The government has officially confirmed the decision to double penalties for stock price manipulation gains as fines starting from January next year. However, it has decided to exclude cases where the prosecution has raised investigation concerns. The Korea Exchange (KRX) has also decided to expand its monitoring organization for stock price manipulation.
On Sept. 25, the Financial Services Commission (FSC) re-announced legislative proposals, including amendments to the Capital Market Act Enforcement Decree and supervisory regulations. In the new Enforcement Decree, in principle, the FSC can impose fines after being informed of the investigation and actions by the prosecution regarding unfair trading suspects. Additionally, even if one year has passed since the FSC notified the Prosecutor General, it cannot impose fines first if there are reasons for delays in investigation and disposition such as a suspension of prosecution.
The FSC has also decided to exempt cases where the prosecution requests that the final investigation and course of action go against being subject to fines. After completing the legislative proposal by Nov. 6 following the legislative notice, it will be implemented in conjunction with the amendment of the Capital Markets Act. This implementation is scheduled for Jan. 19 of next year, following reviews by the Legislation Office and deliberation at the Cabinet meeting.
The FSC has also clarified the procedures for imposing fines to prevent duplication with criminal punishment. Additionally, it has specified criteria for calculating undue profits, including total income and total costs, as well as outlining the scope of reduction when unfair trading actors voluntarily report their actions.
The KRX has also announced new measures to address long-term stock price manipulation. In addition to the existing short-term trading criteria, the KRX will introduce six-month medium-term and annual long-term abnormal trading criteria. It will also incorporate the percentage of linked accounts involved in stock manipulation as well as key corporate value indicators like price-to-earnings ratio (PER) and price-to-book ratio (PBR) into its trading criteria. Furthermore, it plans to establish an expert advisory council to gather external opinions and reorganize the Market Surveillance Department from 6 divisions to 7.
The Financial Supervisory Service has decided to strengthen its response system in collaboration with organizations such as the National Police Agency’s National Investigation Headquarters by the end of the year. It plans to disclose cases related to unfair conduct by investment advisors similar to illegal “reading rooms” through its special enforcement team, which has been in operation since June.