The Securities and Futures Commission Uncovers 18 Cases of Unfair Capital Market Trading Including Insider Information Misuse

[Asia Economy Reporter Ji-hwan Park] The Securities and Futures Commission under the Financial Services Commission announced on the 8th that it sanctioned 18 cases of unfair trading in the stock market, including price manipulation, in the third quarter of this year, and took prosecutorial referral and notification actions against 31 individuals and 16 corporations.

The SFC introduced major sanction cases in the third quarter of this year, including the use of undisclosed material information, price manipulation, and violations of large shareholding reporting obligations, to prevent investor damage, and urged caution.

Mr. B, the representative of company A listed on KOSDAQ, who signed a stock transfer and management rights transfer contract involving a change of the largest shareholder, had prior knowledge that a bio product manufacturer would be added as a new transferee of company A. In particular, Mr. B is suspected of purchasing company A’s shares under his spouse’s name before the information was disclosed and selling all of them the day after the disclosure to gain unfair profits.

The SFC emphasized that the use of undisclosed material information of a company learned during the contract signing and execution process by employees, major shareholders of the corporation, or persons who signed contracts with the corporation constitutes a violation of Article 174 of the Capital Markets Act.

Furthermore, the SFC’s judgment is that trading to defend against stock price declines to prevent forced sale of pledged shares also constitutes price manipulation.

Additionally, the Financial Services Commission stated that if a large shareholder reporting obligor enters into a stock collateral loan contract using held shares as collateral, the reporting obligation applies not only to the contract signing but also to the disposal of the pledged shares. When the combined holding ratio of the person and their special related parties is 5% or more of the total issued shares, the person has a large shareholding reporting obligation.

An SFC official emphasized, "If you hold 5% or more of the shares of a listed company or if your holding ratio changes by 1% or more, you must report the holding status and changes within 5 business days to the Financial Services Commission (Financial Supervisory Service) and the stock exchange," adding, "Violation of this may result in criminal action or imposition of fines."

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