The financial authorities are actively disclosing actions taken by the Securities and Futures Commission in order to raise market awareness of unfair transactions starting this year.
On the 24th, the Financial Services Commission held the first 'Unfair Transaction Investigation and Deliberation Agency Council' this year at the Government Seoul Building in Gwanghwamun, Seoul, in cooperation with the prosecution, the Financial Supervisory Service, and the Korea Exchange, and discussed key issues related to unfair transactions.
The Unfair Transaction Investigation Council aims to establish an organic and efficient response system to unfair transactions by sharing the status of responses and discovering and pursuing cooperative tasks among institutions from suspicion detection and deliberation (exchange) to investigation (Financial Services Commission, Financial Supervisory Service) and prosecution.
During this council, participants checked the capital market environment changes due to the opening of the alternative exchange NextTrade and the response status of multiple markets. The exchange has been operating a comprehensive market monitoring system since the launch of NextTrade on the 4th and is closely monitoring whether unfair transactions occur in multiple markets.
Participating institutions in the council stated that they will operate the market monitoring system precisely and support the creation of a fair capital market environment by swiftly and strictly imposing sanctions according to laws and principles in the event of unfair transactions.
At that day's council, they also discussed the progress of investigations into unfair transactions involving the misuse of private convertible bonds (CBs) and major cases. The annual issuance volume of private CBs peaked at 9.3 trillion won in 2021. Subsequently, as financial authorities conducted concentrated investigations into the misuse of private CBs and implemented system improvements, the volume decreased to 5.8 trillion won last year.
The participating institutions of the council examined and discussed major cases of unfair transactions involving misuses of private CBs, such as selling stocks at high prices after CB conversion prior to audit opinion rejection disclosure, false announcements of new business for high-priced sales of CB-converted stocks, private use after mass issuance of CBs, and the formation of appearances of fundraising through large-scale issuance of CBs.
The financial authorities stated that in order to eradicate unfair transactions involving the misuse of private CBs, they will continuously monitor private CB cases based on trading psychology, complaints, and tips, while promptly conducting related investigations to smoothly proceed with prosecution reports and notifications. They also decided to continue to review the need for future system improvements.
The council has also established guidelines related to the application of trading restrictions on financial investment product transaction violators. Following the amendment of the Capital Market Act, as of April 23 this year, it has become possible to impose financial investment product trading restrictions for up to five years on violators of unfair transactions or illegal short selling. Those receiving this restriction order are generally prohibited from opening accounts, trading, lending, and borrowing financial investment products.
In response, the council prepared guidelines related to the application of financial investment product trading restrictions to enhance predictability for restricted parties and resolve legal uncertainties when determining exceptions for financial investment companies. They plan to distribute these guidelines to financial investment companies and related institutions.
Meanwhile, the financial authorities stated that they are promoting the strengthening of disclosure regarding actions taken by the Securities and Futures Commission to raise market awareness of unfair transactions starting this year. After the conclusion of Securities and Futures Commission meetings, they have been distributing key unfair transaction actions in the form of press reference materials. The Financial Services Commission said, "They are also preparing to create a webpage where information on unfair transaction cases and types can be easily accessed."