An employee of a broadcaster and a former executive of a KOSDAQ-listed company have come under regulatory sanction on suspicion of unfair trading in the capital market.
The Securities and Futures Commission under the Financial Services Commission said it held a regular meeting on the 7th and voted to file complaints with prosecutors and issue notifications in two unfair trading cases: the use of undisclosed, material information by a broadcaster's employee and unfair trading by a former director of a KOSDAQ-listed company, among others.
The first case involves the use of undisclosed information by an insider at a broadcaster. The employee, who handled disclosure duties in the broadcaster's finance team, was found to have learned in advance of a strategic partnership related to content supply and used it to buy the company's shares between Oct. and Dec. 2024.
The employee also passed the information to family members for use in transactions and is believed to have gained an illicit profit of about 830 million won.
The Securities and Futures Commission (SFC) determined that the conduct violated the prohibition on the use of undisclosed, material information under the Financial Investment Services and Capital Markets Act. Financial authorities are expanding their probe, not ruling out the possibility of additional participants.
The second case is false disclosure and unfair trading that occurred during a "no-capital merger and acquisition (M&A)." A former director of a KOSDAQ-listed company took over management control without substantial own funds and was found to have falsely stated the source of acquisition funds as own funds in a large shareholding report. Authorities also identified signs of disclosure violations, including delayed reporting of collateral provision.
In addition, the company's former largest shareholder and former CEO is suspected of concealing the no-capital acquisition by recording in the disclosure on the change of the largest shareholder that the acquisition funds were another person's money despite knowing that fact. They were found to have also disclosed, in the process of issuing convertible bonds, as if normal funds were flowing in by fronting a corporation with no actual payment capacity as an investor. The Securities and Futures Commission (SFC) views the conduct as false entries on material matters and unfair trading using deception.
Financial authorities emphasized that, under the recently amended Financial Investment Services and Capital Markets Act, sanctions in addition to criminal penalties are possible for unfair trading, including a penalty surcharge of up to twice the illicit gain, account payment suspension for up to 12 months, restrictions on transactions in financial investment products, and limits on the appointment or tenure of executives for up to five years.
An official at the Financial Services Commission (FSC) said, "We will actively cooperate with the prosecution's investigation to ensure the allegations are thoroughly established," adding, "We will thoroughly investigate detected violations and take stern action to ensure the establishment of order in capital market transactions."