Court: "Undermining Fairness and Trust in the Capital Market"
[Asia Economy Reporter Yoo Byung-don] A securities analyst who made a huge profit by writing favorable corporate reports on stocks held under borrowed names and then selling the stocks after their prices rose has been sentenced to prison.
The Criminal Division 12 of the Seoul Southern District Court (Presiding Judge Oh Sang-yong) sentenced former analyst Oh of Securities Company A to three years in prison and a fine of 500 million won on charges of violating the Capital Markets Act and the Act on the Aggravated Punishment of Specific Economic Crimes (bribery, etc.).
Lee, a friend of Oh and also indicted on the same charges, was sentenced to two years in prison with a three-year probation and fined 500 million won.
From 2015 to 2019, Oh purchased specific stocks in advance through his mother's account before writing reports recommending 'buy' for those stocks, and after the reports were published and the stock prices rose, he sold the stocks to gain the price difference.
It is reported that the number of stocks Oh was involved in trading reached dozens, and the related reports numbered in the dozens as well.
Lee bought and sold stocks based on information obtained from Oh, sometimes conducting transactions exceeding 2 billion won at once. He also gave Oh over 600 million won as compensation for the information.
Regarding this, the defendants denied the charges, arguing that it is difficult to see that the analyst's reports influenced the stock price increase. The court also judged that since the stocks they traded were determined by numerous variables, it is difficult to consider all profits from their trades as fraudulent unfair transactions.
However, the court ruled that "Oh disclosed in the reports that he had no interests in the stocks he analyzed, but colluded with his mother and friend to buy stocks in advance, and while recommending long-term purchases to investors, he sold immediately after the report was published, thereby undermining the fairness and reliability of the capital market," and found him guilty of violating the Capital Markets Act.
The court also found Lee guilty of violating the Capital Markets Act, stating, "He knowingly engaged in illegal activities for four years and actively participated by providing cash to Oh."
However, the court acquitted them of bribery and mediation charges under the Act on the Aggravated Punishment of Specific Economic Crimes, stating, "Oh receiving money from Lee and informing him of stock trading timings cannot be considered a primary duty of an analyst."
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