Report 'Illegal Reading Rooms' and Receive a Minimum Reward of 5 Million Won

At Least 10 Million Won When Reforming the Reward System

[Asia Economy Reporter Ji Yeon-jin] Individuals who report operators of leading chat rooms who repeatedly spread rumors likely to cause stock price fluctuations will receive a minimum reward of 5 million KRW if unfair practices are confirmed.

The Financial Services Commission, Financial Supervisory Service, Korea Exchange, and Seoul Southern District Prosecutors' Office held the 3rd Unfair Trade Investigation and Deliberation Agency Council (Josimhyeop) on the 27th, where they decided to raise the reward calculation standards for reporting unfair trading and expand rewards for reports related to stock leading chat rooms.

The reward is calculated by multiplying the base amount by a contribution rate that considers the specificity of the report. The base amount is assigned from the highest 1st grade to the lowest 10th grade depending on the importance of the report content, and the financial authorities decided to apply an upgraded 1st grade for reports related to stock leading chat rooms. This applies even before the reward system reform, meaning that if unfair trading related to stock leading chat rooms is confirmed, the base amount will be at least 10th grade, allowing for reward eligibility.

Stock leading chat rooms are considered unfair practices such as front-running, where operators recommend stocks by certifying profitable accounts in stocks with low trading volume, then disappear after the stock price surges, causing investors who follow the purchases to incur losses. There are also cases where accounts are borrowed under the pretense of "guaranteeing a certain level of returns" and used for market manipulation.

Operators of leading chat rooms who repeatedly spread rumors likely to cause stock price fluctuations as if they were true can also face fines for disrupting market order.

The base amounts for rewards, except for the top grade (1st grade) with a cap of 2 billion KRW, will be increased. Currently, the base amount for the lowest 10th grade is raised from 5 million KRW to 10 million KRW, and for the 3rd grade, from 1 billion KRW to 2 billion KRW.

The criteria for judging importance based on the amount of fines will also be relaxed to pay more rewards for the same fine cases, and importance points will be added for cases with large unjust profits.

Currently, the FSC, FSS, and Korea Exchange manage unfair trading report information separately, but they plan to build an integrated database (DB) to increase the utilization of report information.

However, the financial authorities urged that when reporting unfair trading, details such as the stock, actor, date, method, and related stores must be specified to receive rewards. Attaching evidence such as photos or smartphone screen captures can lead to more effective investigations.

A Financial Services Commission official said, "It is difficult for reports based solely on stock price rises or falls or rumors to lead to actual investigations or deliberations," adding, "If the report lacks specificity or the degree of match with actual detected content is low, it may not be eligible for reward payment, or even if selected, a high reward is unlikely to be calculated."