[Asia Economy Reporter Lee Jung-yoon] The Financial Services Commission (FSC) has decided to enhance the utilization of the Korea Exchange's insider trading alert service (K-ITAS) to prevent unfair trading by executives and employees of listed companies.
On the 6th, the FSC announced plans to improve related systems so that executives and employees of listed companies using the insider trading alert service will be exempt from the obligation to report trading details of their own company’s shares.
Currently, when executives and employees of listed companies trade their own company’s shares, they separately report the trading details to their affiliated company according to the internal regulations of each listed company. However, by utilizing the insider trading alert service, the reporting burden is reduced and trading details can be checked without omission.
The day before, the FSC, the Financial Supervisory Service, the Korea Exchange, and the Seoul Southern District Prosecutors' Office held a meeting of the Unfair Trading Investigation and Deliberation Agency Council (Josimhyeop) to discuss major issues related to unfair trading.
Recently, the proportion of insiders such as executives and employees of listed companies involved in major unfair trading cases has increased, raising the need for preventive measures. Among unfair trading suspicion cases reported by the FSC’s Capital Market Investigation Team to the Korea Exchange, the proportion involving insiders of listed corporations increased from 62.6% in 2020 to 69.0% last year.
Until now, when executives and employees of listed companies omitted reporting trading details of their own company’s shares, it was difficult for the company to verify, limiting the effectiveness of internal controls. Accordingly, the Josimhyeop expressed the opinion that system improvements are necessary to increase the utilization of the insider trading alert service.
Accordingly, within this month, the Korea Listed Companies Association and the KOSDAQ Association plan to implement revised standard regulations that consider the reporting obligation fulfilled when trading details of executives and employees’ own company shares are notified to the company through the Korea Exchange’s insider trading alert service.
Through this, the separate reporting burden for trading details of own company shares will be reduced, and it is expected to have a preventive effect by raising awareness of unfair trading. In addition, listed companies will be able to check trading details without omission, enhancing the effectiveness of internal controls related to unfair trading and helping compliance with regulations such as the return of short-term trading profits and reporting of executives’ ownership status.
An FSC official stated, "The FSC, Korea Exchange, Listed Companies Association, and KOSDAQ Association will encourage each listed company to promptly reflect the revised standard regulations in their internal rules," adding, "We plan to actively promote the expansion of listed companies using the insider trading alert service."
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