Next Year, Penalties for Stock Price Manipulation... Maximum Fine Up to Twice the Illicit Gains

Financial Services Commission to Enforce Capital Markets Act Amendment on January 19

Starting January next year, fines of up to twice the amount of unfair gains obtained through unfair trading such as stock price manipulation will be imposed. Even if there are no unfair gains or if it is difficult to calculate, fines of up to 4 billion KRW can be imposed.

The Financial Services Commission announced on the 28th that the amended "Capital Markets and Financial Investment Services Act (Capital Markets Act)" with these provisions will be enforced from January 19 next year.

The core of the amended Capital Markets Act is ▲ the introduction of fines for unfair trading ▲ legalization of the method for calculating unfair gains ▲ introduction of a leniency system for voluntary reporters.

A fine system was newly established for the three major unfair trading acts: insider trading, market manipulation, and fraudulent trading. Previously, only criminal penalties such as fines and imprisonment were possible. From now on, fines of up to twice the amount of unfair gains obtained through unfair trading can be imposed. Even if there are no unfair gains or if it is difficult to calculate, fines of up to 4 billion KRW can be imposed.

The amount of unfair gains is clearly defined as "the difference between total revenue and total costs," and specific calculation methods for each type of act are presented in subordinate regulations. Unfair gains refer to profits obtained or losses avoided through violations, serving as the basis for fines and penalties.

The financial authorities allow for reductions in penalties and fines if the unfair trading actor voluntarily reports the violation or testifies about another person's crime. However, reductions will not be granted if the person coerces others to participate in unfair trading or repeatedly commits unfair trading acts over a certain period.

Stock price manipulation also occurred on a large scale this year. There were three large-scale stock price manipulation detections this year. The total number of unfair trading cases handled by the Securities and Futures Commission was 104, an increase of more than 28% compared to last year. By type, there were 13 cases of insider trading, 8 cases of market manipulation, 24 cases of fraudulent trading, 3 cases of market order disruption, and 56 cases of other reporting obligation violations.

The Financial Services Commission plans to maintain a close cooperative system with the Financial Supervisory Service, Korea Exchange, and prosecution, applying a zero-tolerance principle to illegal acts that undermine the capital market order.

The Financial Services Commission stated, "From next year, the introduction of the fine system and legalization of unfair gains will enable swift and effective sanctions, allowing appropriate punishment corresponding to the actual economic benefits obtained by criminals." They added, "The introduction of a leniency system for voluntary reporters and improvements to the whistleblower reward system will activate insider reporting, effectively preventing and detecting unfair trading."

Meanwhile, sanctions for violations of short-selling restrictions have been significantly strengthened this year. The Financial Services Commission announced that after imposing fines for illegal short selling in February, a total of 37 companies were fined approximately 37.08 billion KRW throughout this year.

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