Insider Trading Detected Using Positive COVID-19 Related Information

Both Watched Stocks and Market Alert Stocks Increase Compared to Last Week

[Asia Economy Reporter Minwoo Lee] Before positive news related to the novel coronavirus infection (COVID-19) was released, a pattern of large-scale purchases of their own company’s stock followed by massive sales after a sharp rise in stock prices was discovered through the Korea Exchange’s weekly market surveillance.

The Korea Exchange Market Surveillance Committee announced on the 16th that during last week’s (December 7?11) market surveillance, the number of cases involving the misuse of undisclosed information increased by 26. Among these, planned surveillance will be conducted on 22 stocks.

Among these, 15 stocks were companies subject to substantive delisting review (5 due to business suspension, 4 due to embezzlement or breach of trust, 3 due to accounting violations, and 1 due to adverse audit opinion). Seven stocks were companies with unfaithful disclosures due to failure to comply with disclosure obligations.

Examples of undisclosed material information misuse are as follows. In the case of Company A, insiders purchased large amounts of their own stock just before positive COVID-19 related news was released. After the news, they sold their holdings during the sharp rise in stock price to realize profits. In the case of Company B, individuals were caught buying large amounts of stock through multiple linked accounts just before the announcement of a new business venture, then selling after the announcement to gain trading profits. Among the suspects with multiple (6) accounts, one sold all holdings of other stocks just before Company C’s new facility investment announcement to secure funds, then concentrated purchases of Company C’s stock. They earned trading profits after the stock price rose following the announcement. The Exchange plans to notify supervisory authorities after further review of these stocks.

Meanwhile, preventive measures totaled 62 cases, an increase from 56 cases the previous week. Acts such as repeatedly submitting high-priced buy orders to induce price increases with the intent to sell pre-purchased stocks at high prices (excessive price manipulation), submitting low-priced sell orders exceeding 45% of total order quantity during the closing single-price trading session to sharply drop the expected execution price, then canceling all those orders just before the simultaneous closing price (sudden expected price fluctuation) were detected.

The total number of stocks subject to market warning measures was 60, also up from 56 the previous week. This was analyzed to be due to increased price volatility in untact-related stocks such as packaging, content, and food, as well as COVID-19 vaccine-related stocks. The Exchange took investment caution measures for 55 cases and investment warning measures for 5 cases.

The Market Surveillance Committee plans to promptly notify financial authorities of stocks suspected of unfair trading after conducting reviews.

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