Rep. Lee Yong-woo Proposes KakaoPay Fraud Prevention Bill

Representative Proposal of Capital Market Act Amendment Introducing Insider Trading Pre-Notification System with Exemption Provisions

Lee Yong-woo: "Must Greatly Expand Disclosure Obligations to Enhance Transparency and Fairness of the Stock Market"

On the 3rd, attendees are taking a commemorative photo at the KakaoPay KOSPI listing ceremony held at the Korea Exchange in Yeouido, Seoul. From the left: Song Young-hoon, Deputy Director of the Korea Exchange's KOSPI Market Headquarters; Ahn Sang-hwan, Chairman of the Korea IR Association; Jung Hyung-jin, Korea Representative of Goldman Sachs Seoul Branch; Lim Jae-jun, Director of the Korea Exchange's KOSPI Market Headquarters; Son Byung-doo, Chairman of the Korea Exchange; Ryu Young-joon, CEO of KakaoPay; Kim Joo-won, Vice Chairman of Kakao; Jang Seok-hoon, President of Samsung Securities; Park Tae-jin, Head of JP Morgan Securities Korea; Jung Woo-yong, Vice Chairman of the Korea Listed Companies Association Policy Committee. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Ji Yeon-jin] Rep. Lee Yong-woo (Democratic Party, Goyang City) announced on the 15th that he has taken the lead in proposing the "Act on Capital Markets and Financial Investment Business," which introduces a pre-reporting system for insider trading.

The current Capital Markets Act prohibits insiders of listed companies from using or allowing others to use undisclosed material information for trading specific securities or other transactions.

However, recently, allegations arose that the management of a company newly listed on the stock market sold a large volume of shares using undisclosed material information of the corporation, leading to a decline in the company's stock price and causing harm to general shareholders, sparking controversy.

In response, Rep. Lee Yong-woo proposed this amendment to introduce the pre-reporting system for insider trading, already implemented in the United States, and to significantly strengthen disclosure obligations to prevent harm to small general shareholders caused by unfair stock trading by insiders using undisclosed material information.

The amendment stipulates that when insiders trade stocks, they must prepare a pre-trade plan meeting criteria set by Presidential Decree, submit it to the relevant corporation for confirmation, and if the trade is conducted according to the submitted pre-trade plan, it will be presumed that undisclosed material information was not used, thereby granting exemption from liability.

Additionally, ▲ disclosure of the submitted plan ▲ submission of the pre-trade plan at least 120 days before the trading date (30 days for the corporation's own pre-trade plan) ▲ and allowing the exemption rule only once within the last 12 months are included.

Recently, the U.S. Securities and Exchange Commission (SEC) announced amendments to the U.S. securities law anti-fraud provisions (SEA, Rule 10b5-1) that significantly strengthen disclosure obligations for insider trading and impose a cooling-off period (120 days) for insiders' stock trades to prevent trading using undisclosed material information and to enable general shareholders to recognize such trades.

Rep. Lee Yong-woo stated, "The aim is to prevent insider trading using undisclosed material information by strengthening disclosure obligations such as the pre-reporting system and imposing a cooling-off period," adding, "I hope this will prevent harm to general shareholders caused by insider trading and enhance the transparency and fairness of the stock market."

He also noted that while there are no prior regulations on stock sales by major shareholders in Korea, in the U.S., major shareholders must submit a securities report if they sell more than 1% of the total issued shares within three months, and that he is preparing an amendment to the Capital Markets Act to introduce this system in Korea as well.

The co-sponsors of this Capital Markets Act amendment include Rep. Kang Min-jung, Kim Byung-joo, Kim Ui-gyeom, Kim Ju-young, Park Yong-jin, Yoon Gun-young, Lee Byung-hoon, Jeong Il-young, Jeong Pil-mo, Joo Cheol-hyun, Hong Ki-won, Hong Seong-guk, Hong Jeong-min, and Hwang Un-ha.

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