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| From left, Seoul Southern District Prosecutors' Office chief Yang Seok-jo, Financial Supervisory Service (FSS) Governor Lee Bok-hyun, Financial Services Commission (FSC) Chairman Kim Joo-hyun and Korea Exchange (KRX) Chairman Sohn Byung-doo pose during the joint conference on eradication of unfair transactions held at KRX headquarters in Yeouido, Seoul, Tuesday. Courtesy of FSC |
Punishments to be strengthened, CFD to be overhauled
By Lee Yeon-woo
The bank accounts of those suspected of manipulating stock prices will be frozen and their illegally earned profits will also be confiscated. These are part of plans announced by financial regulators in what they are calling a "war against those who disturb the market."
The Financial Services Commission (FSC), the Financial Supervisory Service (FSS), Korea Exchange (KRX) and Seoul Southern District Prosecutors' Office discussed such measures, Tuesday, at a joint conference in which they pledged to implement an emergency response system throughout this year to combat such manipulations.
"Financial authorities and the prosecution are declaring war on those who disturb the market," FSS Governor Lee Bok-hyun said. "I will shoulder the responsibility as if my position depends on it, undertaking stringent investigations and improving systems."
The conference was held in response to a recent price manipulation scandal involving eight local stocks ― including Samchully, Daesung Holdings and Daou Data ― which led to losses totaling 1 trillion won ($762 million) across approximately 1,000 investors.
The suspects are alleged to have misused contract for difference (CFD) transactions, a type of financial derivative that speculates on stock price movements. It has been reported that some high-income earners and celebrities were also swindled by the scam.
The financial authorities have vowed to make their best efforts in investigating the case and preventing similar cases from happening in the future.
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| Financial Services Commission Chairman (FSC) Kim Joo-hyun speaks during a joint conference on eradication of unfair transactions held at the KRX headquarters in Seoul, Tuesday. Courtesy of FSC |
In particular, FSC Chairman Kim Joo-hyun emphasized the importance of enforcing harsher punishments. He mentioned that a revised bill including such measures is currently being discussed in the National Assembly.
"Criminals exhibit a prevalent attitude of 'let's just endure for a few years,' given that sentences are so lenient, even if they are caught embezzling vast sums of money," Kim said. "If we enforce financial sanctions, we can restrict these criminals."
Under the current laws, those involved in illegal trading can only be sentenced to jail time with no recourse to seize their illicit gains. Kim also introduced measures expected to be included in the bill, such as banning market manipulators from making market transactions for up to 10 years, and freezing accounts suspected of involvement in stock manipulation.
In addition, plans to overhaul CFD transactions were also discussed at the conference.
"We have faced challenges in monitoring unfair trading as CFD transactions do not disclose the investor's real identity. Therefore, we are planning to revise the regulations so that the real investor, rather than the securities firm, is identified when a CFD transaction is ordered," KRX Chairman Sohn Byung-doo said.
The application process for individual investors to gain permission for CFD transactions will also be strengthened. Those who wish to perform CFD transactions will now need to apply in person and receive approval from securities firms.
"There is undoubtedly a critical window of time for responding to capital market crimes," said Yang Seok-jo, chief of the Seoul Southern District Prosecutors' Office. "We will strive to maintain this time through systemic information sharing among relevant institutions and by establishing a prompt response system."
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