Analyst Sentenced to 2 Years in Prison for Illegally Profiting by Buying Recommended Stocks in Advance

Court: "Abusing Position to Undermine Public Value of Capital Market"

[Asia Economy Reporter Yoo Byung-don] A former securities firm analyst who made hundreds of millions of won in illicit profits by buying stocks in advance before releasing corporate analysis reports has been sentenced to prison in the first trial.

The Criminal Division 13 of the Seoul Southern District Court (Chief Judge Lee Sang-joo) announced on the 5th that it sentenced Mr. A, former head of the research center at DS Investment Securities, who was indicted for violating the Capital Markets and Financial Investment Business Act, to two years in prison and a fine of 500 million won.

The court explained the sentencing reason, saying, "The defendant actively used his position as head of the research center, which could influence investors' investment decisions, to commit crimes for personal gain, seriously damaging the public values of fairness, reliability, and efficiency in the capital market."

It added, "It appears that the defendant personally consumed most of the capital gains obtained through the crime in this case," and "He also attempted to actively conceal the crime by replacing his mobile phone with a rented used phone the day before the investigation agency's search and seizure."

Earlier, Mr. A was arrested and indicted on charges of making about 450 million won in capital gains by informing his acquaintance Mr. B of the stocks listed in the corporate research analysis report (buy recommendation) he prepared, prompting Mr. B to buy them, and then selling the stocks after the report was published and the stock price rose, a method known as 'front-running.' Mr. A resigned from the company after the incident.

The court also sentenced Mr. B, who was indicted for trading stocks under Mr. A's instructions, to one year and six months in prison with a three-year probation and a fine of 200 million won. Mr. B joined a securities firm as a professional investment advisor on Mr. A's recommendation and later resigned.

In June of last year, the Capital Market Special Judicial Police (Special Judicial Police) of the Financial Supervisory Service conducted search and seizure operations at Mr. A's residence and DS Investment Securities to secure related materials, and in October of the same year, applied for and obtained an arrest warrant. This was the first time the Special Judicial Police directly secured the suspect's custody after obtaining a warrant.

The Seoul Southern District Prosecutors' Office, which received the case from the Special Judicial Police, conducted supplementary investigations and arrested and indicted Mr. A and others for violating the Capital Markets Act.

Launched last year, the Financial Supervisory Service's Special Judicial Police is an organization that investigates unfair trading practices in the capital market, such as price manipulation, stock price rigging, and insider trading. It is composed of Financial Supervisory Service employees and can investigate cases referred to the prosecution by the Securities and Futures Commission chairman under emergency measures, under the supervision of prosecutors.

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