Hyundai Motor Executive Suspected of Using Non-Public Information... 'Double Profit Penalty' Gains Momentum in February National Assembly

[Asia Economy Reporter Ji Yeon-jin] Financial authorities are accelerating the introduction of fines for unfair trading practices such as using undisclosed information to gain profits in the stock market. As suspicions arise that Hyundai Motor Group executives obtained unfair gains by using undisclosed information related to Apple Car development, the passage of the relevant bill is expected to gain momentum.

On the 19th, according to the National Assembly and financial authorities, the Financial Services Commission recently included in its business report submitted to the National Assembly's Political Affairs Committee a revision of the Capital Markets Act to introduce fines for unfair trading practices as a key bill for the February extraordinary session. The amendment stipulates that fines of up to twice the amount of profits gained or losses avoided through unfair trading practices such as using undisclosed important information, market manipulation, or fraudulent trading shall be imposed. The bill was originally proposed by Yoon Kwan-seok, chairman of the Political Affairs Committee, in September last year.

According to the Political Affairs Committee's review report, from 2015 to 2019, a total of 311 cases of unfair trading practices under the Capital Markets Act were submitted to the Securities and Futures Commission over the past five years, with 50 to 70 cases detected annually. Among these, 157 cases (50.5%) involved the use of undisclosed information, which means trading securities of a company or allowing others to use such information. Market manipulation (83 cases) and fraudulent trading (71 cases) followed.

Under current law, unfair trading is punishable only by imprisonment of one year or more or a fine of up to three to five times the amount of unfair gains. However, criminal penalties often take a long time from prosecution by the prosecution to court rulings, and due to difficulties in proving illegality, many cases result in non-prosecution or suspended sentences or lighter judgments. It took an average of 393 days for the Securities and Futures Commission to notify the prosecution and for the decision on whether to indict to be made, and up to two years for a final ruling by the Supreme Court. Among 92 defendants convicted in unfair trading cases in 2018, 37 (40.2%) received prison sentences, while 55 (59.8%) received suspended sentences. Lee Yong-jun, senior expert of the Political Affairs Committee, said, "It is reasonable to legislate so that the Financial Services Commission can impose fines for unfair trading to complement the gaps in existing criminal sanctions and to swiftly and effectively sanction unfair trading."

Recently, as Hyundai Motor announced the termination of its electric vehicle development cooperation with Apple, causing Hyundai Motor's stock price to plummet, suspicions of insider trading arose over Hyundai Motor Group executives selling shares before the announcement, acting as a catalyst for the introduction of fines. Park Yong-jin, a member of the Democratic Party, urged at the Political Affairs Committee plenary session on the 17th, "General investors who suffered losses from the Hyundai stock price crash will be outraged," and called on "both the Financial Services Commission and the Financial Supervisory Service to actively investigate." The Korea Exchange is scheduled to begin hearings on these suspicions next week.

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