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| Seoul's financial district of Yeouido / gettyimagesbank |
By Lee Min-hyung
People engaging in unfair trading activities in the local capital market will face fines of up to five times the profits they gained.
The Financial Services Commission (FSC) said Monday that it agreed on a revision act for the capital market and financial investment business presented by Rep. Yoon Kwan-seok and Rep. Park Yong-jin of the main opposition Democratic Party of Korea.
Under the revision, people found guilty of engaging in three unfair trading practices ― using undisclosed information, price manipulation and illegal trading ― will face either a prison sentence of more than a year or fines of three to five times their profits.
The move came amid growing calls from lawmakers and the Korean public for stock traders involved in illegal activities to face tougher punishment. Under the current capital market act, those caught violating the law only receive criminal punishment rather than fines.
Discussions on the revision of the act surfaced after a major financial scandal regarding the mis-selling of problematic fund products managed by Lime Asset Management and Optimus Asset Management in 2019, which led investors to suffer losses of more than 1 trillion won. The incident created a social consensus that financial and investigative authorities should come up with more stringent punishment measures against any illegal trading act.
Under existing laws, people who violate the fair trading act can still commit similar illegalities in the capital market, as their gains are not confiscated immediately until a court makes a decision, which generally takes at least a couple of years.
Rep. Yoon proposed the act two years ago, but little progress has been made since, as opponents claimed that stipulating a clause on fines can be seen as violating the independence of the administrative authority. The FSC and lawmakers are moving to speed up the passage of the revision act by removing the clause. Both sides reached an agreement to keep revising the act to prevent further such disputes.
The FSC also expressed its intent to revise the act to impose fines on illegal traders. It said this will help prevent to some extent further mis-selling of problematic funds.
FSC data also showed that only a few traders engaging in illegalities have been fined. For five years from 2017, around 93 percent out of a total of 274 unfair trading cases did not lead to fines, according to the data.
The revision act is expected to go into effect before the second half of the year.
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