Financial Authorities "Strengthen Detection and Measures Against Unfair Trading... Establish Monitoring Task Force"

[Asia Economy Reporter Park Jihwan] Financial authorities will shorten the operation of the Unfair Trade Investigation and Hearing Agency Council (Josimhyeop) from quarterly to monthly to strengthen the detection and measures against unfair trading, and will newly establish and operate an Unfair Trade Trend Monitoring Team under it.

On the 4th, the Financial Services Commission (FSC) announced that it held the first Josimhyeop meeting of 2021, attended by the FSC, Financial Supervisory Service (FSS), Korea Exchange (KRX), and the prosecution, and made this decision.

Recently, as individual participation in the capital market has surged, preventing damage to individual investors caused by unfair trading has become important. The average daily trading value of individual investors in the domestic stock market increased 5.5 times from 6.1 trillion KRW in 2019 to 33.6 trillion KRW in January this year.

Cases of unfair trading groups abusing SNS and video platforms, which have become active channels for individual investors to obtain stock information, have also become frequent. Accordingly, the FSC, FSS, and KRX decided to change the Josimhyeop meetings from quarterly to monthly to firmly establish a cooperation system among related organizations for swift and accurate market monitoring, detection, and action. In addition, an Unfair Trade Trend Monitoring Team will be newly established under Josimhyeop and operated biweekly. The monitoring team will analyze and share recent trends in unfair trading and investor precautions.

Capital market unfair trading cases generally go through market monitoring and hearings by the Korea Exchange, followed by investigation and measures by the FSC and FSS. Afterwards, they proceed through prosecution investigation, indictment, and trial processes.

The Korea Exchange announced that market alert measures for stocks showing rapid price increases or concentration of trades in a few accounts increased by 29% compared to the previous month in January this year. While COVID-19 and cryptocurrency-related stocks were the focus in December last year, measures related to electric vehicles and politician-related stocks increased significantly in January. The KRX is currently conducting 19 hearings on suspicious unfair trading signs detected through market monitoring. Stocks judged to have unfair trading suspicions based on analysis will be reported to financial authorities.

The FSC and FSS initiated 25 new investigations in January and are currently investigating 123 unfair trading cases. In particular, based on the special audit results of illegal short selling by market makers at the KRX, they plan to complete investigations into no-borrow short selling allegations involving four securities firms within the first quarter. Investigations into 14 cases in January have been concluded, and 12 individuals have been reported or referred to the prosecution through the Securities and Futures Commission. Penalty imposition measures were decided for two individuals.

The FSC’s self-regulation team recently executed two search and seizure operations earlier this month to actively respond to unfair stock trading behaviors using internet cafes and video platforms, which have become prevalent. The targets of the search and seizure include the operator of a Naver stock cafe with 220,000 members, suspected of unfair trading using advance trading methods. Also, a famous stock YouTuber is under investigation for market manipulation allegations involving preferred stocks worth around 30 billion KRW.

The FSC stated, "To efficiently respond to increasingly advanced and intelligent financial crimes and to promptly secure evidence, we will continue to appropriately utilize the FSC’s search and seizure authority in the future."

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