National Assembly passed amendments to the Financial Investment Services and Capital Markets Act on 23 April, introducing cornerstone investor allocations and preliminary book building for initial public offerings. The cornerstone system permits bookrunners to pre-allocate shares from the institutional tranche to investors who accept a minimum six-month lock-up, sidestepping the current ban on solicitation before a securities registration statement is filed. Preliminary book building grants bookrunners an exemption to gauge demand (price and quantity) from institutions before the price band is set, a step previously restricted as it preceded formal disclosure.

The changes form part of the government’s capital market policy reform agenda alongside security token legislation passed in January. Regulators frame both measures as mechanisms to improve price discovery and anchor confidence in primary markets. The cornerstone carve-out creates a pre-IPO allocation channel that was previously off-limits, while preliminary demand surveys shift part of the price-setting conversation upstream from the formal filing date.