"Could I Also Receive 370 Billion Won?"... No Limit on 'Stock Manipulation Whistleblower Rewards' Starting the 26th

Cap on Whistleblower Rewards for Stock Price Manipulation to Be Removed from May 26

Amendments to the Capital Markets Act and Act on External Audit of Stock Companies Approved

Participants in Misconduct Also Eligible for Partial Rewards
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Going forward, the cap on reward payouts to whistleblowers reporting stock price manipulation or accounting fraud will be eliminated. Whistleblowers will now be able to receive up to 30% of illicit gains or fines without an upper limit, making real the kind of large-scale payouts—such as the 370 billion won reward given to whistleblowers in the United States—in Korea as well.

The Financial Services Commission announced on May 20 that a revised Enforcement Decree of the Capital Markets Act and the External Audit Act, containing these changes, was approved at the Cabinet meeting. The amendments will take effect starting May 26.

Whistleblowers reporting stock price manipulation or accounting irregularities can now receive up to 30% of illicit gains or fines, with no ceiling. Previously, the maximum reward was 3 billion won for unfair trading cases and 1 billion won for accounting irregularities.

Participants involved in the wrongdoing can also receive rewards if they report. Previously, if a participant was referred to law enforcement for unfair trading, they were not eligible for a reward. However, if the participant did not coerce others into committing a crime or did not repeat violations within five years, they may now receive a portion of the reward.

Rewards will also be paid out more quickly. When a decision is made to impose a fine, whistleblowers can now receive 10% of the expected payout in advance, up to a maximum of 100 million won. While the principle is to pay out after fines have been collected by the treasury, this change was made because legal proceedings can delay payment. In addition, if principal funds used for price manipulation during unfair trading are confiscated or collected, up to 30% of the confiscated or collected principal can be paid out as a reward.

Whistleblowers can receive rewards even if they report to other agencies, such as the National Police Agency or the Anti-Corruption and Civil Rights Commission. Even if a report is filed with these agencies, the information will be shared with the Financial Services Commission or the Financial Supervisory Service, and the whistleblower will be eligible to receive the reward.

Sanctions for accounting fraud have also been strengthened. Previously, only the fine for the year with the largest violation amount was imposed. Now, in addition to the fine for the year with the largest violation, an additional 20–30% per fiscal year will be imposed based on the motive for the violation, such as intent or gross negligence. However, the total additional fines cannot exceed the sum of the annual fines for each fiscal year.

Fines will now also be imposed on those who are substantively responsible for accounting fraud. Previously, if an individual did not receive financial compensation from the company, a fine could not be levied on that individual. Now, if there is deemed to be a financial benefit from fraudulent accounting—such as private misappropriation, embezzlement, or breach of trust—a fine can be imposed even if the individual received compensation from an affiliate company. If it is difficult to objectively determine the amount of financial benefit for those involved in accounting fraud, a minimum standard amount of 100 million won will be applied.

A representative from the Financial Services Commission stated, "We expect these regulatory improvements to make a significant contribution to the early detection of illegal activities and to enable prompt response."

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