Financial Supervisory Service to Eradicate Unfair Trading... Restructuring Investigation Division and Operating Special Crackdown Team

The Financial Supervisory Service (FSS) announced on the 30th that it will reorganize its investigation division and conduct special crackdowns to strengthen its capabilities in investigating unfair trading and carry out special enforcement operations.

Lee Bok-hyun, Governor of the Financial Supervisory Service, is speaking at the joint discussion forum of related organizations to eradicate unfair trading held at the Korea Exchange in Yeouido, Seoul on the 23rd. Photo by Hyunmin Kim kimhyun81@

With the recent expansion of stock trading, unfair trading activities have also increased, and their methods are becoming more sophisticated and intelligent. According to the FSS, the number of unfair trading cases accepted increased from 127 in 2019, to 165 in 2020, 180 in 2021, and 232 last year. Additionally, there is a growing concern that investors may unknowingly be exposed to unfair trading activities through unregistered investment firms and social networking service (SNS) chat rooms.

Since the inauguration of FSS Governor Lee Bok-hyun, the FSS has improved its investigation processes focusing on major cases and has promoted various planned investigations such as stock leading rooms and private convertible bonds (CBs). However, it explained that due to a shortage of personnel, it was unable to actively respond to the increasing number of investigation cases and the increasingly sophisticated patterns of unfair trading.

Earlier on the 23rd, Governor Lee pledged to strongly respond to unfair trading activities, staking his position in relation to the Soci?t? G?n?rale (SG) Securities stock manipulation incident. He stated, "At the time of my appointment, the appointing authority emphasized strict punishment for unfair trading, but such an incident occurred," adding, "I will proceed with a sense of responsibility as if staking my position."

The FSS plans a practical reorganization of the investigation division, an increase in actual investigative personnel through manpower expansion, enhancement of market information analysis capabilities, and strengthening cooperation with related agencies. The personnel in the three investigation departments will be increased from the current 70 to 95, and new teams such as a special investigation team, an information collection task force, and a digital investigation response team will be established.

Furthermore, the planned investigation, capital market investigation, and special investigation bureau system will be converted into Investigation Departments 1, 2, and 3 to promote healthy competition among departments focusing on important cases. By converting two planning teams into investigation teams and assigning additional personnel to investigation teams, the number of dedicated investigators will be increased from 45 to 69, more than 1.5 times.

At the same time, the FSS will link market information related to unfair trading with financial big data accumulated through its supervision, inspection, and examination processes, and use AI-based customized information detection and analysis to precisely identify the likelihood of unfair trading. The investigation information sharing system with the Financial Services Commission and Korea Exchange will also be activated, and cooperation will be strengthened for rapid response to unfair trading through close collaboration with the prosecution and police.

The FSS will form and operate a special crackdown team on unfair trading from the 1st of next month until the end of December this year, and will also operate a concentrated reporting period from the 7th of next month until the end of the year. After extracting suspicious unfair trading cases through on-site crackdowns at investment briefings and comprehensive and undercover inspections of similar investment advisory businesses, investigations will commence immediately.

Planned investigations will also continue to expand. The FSS will persist with planned investigations into illegal short selling, private CBs, and unfair trading related to abnormally overheated industries, and plans to discover new planned investigations such as insider information use by major shareholders of listed companies. The FSS imposed fines related to illegal short selling (31 cases, 2.15 billion KRW) and surcharges (2 cases, 6.05 billion KRW), and notified the prosecution of 22 suspects (6 cases, estimated illicit gains of 69.2 billion KRW) related to unfair trading involving private CBs. Intensive investigations are also underway for cases other than those already resolved.

An FSS official stated, "We will reorganize everything necessary, including investigative work and organizational structure, and make every effort to protect investors and enhance transparency in the capital market under mutual trust and cooperation with related agencies," adding, "We urge caution to avoid being misled by investment solicitations through SNS and to prevent damage caused by excessive leverage investments."