Financial Services Commission Notifies Prosecutors of Bank Employee Using Non-Public Information

Financial authorities have identified employees of a major bank who gained unfair profits worth approximately 6.6 billion KRW by using undisclosed material information obtained during the processing of bonus share issuance for listed companies, and have reported them to the prosecution.

The Financial Services Commission and the Financial Supervisory Service announced on the 9th that through a joint investigation into unfair trading in the capital market, they detected insider trading involving employees of a major bank's securities business, and after an emergency measure (fast track) by Kim So-young, Chairperson of the Securities and Futures Commission, reported the case to the prosecution.

A significant number of employees in the securities agency department of the bank directly traded stocks using undisclosed material information acquired during the processing of bonus share issuance for listed companies. They were also found to have passed this information to employees in other departments, family members, and acquaintances for trading purposes, violating the prohibition on the use of undisclosed material information under the Capital Markets Act.

From January 2021 to April 2023, these employees obtained advance information regarding the scale and schedule of bonus share issuances while acting as agents for 61 listed companies. They purchased stocks of the target companies under their own and family members' names before the information was disclosed, and then sold the stocks after the bonus share issuance announcement caused the stock price to rise, realizing profits totaling approximately 6.6 billion KRW.

Some of them also conveyed information about the bonus share issuance to colleagues in other departments within the bank, family members, relatives, and acquaintances (including accountants and tax accountants), enabling them to trade and gain profits worth about 6.1 billion KRW. Including the unfair profits of 6.1 billion KRW obtained by the recipients of the information, the total trading gains amount to approximately 12.7 billion KRW.

The Financial Services Commission judged that the use of undisclosed information by employees of banks engaged in securities agency work is a serious matter that can undermine trust in the capital market.

Accordingly, separate from the investigation into unfair trading in the capital market, an on-site inspection of the bank was conducted from late March to early April. Upon reviewing the adequacy of the bank’s internal control system related to preventing employees’ use of undisclosed information, deficiencies were found in acquiring and managing internal information of client companies within the securities agency department.

The financial authorities plan to clarify responsibility for any violations of related laws in the future, along with improvement measures for the internal control system.

The Financial Services Commission and the Financial Supervisory Service will continue to activate joint investigations into unfair trading in the capital market to handle important cases more swiftly and effectively, and will take strict action especially against unfair trading acts involving financial company employees seeking personal gain.

Furthermore, to prevent the use of undisclosed material information by employees of other financial companies handling securities agency work, they will require improvements to related internal control systems, and will hold financial companies strictly accountable for any internal control failures when unfair trading involving their employees occurs.

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