Korea Exchange in hot seat after botched Kosdaq status reversal
Korea Exchange headquarters in Seoul / Yonhap
The Korea Exchange (KRX) is under fire after mistakenly removing a management-issue designation from a Kosdaq-listed firm and reinstating it just a day later, triggering sharp market volatility, market watchers said Wednesday.
The controversy has intensified as the stock price swung sharply during the episode, raising concerns about potential investor losses.
A management-issue designation serves as a warning mechanism applied to companies with serious financial or operational concerns, or those at risk of breaching listing requirements.
Its removal, by contrast, is widely interpreted as a signal that such risks have been resolved and that the firm has returned to normal trading status. Because of this signaling effect, any change in designation can significantly move share prices.
SCM Lifescience was designated as a management issue on March 21, 2025, after posting pretax losses from continuing operations for two consecutive years.
The exchange’s Kosdaq market division lifted the designation at 7:02 p.m. Monday, concluding, based on the company’s 2025 audit report, that it had met the criteria for removal.
That judgment, however, proved incorrect. The company still met the designation threshold, having recorded pretax continuing losses exceeding 50 percent of equity in two of the past three fiscal years.
After discovering the misinterpretation, the exchange reversed its decision and reimposed the management-issue designation at 2:28 p.m. Tuesday.
“The error was identified during a follow-up review the next day, and given the risk of investor harm, corrective action was taken during trading hours,” a KRX official said.
The fallout was immediate. The stock, which had hovered around 850 won ($0.57), opened above 1,000 won Tuesday and quickly surged to the daily limit following news of the designation’s removal. It then tumbled after the reversal was disclosed, deepening confusion among investors.
Trading activity also spiked sharply, with volume surging to more than 100 times normal levels.
Retail investors, in particular, have voiced strong anger.
“Authorities should investigate trades executed at inflated prices and compensate affected investors,” one investor wrote on an online forum.
In response, the exchange said it will launch an internal probe to identify procedural flaws and overhaul its disclosure review framework, including the adoption of AI-based verification tools.
“Disciplinary measures could follow if wrongdoing is confirmed,” a KRX official said. “We will also tighten oversight to prevent similar incidents and ensure more stable market operations going forward.”