The Financial Services Commission announced that a policy seminar on ways to strengthen sanctions against unfair trading activities in capital market was held by the Korea Exchange (KRX) and Korea Capital Market Institute (KCMI) on August 8. Vice Chairman Kim Soyoung of the Financial Services Commission attended the seminar and delivered congratulatory remarks.
In his speech, Vice Chairman Kim outlined the government’s past efforts and progress so far and plans to introduce more diverse sanctions mechanisms targeted at unfair trading activities. The following is a summary of Vice Chairman Kim’s remarks.
In order to more effectively detect and strictly punish unfair trading activities, the government has worked to improve the capital market investigation regimes and bolster sanctions, while boosting incentives for reporting. In this regard, first, a well-coordinated investigation network has been established among related agencies, enabling frequent inter-agency sharing of information about ongoing investigations. Second, against the three major types of unfair trading activities, which include the use of material nonpublic information, price manipulation, and dishonest transactions, imposing penalty surcharges has now become available as a sanctions mechanism. Third, incentives for whistleblowers has been increased to encourage wrongdoers and wrongdoing to be reported.
However, the existing sanctions mechanisms have limits in effectively dealing with the ever evolving and complex patterns of unfair trading activities. The current sanctions mechanisms, which focus on criminal punishment and monetary penalty, often take long times to arrive at a final court sentence and are rather ineffective at preventing recidivism. Major overseas economies, such as the U.S. and Hong Kong, have adopted non-monetary sanctions mechanisms to combat unfair trading activities.
After closely studying these cases from overseas, the government is seeking to introduce more diverse sanctions mechanisms against unfair trading activities in capital market. The measures sought by the government are the following. First, individuals found to have engaged in unfair trading activities will be prohibited from trading in capital market and from serving as an executive officer at a listed company for up to ten years. Second, individuals suspected of having engaged in unfair trading activities will be subject to the suspension of payments from account. In addition, authorities will look into the necessity of expanding information disclosure about wrongdoers.
The International Organization of Securities Commissions (IOSCO) also sees that regulations for protecting investors and ensuring fairness in market should be designed in ways that can prevent price manipulation and other unfair trading activities in capital market. Thus, considering this global perspective, it is essential to introduce more diverse types of sanctions mechanisms to more effectively deal with unfair trading activities taking place in a repeated manner.
* Please refer to the attached PDF for details.