Juhyun Kim "CFD System Improvement Plan to be Announced This Month... Amend Law to Severely Punish Stock Manipulators"

Financial Services Commission, Financial Supervisory Service, Exchange, and Southern District Prosecutors' Office
'Joint Forum of Related Agencies to Eradicate Unfair Trading' Held

Kim Joo-hyun, Chairman of the Financial Services Commission, announced that an emergency response system will be activated in cooperation with the Financial Supervisory Service to restore trust in the capital market and eradicate unfair trading. He also stated that improvement measures related to Contracts for Difference (CFD), which were used as tools in the recent Soci?t? G?n?rale (SG) Securities stock manipulation incident, will be announced within this month, and that unfair trading practices will be eradicated through amendments to the Capital Markets Act.

Financial Services Commission Chairman Kim Joo-hyun (third from the left) is taking a commemorative photo at the joint discussion forum of related organizations to eradicate unfair trading held at the Korea Exchange in Yeouido, Seoul, on the 23rd. From the left, Yang Seok-jo, Chief Prosecutor of the Southern District Prosecutors' Office; Lee Bok-hyun, Governor of the Financial Supervisory Service; Chairman Kim; and Sohn Byung-doo, Chairman of the Korea Exchange. Photo by Kim Hyun-min kimhyun81@

Strengthening Cooperation with Related Agencies Including the Financial Supervisory Service... Enhancing CFD Professional Investor Requirements

At the ‘Joint Discussion Meeting of Related Agencies for Eradicating Unfair Trading’ held on the 23rd at the Korea Exchange Conference Hall, Chairman Kim made these remarks. He said, “We will actively promote joint investigations into major unfair trading cases so that the authorities and strengths of each agency can be immediately utilized,” adding, “We will share all necessary information from the recognition to the conclusion of major cases.” This comes in response to criticism that the Financial Services Commission, which initially recognized the criminal acts related to the Ra Deok-yeon stock manipulation incident, did not share relevant information with the Financial Supervisory Service, exacerbating the situation due to discord between the two agencies. The two agencies are now moving to strengthen cooperation.

Furthermore, Chairman Kim emphasized that the ‘Investigation and Hearing Agency Council,’ which currently operates quarterly, will be increased to 2-3 times a month and transformed into an emergency meeting body to oversee the overall unfair trading response system. The council includes the Financial Services Commission’s Securities and Futures Commission, the Financial Supervisory Service, the Korea Exchange, and the Southern District Prosecutors’ Office. Chairman Kim explained, “We will seek improvement measures for the entire response system at each stage, including recognition, hearing, and investigation, rather than making piecemeal improvements such as personnel and material reinforcement,” and added, “We will broadly listen to opinions from related agencies as well as academia and industry experts to ensure thorough review.”

The CFD system improvement plan is scheduled to be announced within this month. Key improvement measures include eliminating regulatory arbitrage with margin loans that are essentially the same in substance and switching the professional investor application process to face-to-face. Additionally, additional requirements will be applied to professional investors who intend to engage in CFD and over-the-counter derivative transactions. Chairman Kim stated, “Regardless of the investigation results, we have already begun a comprehensive review and supplementation of the problems related to CFD trading.”

“Discussion on Amendments to the Capital Markets Act... Severe Punishment for Those Involved in the Recent Stock Manipulation Incident”

Penalties for unfair trading will also be strengthened. Chairman Kim said, “The National Assembly’s Judiciary Committee is currently discussing amendments to the Capital Markets Act, which include the introduction of surcharge penalties, legalization of the method for calculating unjust profits, and reductions for voluntary reporters,” adding, “If the amendment imposing surcharges up to twice the amount of unjust profits is enacted, it will completely deprive illegal economic gains and sound a warning against the reckless pursuit of quick profits by enduring only a few years of imprisonment.”

These amendments are expected to apply to ongoing investigations as well. It is explained that if it is confirmed that major shareholders who gained profits from selling in the recent stock manipulation incident obtained unjust profits, they may face legal punishment. Regarding this, Chairman Kim emphasized in a meeting with reporters, “Although it is uncertain how the discussions in the Judiciary Committee will change, the current draft law allows application to ongoing investigations,” and added, “It does not mean that those who manipulated stocks before the amendment will be exempt.”

In addition, Chairman Kim explained that amendments are being pursued to expel stock manipulators from the system through severe punishment, including up to 10 years of capital market transaction restrictions and restrictions on executives of listed companies. Furthermore, he mentioned that enhanced measures will be introduced to freeze accounts suspected of stock manipulation to effectively confiscate criminal proceeds and prevent additional crimes at an early stage. Chairman Kim stated, “We will refer to similar legislation and overseas cases and cooperate with related agencies such as the Ministry of Justice to aim for legislative proposals within this year,” adding, “If account freezing is implemented, it will cause irreparable damage to securities criminals and fundamentally block attempts at crime.”

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