Up to Double Penalties Imposed on Unfair Gains from Unfair Trade Practices

[Asia Economy Reporter Eunmo Koo] Financial authorities will be able to impose fines of up to twice the amount of unfair gains if unfair profits are obtained through the use of undisclosed internal information or market manipulation.

The Financial Services Commission (FSC) announced on the 18th that a revision to the Capital Markets Act containing these provisions has been proposed. This amendment was jointly agreed upon by the FSC, the prosecution, and the Ministry of Justice, and was introduced on the 15th by Yoon Kwan-seok, chairman of the National Assembly's Political Affairs Committee, as the principal sponsor.

The FSC pointed out that currently, only criminal penalties such as imprisonment or fines are possible for unfair trading, but criminal procedures take a long time due to investigations and lawsuits, and require strict proof of responsibility, limiting swift and effective punishment. The introduction of this fine system aims to promptly sanction unfair trading and establish a fair trading order in the capital market.

The amendment stipulates that the FSC may impose fines up to twice the amount of profits gained or losses avoided (unfair gains) through unfair trading. However, if there are no unfair gains or if it is difficult to calculate, fines of up to 5 billion KRW may be imposed.

Fines are generally to be imposed after the FSC receives notification of investigation and disposition results regarding unfair trading suspects from the prosecution. However, if the FSC notifies the prosecution of unfair trading suspicions and consults with them, or if one year has passed, fines may be imposed even before receiving investigation and disposition results from the prosecution.

Furthermore, the amendment provides that if the subject of the fine has already been criminally punished for the same violation, the previously imposed fine may be canceled or the amount equivalent to the criminal fine (including confiscation and seizure) may be deducted from the fine.

It also stipulates that when the FSC requests investigation-related materials to impose fines, the prosecution may provide them.

An FSC official stated, “Through these provisions, we expect to enhance the effectiveness of fine imposition by receiving investigation-related materials on unfair trading cases from the prosecution.”