Court Rules "Imposing Fine on Samsung Securities Employee for 'Phantom Stock Sale' Is Justified"

[Asia Economy Reporter Seongpil Cho] A court ruling has upheld the financial authorities' decision to impose a fine on an employee who sold 'ghost stocks' mistakenly credited due to a company error.

On the 30th, according to the legal community, the Seoul Administrative Court Administrative Division 5 (Presiding Judge Yangjun Park) ruled against Mr. A, who worked at Samsung Securities and filed a lawsuit against the Financial Services Commission seeking to cancel the fine imposed for disposing of stocks received due to a dividend error. The court stated, "Even the general public can reasonably anticipate that an incorrect stock trading contract could be concluded, and mistakenly entered stocks cannot be considered meaningless numbers."

On April 6, 2018, during the computerized input process of dividends for employee stock ownership, Mr. A received 838,000 'ghost stocks' that were never actually issued due to an error by the responsible employee. Mr. A placed a sell order at market price and sold all the stocks for over 1.1 billion KRW, then repurchased the same number of shares at a lower price a few tens of minutes later. The Securities and Futures Commission under the Financial Services Commission imposed fines on Mr. A and other Samsung Securities employees for 'market order disruption' charges, with Mr. A receiving a fine of 22.5 million KRW. Mr. A filed an administrative lawsuit seeking cancellation of the fine.

In court, Mr. A argued that he immediately repurchased the stocks after selling them, so he did not actually distort the price. However, the court did not accept this, stating, "If he wanted to verify the possibility of a sell order, he should have attempted only a small sell order or placed an order at a price higher than the market price. Instead, Mr. A placed a sell order for all the mistakenly entered stocks at market price, causing a sharp drop in Samsung Securities' stock price."

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