The impact on market prices due to unfair transactions or illegal short selling is significant, and in cases where violations are concealed or minimized, an individual may be prohibited from engaging in transactions of financial investment products for up to five years.
The Financial Services Commission noted on the 27th that it has announced a legislative notice regarding the enforcement decree and operational regulations related to the amended Capital Markets Act.
The amended Capital Markets Act, which is set to take effect, stipulates that the Financial Services Commission can restrict transactions of financial investment products executed on one's account for up to five years for those who engage in unfair transactions and illegal short selling.
In line with this, the amendment to the subordinate regulations adds details that categorize the prohibition period for transactions of financial investment products based on the impact of violations on market prices, the amount of short sale orders, and the extent of unjust gains.
If one violates the restrictions on transactions of financial investment products, fines of up to 10 million won may be imposed. If the request for transaction from those subject to the restriction or the result of processing is not communicated, a fine of up to 18 million won must also be paid.
However, if it is recognized that the holder was not involved in a specific unfair transaction, the transaction restriction will be lifted. The amended subordinate regulations reflect that other measures equivalent to a payment halt under different laws, or instances where law enforcement agencies have withdrawn the payment halt request, can also serve as grounds for lifting the restriction.
The amendment to the subordinate regulations also includes corporations subject to restrictions on the appointment of executives, now encompassing not only publicly traded companies but also banks, insurance companies, mutual savings banks, and credit companies. Moreover, those who violate the executive appointment restrictions or fail to dismiss individuals designated as subject to restrictions will face fines set at 10 million won.
Detailed grounds for the lifting of payment stoppage have also been included in the amendment to the subordinate regulations. According to the amended Capital Markets Act, the Financial Services Commission can demand financial companies to implement payment stoppages for up to one year on accounts suspected of being used for specific unfair trading practices.
However, if it is acknowledged that the account holder was not involved in any unfair trading acts, the account stoppage will be lifted. The amended subordinate regulations further incorporate cases where measures equivalent to a payment stoppage have been imposed under other laws, or where law enforcement agencies have retracted the request for stoppage, as grounds for lifting the restriction.
Additionally, the account holder can file an objection to the Financial Services Commission within 60 days after learning about the payment stoppage, and the commission must inform the applicant of its decision regarding the objection within the following 60 days.
The criteria for fines related to violations of payment stoppages are also included in the amendment to the subordinate regulations. Financial companies that do not implement the payment stoppage may face fines of up to 10 million won, while those that have imposed a payment stoppage without communicating the related information may be fined up to 18 million won.
The notice procedure for amendments to the subordinate regulations will take place from today until Feb. 5, 2025. Following this, the revised Capital Markets Act is expected to come into effect on Apr. 23, 2025, after procedures including reviews by the Regulatory Reform Committee, the Ministry of Government Legislation, and resolutions by the State Council.
A Financial Services Commission official expressed, "With the enforcement of the amended Capital Markets Act and subordinate regulations, swift actions against unfair transactions and illegal short selling will become possible, and various punitive measures will help minimize the concealment of unjust gains."