[Viewpoint] Is There a Value Greater Than Fair Competition to Uphold?

Legal Amendment to Eradicate Stock Price Manipulation Faces Hurdles
Will Lawmakers Stand By Over Technicalities?
The Market Knows: Cheating Still Pays

The revision of the law aimed at imposing harsher penalties on criminal acts that undermine the foundation of a free market economy is on the verge of collapse. Criticism that the punishment for securities crimes in Korea is excessively lenient is nothing new. So, who exactly is blocking this legal amendment, and why?

To summarize the complex issue, the opposition argues that the proposed amendment to the Capital Markets Act includes provisions that deviate from the current legal framework, making it impossible to pass as is. It is reasonable to demand that the formal aspects of the law be fully met when amending it. However, the willingness to 'ultimately solve the problem' versus an indifferent attitude leads to completely different outcomes. The market clearly recognizes this difference.

After the Court Administration Office expressed negative opinions, lawmakers from the People Power Party opposed the bill’s passage at the full meeting of the National Assembly’s Legislation and Judiciary Committee held on the 20th. Another meeting is scheduled for the 29th, but after sluggish discussions, there is a possibility that the purpose of the law will be significantly compromised or the bill may be completely scrapped. The amendment to the Capital Markets Act is a core issue in President Yoon Suk-yeol’s repeated calls for the establishment of a ‘fair competitive order.’ Nevertheless, the ruling party’s delay in passing the bill through the Judiciary Committee, as if waiting for the opportunity, could send the wrong signal to the market. It is telling that Lee Bok-hyun, the Governor of the Financial Supervisory Service, had to rush to the National Assembly and plead to ‘find a way.’

The amendment places the burden of proof on the accused to demonstrate whether there were unjust profits from unfair acts such as stock price manipulation, and if so, how much. The Court Administration Office pointed out in its review report that this violates the fundamental principle of criminal procedure law, which holds that the prosecution (investigative authorities) bears the burden of proof, raising concerns about unconstitutionality. However, isn’t this fundamental principle precisely the core reason why crimes like stock price manipulation have been treated with ‘light punishments’?

Under the current law, it is not even possible to impose fines for unfair trading practices. The Court Administration Office conservatively interpreted the provision to impose fines twice the amount of unjust profits as potentially violating the principles of responsibility and prohibition of excess. Because penalties are light, the recidivism rate for unfair trading is as high as 23%, much higher than for general crimes. Criminals have mocked the current legal framework and fundamental principles, saying, ‘Serving a few years in prison is still a profitable deal.’

As is well known, the United States imposes very severe penalties for crimes such as stock price manipulation. The suspicion that current stock prices may have been manipulated regardless of corporate value disrupts the market and destroys companies’ ability to raise funds. This is a common-sense judgment that such crimes, which shake the foundation of the market economy, must be dealt with strictly, as well as a strong will to protect a robust capitalism.

Governor Lee Bok-hyun, who visited the National Assembly, appealed, “I hope that the National Assembly’s Political Affairs Committee, Judiciary Committee, Ministry of Justice, Financial Services Commission, and Financial Supervisory Service can move forward together in a process of finding the right answer for the development of the capital market.” The key is whether our institutional framework moves in a direction that overcomes and improves the limitations of the current legal system to uphold the value of fair competition, or whether it maintains a passive attitude that only allows institutional improvements within an unchanging legal framework. It is a matter of showing the market which force is stronger. An attitude of ‘It can’t be helped because that is the fundamental principle’ would mean no change in the practice of lightly handling unfair trading acts, tacitly acknowledging that cheating still pays, and showing helpless acceptance. The direction the National Assembly should choose requires no great deliberation.

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