Seed Money for Market Manipulation Also Reclaimed... Securities Account Lending Brokerage Punished

[Asia Economy Reporter Ji Yeon-jin] The scope of surcharge and confiscation related to stock price manipulation has been expanded, and the act of brokering the lending of financial investment product accounts will also be punishable.

On the 21st, the Financial Services Commission announced that the amendment to the "Capital Markets and Financial Investment Services Act (Capital Markets Act)" aimed at establishing market trading order and strengthening investor protection in the capital market was passed at the plenary session of the National Assembly.

The amendment stipulates that not only the property (unjust gains) acquired through price manipulation but also the property provided for price manipulation shall be subject to confiscation and surcharge. Currently, seed money for price manipulation is subject to discretionary confiscation and surcharge, allowing courts to decide based on the scale of unjust gains, but the amendment strengthens punishment by including funds provided or prepared to be provided for price manipulation as subject to confiscation and surcharge.

Accordingly, in a case where 10,000 shares priced at 10,000 KRW per share are purchased for 100 million KRW, then the price is manipulated to 30,000 KRW per share and all shares are sold (300 million KRW), not only the capital gain of 200 million KRW but also the seed money of 100 million KRW can be confiscated or surcharged.

Additionally, a provision has been added to punish those who broker the lending of financial investment product trading accounts to others as unlicensed investment brokerage business. Those who mediate account lending may face imprisonment of up to 5 years or a fine of up to 200 million KRW.

Currently, when a financial investment company goes bankrupt, investor deposits are withdrawn by the investment operator from the deposit institution and paid to investors, but the amendment requires the deposit institution, Korea Securities Finance, to pay investors directly.

The amendment simplifies the review process by applying registration procedures when financial investment companies (investment trading business and investment brokerage business) add business units within homogeneous operations or product groups, and also relaxes approval review requirements when foreign financial investment operators change their organizational form through business transfers.

This amendment is scheduled to take effect six months after the date of promulgation.

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