Undisclosed Information Leads to 12.7 Billion KRW Stock Illicit Gains, Kookmin Bank Receives 'Management Caution'

Financial Supervisory Service Management Precautions and Improvement Measures Actions

The Financial Supervisory Service (FSS) has notified KB Kookmin Bank, where employees were caught pocketing illicit gains amounting to around 10 billion KRW, to strengthen its internal controls.

According to the financial sector on the 3rd, the FSS took measures on one management advisory item related to strengthening internal controls and one improvement item for the internal information management system at Kookmin Bank on the 17th of last month.

Under the Capital Markets Act, employees in the securities agency department are restricted to "trading under their own name" and "trading through one financial investment company and one account" when dealing with financial investment products. When employees in this department open accounts, they must immediately report to the compliance officer and submit trading details. Kookmin Bank allowed its employees to self-check and report according to guidelines related to financial investment product trading. The FSS pointed out that voluntary reporting may fail to detect and prevent employees from improperly using job-related information.

The FSS urged the bank to shorten the reporting cycle for financial investment product trading details and strengthen internal controls by reviewing the appropriateness through comparison of trading details and assigned duties. Additionally, the FSS instructed the bank to improve work procedures to minimize the acquisition of non-public information while performing name transfer agency tasks such as consulting with client companies.

Furthermore, the FSS ordered the bank to organize the internal information management system by recording and inspecting telephone consultations with client companies, managing the history of responsible personnel, and establishing mechanisms to block information exchange within the securities agency department.

Earlier, financial authorities detected that employees of Kookmin Bank’s securities agency department had acquired non-public information in advance while handling free capital increase tasks for 61 listed companies from January 2021 to April this year, and purchased stocks under their own and family members’ names. The case was reported to the prosecution as a fast-track case by the Chairman of the Securities and Futures Commission. The total trading gains of these employees amounted to approximately 12.7 billion KRW.

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