Employees from a company assisting with the public purchase of a listed company and staff members from a law firm gained undisclosed information during the process of the public purchase, resulting in illicit profits ranging from tens of millions to hundreds of millions of won, and were subsequently caught by financial authorities. The authorities reported them to the prosecution.
The Financial Services Commission's Securities and Futures Commission (SFC) held a regular meeting on the 22nd of this month and noted on the 30th that they reported and notified the prosecution of public purchasers of listed company stocks and employees of consulting firms due to suspicions of violating Article 174 (Prohibition of acts using undisclosed significant information) of the Capital Markets and Financial Investment Business Act.
There have been repeated occurrences where the trading volume and stock prices of target stocks for public purchases have surged just before the announcement of public purchase plans, raising ongoing suspicions regarding the prior leak of public purchase information or the use of undisclosed information. In response, financial authorities captured and investigated numerous suspicious transactions indicative of unfair trading through concentrated monitoring, and confirmed that the suspicions of unfair trading involving public purchasers or members of affiliated consulting firms were largely substantiated.
An employee identified as A, who was a public purchaser (prospective public purchaser at the time), disclosed the fact of the public purchase to acquaintances during the process of conducting a public purchase of stocks in the fourth quarter of 2023. Thanks to A, acquaintances who purchased stocks before the information was made public were able to gain illicit profits amounting to tens of millions of won.
Also, employees B, C, and D from the law firm responsible for legal consultations related to public purchases acquired information about the implementation of public purchases for three stocks while managing the company's document system from 2021 to 2023. They utilized either their own or proxy accounts to directly purchase the stocks before the fact of the public purchase was disclosed to the outside, gaining illicit profits ranging from tens of millions to hundreds of millions of won.
Among them, B and C not only obtained information about the public purchases for three stocks but also acquired beforehand, prior to market disclosure, information about 'decisions on capital increases', and 'signing stock purchase agreements involving changes in the largest shareholders' for two other companies for which their law firm provided consulting.
Public purchase prices are generally set with a premium on current prices to induce investor sales. As the likelihood of stock prices rising is high, information regarding public purchases is perceived as good news in the capital market. The SFC stated, "The misuse of information acquired in the course of their duties by public purchasers as well as consultants who contracted with them to participate in the public purchase process for personal gain seriously undermines the fairness of the public purchase system and the order of the capital market."
The financial authorities stated, "In order to secure the fairness of the public purchase system and the trust of investors, we will expand the targets and scope of unfair trading monitoring in the future, thoroughly investigate any identified violations, and take strict measures against them."