7 out of 10 Cases of Unfair Trading in the Stock Market Last Year Involved 'Insider Information'

▲Korea Exchange building exterior

[Asia Economy Reporter Kwon Jae-hee] Among the 10 unfair trading cases detected in the Korean stock market last year, 7 were found to involve the use of undisclosed information. In particular, unfair trading using favorable information related to future industry themes such as COVID-19 and autonomous driving increased.

The Korea Exchange Market Surveillance Committee announced on the 15th that it reported a total of 109 suspected unfair trading cases identified through abnormal transaction investigations last year to the Financial Services Commission.

Among them, the use of undisclosed information accounted for 77 cases (70.6%), the highest number. The use of undisclosed information significantly increased from 51 cases (45.5%) in the previous year (2020).

According to the Exchange, the types of undisclosed information used last year showed an increase in the proportion of favorable information related to COVID-19 (vaccines, treatments, clinical trials, etc.) and future industry themes (autonomous driving, secondary batteries, virtual currencies, etc.).

The proportion of favorable information usage rose sharply from 42% in 2020 to 66.2% in 2021. Among these, COVID-19 and future industry themes accounted for 28.6%.

The Exchange analyzed, "As investors' interest in overcoming COVID-19 and companies' future growth prospects increased, unfair trading using such undisclosed information appears to have risen."

Next, market manipulation accounted for 13 cases (11.9%), and fraudulent trading for 10 cases (9.2%). In 2020, market manipulation and fraudulent trading were at 33 cases (29.5%) and 23 cases (20.5%) respectively, showing a decrease from the previous year.

The Exchange explained, "From 2019 to 2020, there was an unusually high number of fraudulent trading and market manipulation cases related to Lime and Optimus funds."

The total number of unfair trading cases slightly decreased compared to the previous year (112 cases).

By market, KOSDAQ had the highest number with 71 cases (65.1%), followed by KOSPI with 31 cases (28.4%), and KONEX with 3 cases (2.8%).

The Exchange explained that market manipulation activities aimed at maintaining the collateral value of major shareholders' stakes and forming favorable conversion prices have increased recently.

It also added that fraudulent trading using false statements and rumor spreading, as well as corporate raiding-type and leading room fraudulent trading, continue to occur.

Last year, 80% of fraudulent trading involved corporate raiding-type unfair trading aimed at realizing profits after acquiring management rights.

New types of unfair trading were also detected, such as realizing double illegal profits by trading both the underlying assets (stocks) and highly leveraged derivatives (stock futures) using favorable important information.

The Exchange warned that the volatility of domestic and international stock markets, heightened by recent tightening monetary policies in major countries, is expected to continue during the presidential election and earnings announcement periods.

The Exchange stated, "We will focus on monitoring rumor spreading activities centered on election-themed stocks in the future," and added, "We plan to cooperate with financial authorities to prevent and curb the spread of unfair trading through prompt investigations of socially sensitive stocks."

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