[Public Voices] We Must Acknowledge the Failure of the Capital Market Unfair Trading Control System

Organized Price Manipulation and Fraudulent Trading
Even Criminals Earning Hundreds of Billions Face Only Fines
National Assembly Must Urgently Reform the System

Jaebin Jo, Attorney at Barun Law LLC

Recently, the prosecution has indicted and detained seven individuals in connection with Edison Motors' acquisition of Ssangyong Motor. Investigations into the masterminds behind the involvement are also progressing rapidly. Authorities are conducting raids and investigations on companies related to virtual asset exchanges, healthcare, and heritage fund-related financial institutions. The prosecution is making every effort to investigate unfair trading in the capital market.

The author was seconded to the Financial Services Commission as the Director of Capital Market Investigation Planning from 2019 to 2020. Unfair trading in the capital market is difficult to uncover and takes a long time to punish properly. In other words, price manipulation and fraudulent trading are carried out secretly and systematically by many people. It is not only difficult to determine involvement but also hard to distinguish between principal and accomplice. Even if unfair trading, including insider trading, is partially identified, it takes a considerable amount of time to reach criminal punishment. As of 2019, from the time of the crime to the Securities and Futures Commission's resolution, insider trading cases took 693 days, price manipulation cases 1,121 days, and fraudulent trading cases 756 days. Prosecution investigations take an additional 2 to 3 years, and court proceedings add another 1 to 2 years. In criminal trials, due to the lack of standards for calculating illicit gains, fair punishment and recovery of criminal proceeds fail. Criminals who have gained billions of won in illicit profits escape with only fines of 500 million won. The capital market control system is failing, but only the public remains unaware.

In 2020, the author actively worked to solve these problems. It was believed that the issues could be resolved by introducing systems without additional budget input. Organized unfair trading crimes can be disrupted by creating distrust among members. By reducing criminal liability for voluntary reporters or whistleblowers, they can be encouraged to report each other, thereby dismantling the organization from within. If criminal punishment is prolonged, financial authorities can take action at earlier stages. This is why a system imposing fines up to twice the amount of illicit gains on unfair trading acts should be introduced. The method of calculating illicit gains can be simplified by deducting total costs from total revenue while reflecting third-party factors presented by the actor. The author made every effort to persuade members of the National Assembly and voluntarily gave media interviews to advocate for measures to eradicate unfair trading in the capital market and reform the investigation system. Unfortunately, the bills did not pass the Political Affairs Committee. Our system still fails to detect criminals and impose strict punishment. Meanwhile, criminals active in the capital market are training disciples, and the profits they acquire are increasing astronomically.

Due to competitive media coverage of prosecution investigations, the public is under the illusion that the government is properly controlling capital market crimes. It is time to be honest. Our system is failing, and the control net is too loose. Financial authorities and the prosecution have no means to control crime. The National Assembly must equip the authorities and prosecution, who are engaged in the battle, with spear and shield. Increasing the number of investigators and prosecutors has its limits. The system must be able to automatically defend the capital market through institutional introduction, not just individual efforts of public officials.

Jaebin Cho, Attorney at Barun Law LLC

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