The Financial Supervisory Service Strengthens Its Role as a Special Detective for Unfair Trade Practices This Year

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This year, the role of the Capital Market Special Judicial Police (Special Judicial Police) is expected to grow in the Financial Supervisory Service's (FSS) investigation of unfair trading. Unlike last year, when the number of personnel in the investigation department increased significantly, this year the Special Judicial Police and the Special Short Selling Investigation Team have expanded. This is interpreted as the FSS Special Judicial Police working swiftly with the Southern District Prosecutors' Office to respond to stock price manipulation.

According to the FSS on the 29th, as of the end of February this year, the number of personnel in the unfair trading investigation department was 145, an increase of 21.8% (26 people) compared to the end of last year (119 people).

Unfair trading investigations are handled by △ Investigation Departments 1, 2, and 3 △ Special Short Selling Investigation Team △ Special Judicial Police. By department, the Special Judicial Police currently has 51 personnel, a 64.5% increase from 31 at the end of last year. The Special Short Selling Investigation Team, which previously existed as a team within the investigation department, has been newly established as an organization with 20 members.

The notable point is the Special Judicial Police. The Special Judicial Police was established in 2019. Although they are civilians, they can exercise 'investigative' authority like the police under the direction of the prosecution. Since its inception, the Special Judicial Police has rarely shown a strong presence. This is because the role of the Securities and Futures Commission, which decides administrative sanctions for unfair trading acts, was emphasized more, and there was reluctance to operate the Special Judicial Police due to concerns about potential abuse of judicial police authority.

Their status changed with the appointment of FSS Governor Lee Bok-hyun. Especially last year, with a series of unfair trading issues such as the Ra Deok-yeon incident, five stocks hitting the lower limit, and suspicions of market manipulation involving Kakao and SM Entertainment, the Special Judicial Police came to the forefront. A financial authority official explained, "As stock manipulation tactics evolve, it has become important to respond quickly before evidence is destroyed," adding, "The FSS (Special Judicial Police), which knows the capital market best, utilizes coercive measures such as search and seizure and travel bans, and refers cases to the prosecution through emergency measures (fast track)."

This year, with personnel increased to 51, it is expected to focus on comprehensive investigations related to unfair trading acts such as stock manipulation, market manipulation, mergers and acquisitions (M&A), and illegal short selling. Furthermore, attention is on whether the first stock manipulation offender subject to the revised Capital Markets Act (regarding the method of calculating unjust profits) will emerge.

However, the Investigation Departments 1, 2, and 3 decreased by 15.9%, from 88 to 74 personnel. Earlier, after the Ra Deok-yeon stock manipulation incident in April last year, the FSS reorganized the investigation department in July last year to strengthen unfair trading investigation capabilities, expanding personnel from 70 to 88. Although the investigation departments can summon related parties to the FSS or request related data such as bank accounts concerning unfair trading acts, they do not have coercive investigative authority like the Special Judicial Police.

An FSS official stated, "To expand the FSS organizational personnel, approval from the Financial Services Commission is required," and explained, "Since the personnel were already expanded last year, we reallocated investigation department personnel while expanding the Special Short Selling Investigation Team and the Special Judicial Police."

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