The Securities and Futures Commission caught insiders who used undisclosed material information to reap unfair gains or avoid losses and referred them to investigative authorities.
The Financial Services Commission said on Feb. 4 that at the 3rd regular meeting it voted to file complaints and notify investigative authorities in four cases of alleged unfair trading using undisclosed material information. The Financial Investment Services and Capital Markets Act bans insiders from using undisclosed material information learned in connection with a listed company's business to trade specific securities or having others use it.
First, three people, including a disclosure agent and the head of an investor relations (IR) consulting firm, were caught using favorable insider information such as planned disclosures to reap unfair gains. According to a Securities and Futures Commission (SFC) probe, A, the head of a disclosure agency, learned favorable undisclosed information about companies B and C while performing disclosure agency work and then traded the stocks to reap about 100 million won in unfair gains. A passed this information to acquaintance D, and D paid A about 30 million won in return for the information, the probe was found.
The largest shareholder of a listed company was also caught for avoiding losses by using adverse insider information such as a swing to a loss. I, the largest shareholder of listed company G and the person directing business execution, allegedly obtained in advance during the internal settlement of account process information that operating profit and net profit would swing to a loss, and before the information was disclosed, sold shares of G held by the person and affiliated company H, reaping a total of about 3.2 billion won in unfair gains.
Employees of a pharmaceutical company and related parties who used favorable insider information related to the development of a treatment were also reported to investigative authorities. According to the probe, K, an employee of pharmaceutical company J, used undisclosed information related to the research results and development push for a COVID-19 treatment to buy shares, and passed the information to a spouse to trade together, reaping about 70 million won in unfair gains. K's spouse L passed this information to acquaintances M and N to make a pooled investment, and in the process was confirmed to have reaped a total of about 147 million won in unfair gains.
In addition, 16 people, including executives and employees of a listed company and former employees, who used favorable insider information such as rights issues and information on large-scale acquisitions and disposals, were also subject to complaints or notification to investigative authorities. They used information that company P would participate in company O's rights issue and information on a large-scale acquisition to directly buy O's shares or to pass the information to family and acquaintances to make a transaction, and were found to have reaped unfair gains totaling about 4.34 billion won.
The Financial Services Commission said, "Not only a company's largest shareholder, CEO, and executives and employees, but also quasi-insiders such as disclosure agents or IR firms are subject to criminal punishment for violating the Financial Investment Services and Capital Markets Act if they use undisclosed material information learned in connection with their duties for a transaction or have others use it."
It added, "Previously, only criminal punishment was possible for unfair trading such as using undisclosed material information or engaging in manipulative transactions, but with the recent introduction of new sanctions, measures such as a penalty surcharge (up to twice the unfair gains), account payment suspension (up to 12 months), and restrictions on trading financial investment products and on executive appointments and tenures (up to five years) can also be applied."