Financial authorities have reported participants in a capital increase who allegedly gained approximately 1.3 billion won ($1 million) by using undisclosed information.
On October 28, the Securities and Futures Commission, under the Financial Services Commission, held its 19th regular meeting and decided to report two cases involving the use of undisclosed important information related to a significant capital increase that accompanied a change in management rights, as well as actions that disrupted market order, to the Serious Crimes Investigation Agency. They also decided to impose fines.
The Capital Markets Act prohibits the use of undisclosed important information, which includes actions by insiders who utilize undisclosed information related to the operations of listed companies for trading specific securities or allowing others to use such information. Disruptive market activities refer to actions taken by individuals who received undisclosed information from those who used it, knowingly engaging in trading of the relevant listed securities.
According to the Financial Services Commission, employees and acquaintances of Company E, which participated in a third-party allocation capital increase involving a change in management rights of listed Company A, are suspected of having gained approximately 1.25 billion won ($930,000) by using information related to the capital increase that they learned through their positions.
They reportedly believed that the participation of a celebrity in the large capital increase, along with changes in management rights, improvements in financial status, and the potential for new business initiatives, would drive up stock prices, leading them to use or share this information. The Financial Services Commission confirmed the circumstances through searches and digital forensic analysis.
Another case involved market disruption by employees of a company acquiring management rights. K, an internal director of Company J, which agreed to acquire management rights of listed Company I, allegedly shared information related to the acquisition contract with acquaintance L, who then traded Company I's shares based on this information and passed it on to relatives M, N, and O. The unjust gains for K and L are estimated at around 100 million won ($74,000).
Additionally, M, N, and O, as secondary recipients of the information, are also suspected of trading Company I's shares based on the information, gaining approximately 100 million won. The Securities and Futures Commission reported K and L for violating the prohibition on the use of undisclosed important information and imposed fines on M, N, and O for market disruption.
The Financial Services Commission warned that not only employees of companies but also those negotiating contracts with companies could face criminal penalties, including imprisonment for over a year or fines up to six times the unjust gains for using undisclosed important information related to their duties. Furthermore, secondary recipients who trade based on information received can also face fines up to 1.5 times the unjust gains for market disruption.
The Financial Services Commission and the Financial Supervisory Service stated, "We will respond sternly to unfair trading practices in the capital market using undisclosed information," urging compliance with relevant regulations and strengthening internal controls to prevent such practices.
* This article has been translated by AI.
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