Cornerstone Investor System Takes Effect November 13: What Changes for IPO Subscriptions?

The image used in this article is not an official company image.

South Korea’s cornerstone investor system will take effect on November 13, 2026. The system allows a portion of shares offered in an initial public offering (IPO) to be allocated in advance to institutional investors that will hold those shares for an extended period.

It does not reduce the 25% allocation reserved for retail subscribers. Nor does it allow ordinary individual subscribers to participate as cornerstone investors. Furthermore, the system will not automatically apply to every IPO once it takes effect.

The key change is that part of the institutional allocation can be made in advance, with the allocated shares subject to long-term lock-up requirements. The change therefore concerns the structure of institutional allocations rather than the IPO subscription process for individual investors.

This article explains the implementation schedule, allocation limits, and lock-up conditions separately. The information is current as of November 11, 2026, and the policy’s expected benefits should be distinguished from actual investment performance.

📋 1. What Is the Cornerstone Investor System?

The cornerstone investor system allows a company conducting an IPO to allocate some of its offered shares in advance to institutional investors that meet specified eligibility requirements.

An important condition is that investors receiving these advance allocations must hold the shares for a prescribed period.

Institutional investors cannot sell the shares during the required lock-up period. A lock-up is a mechanism that restricts the disposal of shares for a specified period.

While the existing IPO allocation process primarily involved assessing institutional investors’ demand for shares, the cornerstone investor system makes it possible to allocate shares in advance to qualifying institutions on the condition that they hold them for the long term.

The main features of the system are as follows.

• Advance allocation: A portion of the shares designated for institutional investors may be allocated in advance.
• Long-term holding: Shares allocated in advance are subject to tiered lock-up requirements.
• Restricted eligibility: Participants must meet professional investor requirements and additional asset-size criteria.
• Optional use: IPO issuers are not required to recruit cornerstone investors for every offering.

From a company’s perspective, the system may help secure institutional investors with medium- to long-term investment horizons and build confidence in the IPO process.

However, an institutional investor’s commitment to hold shares for the long term does not, by itself, establish that the offering price is appropriate or that the share price will remain stable after listing.

🗓️ 2. November 13 Implementation Schedule — The Act and Enforcement Decree

The cornerstone investor system is being introduced through amendments to the law, its Enforcement Decree, and related regulations.

It is important to distinguish the date on which the amended law was promulgated from the date on which it takes effect.

As of November 11, 2026, the system has not yet taken effect.

From November 13, the legal framework will allow the cornerstone investor system to be used. Whether an individual company actually uses it in its IPO is a separate matter.

The system’s effective date should therefore not be treated as confirmation that it will be applied to a particular IPO.

📊 3. The 25% Retail Allocation Will Not Be Reduced

For individual investors, the most immediate question is whether the allocation reserved for retail subscribers will decrease.

The new cornerstone investor system does not reduce the 25% allocation reserved for retail subscribers.

Under the existing IPO allocation structure presented by the Financial Services Commission (FSC), retail subscribers receive a 25% allocation in both the KOSPI and KOSDAQ markets.

Shares available for advance allocation to cornerstone investors come from the remaining institutional allocation after excluding shares allocated to retail subscribers, employee stock ownership associations, and designated policy funds.

The policy fund allocations include high-yield funds and KOSDAQ venture funds, among others.

What changes under this structure is not the retail allocation but the internal composition of the institutional allocation.

• The existing 25% retail allocation is not transferred to cornerstone investors.
• A portion of the shares designated for institutional investors may be allocated in advance subject to long-term holding requirements.
• The actual size of advance allocations and whether the system is used may differ from one IPO to another.

The system also does not create a new category of IPO subscription eligibility for individual investors.

From an individual investor’s perspective, the change is therefore not a reduction in retail allocations, but the addition of advance allocation and lock-up conditions as factors when interpreting institutional allocation disclosures.

🏷️ 4. Allocation Limits for KOSPI and KOSDAQ

There are maximum limits on the number of IPO shares that can be allocated to cornerstone investors.

Different limits apply to KOSPI and KOSDAQ. The aggregate limit for all cornerstone investors must also be distinguished from the limit applicable to each individual institution.

The aggregate limit is the maximum combined allocation to multiple cornerstone investors. The per-institution limit is the maximum allocation to a single cornerstone investor.

For KOSPI, advance allocations can account for up to 20% of the general institutional allocation in aggregate, with a limit of 10% per institution. Expressed as a share of the total IPO offering, these limits are 10% in aggregate and 5% per institution.

For KOSDAQ, the corresponding limits are 30% in aggregate and 20% per institution, measured against the general institutional allocation. Expressed as a share of the total IPO offering, the limits range from 4.5~10.5% in aggregate and 3~7% per institution, depending on the allocation to employee stock ownership associations.

These figures represent the maximum permitted limits. They do not mean that every IPO must allocate shares to cornerstone investors at those percentages.

Furthermore, a percentage calculated against the general institutional allocation is different from a percentage calculated against the total IPO offering.

When interpreting the proportion of shares allocated in advance in a particular IPO, it is therefore important to distinguish which pool of shares serves as the denominator.

🔒 5. Tiered Lock-Ups of Up to 10 Months

Shares allocated to cornerstone investors are subject to tiered lock-up requirements.

Rather than applying the same lock-up period to the entire allocation, the shares are divided into portions subject to lock-up periods of 6 months, 8 months, and 10 months, respectively.

For example, suppose a single cornerstone investor receives an advance allocation of 1,000,000 IPO shares.

This is a hypothetical example intended to explain the lock-up structure. Actual allocation quantities vary by offering.

• 500,000 shares would be subject to a 6-month lock-up.
• 300,000 shares would be subject to an 8-month lock-up.
• 200,000 shares would be subject to a 10-month lock-up.

The purpose of staggering the expiration dates is to mitigate the concentration of shares becoming available for sale at a single point in time.

By dividing long-term holdings across different lock-up periods, the system can be structured to avoid having disposal restrictions on all advance-allocated shares expire simultaneously.

However, a lock-up does not mean permanent ownership. Once the applicable period expires, the shares may subsequently be sold.

Consequently, the existence of lock-up periods of up to 10 months should not be interpreted to mean that selling pressure after listing will disappear completely.

👤 6. Can Individuals Become Cornerstone Investors?

The system does not provide a way for ordinary individual IPO subscribers to participate as cornerstone investors.

Cornerstone investor eligibility is limited to professional investors that meet the requirements for participation in pre-bookbuilding as well as additional asset-size criteria.

Simply holding an ordinary IPO subscription account does not qualify an investor to participate.

In particular, a cornerstone investor must hold equity capital or entrusted assets equivalent to at least 20 times the value of the IPO shares it subscribes for in advance.

This requirement is intended to assess whether an investor can withstand the risk of share price fluctuations over an extended period after receiving an advance allocation.

Conflict-of-interest safeguards also apply to cornerstone investor agreements.

• Cornerstone investor agreements with institutions having relevant interests, including major shareholders or specially related parties, are prohibited.
• Providing or receiving direct or indirect benefits in exchange for entering into a cornerstone investor agreement is also prohibited.

These restrictions are intended to prevent advance allocations from being used to favor interested parties or transfer risk improperly.

Ultimately, the cornerstone investor system does not provide ordinary individual subscribers with a new advance subscription channel. It applies to professional investors that meet specified eligibility and financial requirements.

📈 7. Pre-Bookbuilding Will Also Be Introduced

Pre-bookbuilding will also become available alongside the cornerstone investor system from November 13, 2026.

Pre-bookbuilding is a procedure that allows institutional investor demand to be assessed at an earlier stage of the IPO process, before conventional bookbuilding.

It makes it possible to determine the prices and quantities at which institutional investors would be willing to purchase shares before a securities registration statement is filed and the indicative offering price range is finalized.

However, this process cannot be conducted at just any stage.

• It must take place after a due diligence findings report on the company has been prepared.
• The eligibility of participating institutions must be verified.
• When information is provided before public disclosure, confidentiality agreements must be concluded with participating institutions.
• Records of when information was provided, to whom it was provided, and what information was provided must be maintained and managed.

The policy objective of pre-bookbuilding is to improve the reasonableness of IPO pricing by assessing institutional investor demand from the stage when the indicative offering price range is being established.

However, the availability of pre-bookbuilding does not guarantee that an offering price will be appropriate.

Nor does this procedure provide ordinary individual investors with a separate opportunity to subscribe for IPO shares before the securities registration statement is filed.

Although pre-bookbuilding and advance allocations to cornerstone investors both involve institutional participation at an early stage of an IPO, they are distinct: one is a process for assessing investor demand in advance, while the other involves an actual advance allocation agreement.

✅ 8. Summary — The Change Concerns Institutional Allocations

The central feature of the cornerstone investor system is that a portion of IPO shares may be allocated in advance to institutional investors on the condition that they hold those shares for the long term.

It does not reduce the 25% allocation reserved for retail subscribers, nor does it allow ordinary individual subscribers to participate directly as cornerstone investors.

Allocation limits differ between KOSPI and KOSDAQ, while actual use of the system and the number of shares allocated may vary by IPO.

Allocated shares are also subject to tiered lock-ups of 6 months, 8 months, and 10 months. However, these restrictions do not eliminate the possibility that shares may be sold once the lock-up periods expire.

The mitigation of sharp share price declines immediately after listing, as described by the Financial Services Commission, is an expected policy benefit. It should not be interpreted as a guarantee of price stability or investment returns.

The existence of institutional lock-up commitments alone is also insufficient to determine whether an IPO offering price is appropriate or whether a company is an attractive investment.

For IPOs conducted after the system takes effect, securities registration statements and related disclosures may be used to distinguish whether the cornerstone investor system is being employed, how many shares are allocated to institutions in advance, and what lock-up periods apply.

The change taking effect on November 13, 2026, can therefore be summarized as the addition of a new mechanism within the institutional allocation structure for IPO shares, rather than a reduction in the allocation reserved for individual subscribers.

🔗 Further Reading

• Financial Services Commission — Cabinet Approval of the Draft Amendment to the Enforcement Decree of the Capital Markets Act Introducing the Cornerstone Investor System and Related Measures
• Financial Services Commission Notice No. 2026-48 — Partial Amendment to the Regulation on Securities Issuance and Disclosure
• National Law Information Center — Enactment and Amendment Texts of the Enforcement Decree of the Financial Investment Services and Capital Markets Act