The nation's top policymaker said April 1, that the government would not tolerate foreign investors' misconduct, stressing that the controversial disclosure rule is necessary for improving transparency in the market. "We will continue with steps to attract foreign capital but will take stern measures against foreign investors' wrongdoings," Finance-Economy Minister Han Duck-soo said at a regular press conference. He dismissed concerns over the new disclosure rule criticized by The Financial Times (FT), which claimed that Korea sticks to economic nationalism by adopting "draconian" and "pernicious" rules to protect domestic markets. "The five-percent rule is to improve transparency. We introduced it after thorough reviews of regulations of the U.S. Securities Exchange Commission," Han said. "If we fail to secure the transparency of capital flows, we will have difficulty in implementing basic economic policies to use foreign capital for the development of our economy in the long term." The "five-percent rule" stipulates that investors report to financial regulators within five days after they newly acquire a stake of 5 percent or more in a certain company. It also obliges them to declare their intention for the purchase of shares as well, which went into effect on Tuesday. The issue is not about the five-percent rule itself but about the new requirement that an investor should declare whether or not he/she has the intention to influence the management of the target company. Han's remarks came a day after the FT criticized Korea, saying it has a strange way of pursuing its vision of becoming a financial hub and that the latest change was inconsistent with South Korea's ambition. The report irked South Korean policymakers and financial regulators. Not Only in Korea "The adoption of the five-percent rule is not a 'sudden move' as claimed by FT," Financial Supervisory Commission (FSC) spokesperson Kim Yong-hwan said. "We studied the case for about one year before implementing it. It is intended to improve corporate governance and transparency." He said that the new rule does not target foreign investors and is not based on any sort of economic nationalism. "Similar rules exist in other financially and economically advanced countries, including the U.S.," he said, citing the U.S. Securities and Exchange Commission Regulation 13D, which clearly stipulates the five-percent rule applies in the event of "changing or influencing" the control of the issuer. Mixed Response Foreign experts have shown mixed views. Some say that the government needs to know about capital inflows, while others counter that the new rule will deter an inflow of foreign capital. "As long as the Korean government keeps the information confidential, then I do not think it should be an issue," Mauro F. Guillen, professor of the Wharton School of the University of Pennsylvania, told The Korea Times. "I am in favor of free capital flows but I think governments have the right to ask companies to disclose their positions," he added. "Of course, this should be done with guarantees that the information will not be misused." In contrast, Market Force Company CEO James Rooney said that the new regulation would hamper foreign investment and hurt the nation's credibility. "The new regulation collides head-on with a fundamental premise of a stock market," he said. "By definition of their ownership of shares in a company, shareholders have also acquired an absolute right to exert influence and control over the management of the invested company." Kookmin Bank Asset Management Garry Pieters said that the introduction or "packaging" of new legislation is not always done or explained properly and is sometimes introduced hastily. "For instance, the five-percent rule includes funds, which in light of the above and of past experiences is understandable but really hard to comply with," he said. "A fund consists of many shareholders and individual reporting is nearly impossible."