Stock price manipulators' accounts to be frozen

The Korea Times

The Korea Times

Finance

Wed, November 29, 2023 | 03:48

Markets

Stock price manipulators' accounts to be frozen

Posted : 2023-09-21 15:30

Updated : 2023-09-22 09:09

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FSC tightens grip on capital market irregularities

By Lee Yeon-woo

Financial authorities say they will tighten their grip on unfair transactions following a recent stock manipulation scheme that caused the share prices of nine companies to plummet without any clear reason.

Regulators will freeze the accounts of stock price manipulators immediately upon detecting such transactions. The rewards for reporting unfair trading will be increased, and the team responsible for investigating such practices will be expanded.

These moves are part of the measures for addressing unfair trading in the capital market, announced jointly on Thursday by the Financial Services Commission (FSC), the Financial Supervisory Service (FSS), Korea Exchange and the Seoul Southern District Prosecutors' Office.

"Illicit activities in various forms continue to take place, with the increased public participation in the capital market and the growing number of listed companies," FSC Chairman Kim Joo-hyun said. "The large-scale stock manipulation crimes that occurred this April provided an opportunity for us to assess our response system. The relevant institutions will function as 'one-team.' Using all our capabilities, we will show zero tolerance and work towards eradicating unfair transactions in the capital market."

Previously, each institution had executed its roles in phases and collaborated only when necessary, leading to an inconsistent cooperative framework, the FSC explained.

From left, Korea Exchange Market Oversight Commission Chairman Kim Kun-ik, Seoul Southern District Prosecutors' Office Chief Kim Yu-cheol, Financial Services Commission Chairman Kim Joo-hyun and Financial Supervisory Service Governor Lee Bok-hyun pose following their joint meeting in Seoul, Thursday. The meeting focused on combating unfair trading practices in the capital market and also celebrated the 10th anniversary of their investigation team's formation. Courtesy of Financial Services Commission

Following the announcement, financial authorities will immediately freeze the accounts of those suspected of manipulation when illicit transactions are detected. Such measures, already adopted in countries like the U.S. and Australia, prevent the accused from siphoning stolen funds and continuing with their financial transactions. Until now, only the prosecution could take such measures after securing permission from a court. Financial regulators, on the other hand, have had no such power.

The rewards for reporting unfair trading will increase from 2 billion won ($1.4 million) to 3 billion won, funded by the government budget. Provisions for anonymous reporting will also be ensured.

Guidelines will be refined to motivate employees of disclosure offices and securities firms to come forward if they spot potentially unfair trading. Those who take the initiative to report cases and assist in investigations could see penalties reduced by as much as 100 percent.

Moreover, individuals with a history of unfair trading will be met with heightened sanctions. They will face limitations on capital market activities like stock trading and account opening for a decade. These individuals will be barred from holding executive roles in publicly traded companies for the same duration.

In April, Ra Deok-yeon, the head of an unregistered investment consulting firm, was discovered to have been manipulating the stock prices of nine listed companies for years. These stocks had risen in value consistently over the years, only to plummet sharply following mass sell-offs through SG Securities Korea, the local branch of France's Societe Generale Group. It is estimated that around 70,000 individual investors endured financial losses totaling 770 billion won.

"As the head of the financial regulator, it is disheartening to see that stock manipulators have disrupted our capital market for such a long time. This incident underscores the need for deep introspection from the financial authorities," Kim expressed in an apology at the time.

yanu@koreatimes.co.kr