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Duty to Disclose, Duty to Correct, and Duty to Update in the United States and the Republic of Korea

  • Korean Social Science Journal
  • Abbr : KSSJ
  • 2004, 31(1), pp.73-112
  • Publisher : Korean Social Science Research Council
  • Research Area : Social Science > Social Science in general

Byoung Youn Kim 1

1건국대학교

Candidate

ABSTRACT

Even though no general disclosure duty exists under the U.S. federal securities laws, an issuer has a duty to disclose material non-public corporate information in the following specific circumstances: (i) when a statute or regulation expressly requires disclosure; (ii) when a corporate insider or an issuer trades its stock on confidential information; (iii) when an issuer voluntarily choose to make a public disclosure, it has a duty to disclose sufficient information so that the disclosure made is not false or misleading. In Korea, issuers must disclose corporate information when they go to initial public offerings and file continuing disclosure under KSEA §§ 186-2 and 186-3. However, there is no basis for a duty to update and a duty to correct. Some commentator says KSEA § 186 is a kind of a duty to update because it needs timely disclosure. However, the items listed under § 186 refer to kinds of hard facts that relate to events which have already taken place. A duty to update is about kinds of forward-looking information. For the purpose of improving investor protection by establishing mandatory disclosure, a duty to disclose should be imposed on issuers who distribute their securities to the public. Further, a duty to correct and a duty to update should also be attached to corporate disclosure of material information to provide accurate information to the public. From this point of view, Korea should prepare those duties to force issuers to provide accurate information; in this way, investor protection may be established.

Citation status

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