Most Unfair Trading in Korean Stock Market Involves Kosdaq Companies... Over 40% Recurrence

Unfair Trading Tactics Also Becoming More Complex and Sophisticated

[Asia Economy Reporter Minwoo Lee] Most of the unfair trading incidents that occurred in the stock market last year were found to have taken place in KOSDAQ-listed companies. In particular, nearly half of these companies had already been identified for unfair trading within the past three years.

The Korea Exchange Market Surveillance Committee announced on the 17th that it reported 120 suspected unfair trading cases discovered through abnormal trading investigations last year to the Financial Services Commission.

According to the Market Surveillance Committee's investigation, 76.7% (92 cases) of the suspected unfair trading incidents last year occurred in KOSDAQ companies. This proportion has steadily increased from 72.6% (85 cases) in 2017 and 75.4% (89 cases) in 2018. The Exchange explained, "The target companies are concentrated among KOSDAQ-listed firms, with about one-quarter being financially distressed companies with poor governance," adding, "There were 45 cases (44%) involving companies repeatedly exposed to unfair trading, indicating that specific companies experienced repeated unfair trading incidents."

In fact, excluding derivative products and account-centered cases, 43.7% (43 cases) of the 103 reported unfair trading cases in the spot market involved companies that had already been exposed to unfair trading within the past three years. Companies reported two or more times in the last three years accounted for 18.4% (19 cases).

By type of unfair trading, insider trading (57 cases) was the most frequent, followed by fraudulent trading (28 cases), market manipulation (20 cases), and reporting obligation violations (3 cases). Other cases numbered 12. However, the highest growth rate was seen in fraudulent trading, which increased by 47.4% (9 cases) compared to the previous year. Insider trading and market manipulation decreased by 14.9% (10 cases) and 9.1% (2 cases), respectively.

The methods of unfair trading are becoming increasingly complex and sophisticated. Cases involving two or more overlapping charges have increased. Complex unfair trading cases with multiple allegations numbered 60, up 13.2% (7 cases) from 53 cases the previous year. Among fraudulent trading cases, 78.6% (22 cases) overlapped with market manipulation or insider trading charges. A Korea Exchange official explained, "In the process of fraudulent trading involving the dissemination of false or exaggerated information, many cases involved manipulating prices or using insider information to attract buying interest."

The Exchange plans to strengthen its response system by building a related database (DB) to counter the recent surge in corporate raid-type unfair trading. An Exchange official stated, "To proactively respond to new types of unfair trading, we will refine our investigation models, upgrade and systematize related statistics and databases, and improve infrastructure."

This content was produced with the assistance of AI translation services.