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Photo: Financial Services Commission (FSC) |
[Alpha Biz= Paul Lee] South Korea's financial authorities announced plans to significantly strengthen penalties for unfair trading practices—including stock price manipulation and accounting fraud—as they prepare to launch a Joint Task Force to Eradicate Stock Price Manipulation on July 30.
At a joint briefing held on July 9 at the Korea Exchange (KRX) headquarters in Yeouido, Seoul, the Financial Services Commission (FSC), Financial Supervisory Service (FSS), and KRX outlined their coordinated efforts to protect market integrity. This follows President Lee Jae-myung’s visit to the KRX last month, during which he instructed authorities to improve systems and expand resources to prevent unfair trading in the capital market.
Authorities emphasized that penalties for unfair trading, including stock manipulation and accounting fraud, will be tougher than ever. Accounting fraud refers to the deliberate manipulation of financial records to inflate business performance.
“Accounting fraud, like stock manipulation and false disclosures, undermines the integrity of the capital markets,” said Yoon-Soo Lee, Standing Commissioner of the Securities and Futures Commission under the FSC. “We are currently working on effective measures to strengthen enforcement against such acts and plan to announce them soon.”
He further stressed, “We aim to revise the system so that controlling shareholders and executives who intentionally commit accounting fraud face penalties severe enough to be considered ruinous.”
Currently, both monetary and non-monetary sanctions for unfair trading are in place. In January 2023, a regulation was introduced allowing authorities to impose fines up to twice the amount of illicit gains. Criminal penalties tied to illicit gains were also strengthened, with fines now set at 4 to 6 times the illegal profit, up from the previous range of 3 to 5 times.
Additionally, suspect accounts may face payment suspensions for up to one year, and individuals involved can be barred from trading financial investment products or serving as company executives for up to five years.
Going forward, the financial authorities plan to publicly disclose the names of violators and affected securities when penalties are imposed for serious offenses such as insider trading, market manipulation, or fraudulent transactions. While names will not be released at the initial investigation or referral stage, they will be disclosed without delay once formal penalties are finalized under a “one-strike-out” policy.
AlphaBIZ Paul Lee(hoondork1977@alphabiz.co.kr)
