South Korea will enforce stricter penalties for unfair trading practices in the capital markets, including stock price manipulation. (Image courtesy of Yonhap)
SEOUL, Jan. 19 (Korea Bizwire) — Starting from January 19, South Korea will enforce stricter penalties for unfair trading practices in the capital markets, including stock price manipulation.
The Financial Services Commission and the Financial Supervisory Service announced that the amendment to the Financial Investment Services and Capital Markets Act (Capital Markets Act), which reinforces punishment for unfair trading, will be implemented.
Previously, only criminal penalties such as fines and imprisonment were possible for unfair trading. However, with the new amendment, fines can now reach up to twice the amount of unfair gains obtained from such practices, and up to 4 billion won in cases where the unfair gains are absent or difficult to calculate.
The amendment specifies the procedure for imposing fines to prevent overlap with criminal penalties. Under this amendment, the Financial Services Commission is typically required to impose a fine after receiving the investigation and disposition results of unfair trading suspects from the prosecution.
However, a fine can be imposed even before these results if the Financial Services Commission has previously notified the prosecution of unfair trading suspicions and agreed with the prosecution, or if one year has passed.
The standard for calculating unfair profits is established as the difference between ‘total revenue’ obtained from the violation and ‘total cost’ deducted. This includes realized profit, unrealized profit, and avoided losses.
Specific calculation methods have been developed for various types of violations, such as the use of undisclosed material information, price manipulation, and fraudulent trading.
Profits derived from trades that were motivated by or targeted the violation are also factored into the calculation of unfair profits.
A leniency system for self-reporting violators has also been introduced. Offenders who voluntarily report their violations or testify about others’ crimes can receive a reduction in criminal penalties and fines.
This change acknowledges that unfair trading often involves multiple actors in an organized manner, making the acquisition of testimony and evidence from insiders crucial.
Depending on the provision of new evidence and cooperation, fines can be reduced by 50 to 100 percent.
The financial authorities emphasized that unfair trading in the capital markets is a serious crime that disrupts market order and generates losses for numerous investors.
They stated, “By strictly sanctioning unfair trading activities according to the principle of zero tolerance, we will create fair capital markets that people can trust with their investments.”
M. H. Lee (mhlee@koreabizwire.com)
