Buying Stocks in Advance and Recommendations on Securities Broadcasts... Supreme Court Rules Guilty

[Asia Economy Reporter Lee Jung-yoon] The Supreme Court has ruled guilty on an investment expert who appeared on cable TV stock broadcasts and gained unfair profits by recommending the purchase of specific stocks he had previously bought.

The Supreme Court's 3rd Division (Presiding Justice Kim Jae-hyung) announced on the 12th that it overturned the lower court's acquittal verdict in the retrial of Mr. A (43), who was indicted for violating the Capital Markets Act, and remanded the case to the Seoul High Court.

Mr. A was prosecuted in 2013 on charges of buying stocks such as AhnLab (Ahn Cheol-soo Research Institute), Seohan, and Biospace at low prices from October 2011 to January 2012, recommending their purchase to investors through broadcasts and his own internet cafe, and then selling them immediately after the stock prices rose, earning about 3.7 billion KRW in profits.

This method is called so-called "scalping." It is the first time that such a crime, where a specific stock is purchased just before being recommended as a long-term investment, and then immediately sold for a profit when the price rises, has been detected by judicial authorities.

However, the first and second trials acquitted him. Although it was acknowledged that Mr. A recommended the purchase of three stocks on television stock broadcasts, it was ruled that this did not violate the Capital Markets Act.

Meanwhile, in 2017, the Supreme Court ruled in another case that scalping acts by investment advisors, securities analysts, media personnel, and operators of investment-related websites fall under "acts using unfair means, plans, or devices" and "use of deception" prohibited by the Capital Markets Act. This judgment influenced Mr. A's case, and the Supreme Court overturned his acquittal that year.

However, the retrial (second trial) again acquitted him. The retrial court stated, "It cannot be concluded that Mr. A expressed an intention to purchase three stocks to general investors on the broadcast or that he intended to induce stock purchases." This means that since he did not recommend the purchase, it was not a scalping crime in the first place.

The Supreme Court, reviewing the case again, affirmed Mr. A's guilt and issued a second remand ruling. The Supreme Court clarified that "'recommending the purchase of securities' refers to introducing to investors that a specific security is suitable for purchase and arousing their intention to buy that security," and confirmed that Mr. A's actions constituted a purchase recommendation. Furthermore, it stated, "The indictment that Mr. A recommended the purchase of securities without disclosing his interest in the securities he had previously purchased and held and might sell after the recommendation can be recognized as (guilty)."

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