Unusually Fast Action as First Measure Under Exchange Market Surveillance Rules
Individual Investors Express Frustration Over Indefinite Trading Suspension Situation
On the 14th, five stocks in the domestic market suddenly hit their lower price limits, and the financial authorities abruptly suspended trading the next day. It has now been eleven days since the suspension. The financial authorities are investigating allegations of unfair trading related to these stocks, while investors in the affected stocks express frustration over the indefinite trading halt.
According to the financial authorities and the Korea Exchange, the five stocks?Banglim, Dongil Metal, Manho Steel, Daehan Textile, and Dongil Industry?have had their trading suspended for 11 trading days from the 15th to the 29th. Although there were expectations that the investigation status and response measures would be announced around this week, the Financial Supervisory Service stated, "The investigation is ongoing, and no decisions have been made regarding the schedule or announcement method."
These five stocks suddenly hit their lower price limits during trading on the 14th, prompting the financial authorities to immediately suspend trading. On the following day, the 15th, prosecutors imposed a travel ban on Kang Mo, the head of the online stock investment cafe 'Bareun Investment Research Institute,' who was identified as being behind the lower price limit incident, and conducted searches of his residence and office. The warrant reportedly detailed allegations that Kang and his acquaintances manipulated prices through thousands of matched trades from January 2020 until last month.
The authorities' unusually swift action in this lower price limit incident was due to a similar event occurring shortly after the stock price manipulation by La Deok-yeon and his group in April, which caused a crash in eight stocks. According to Article 12 of the Korea Exchange Market Surveillance Regulations, "The committee may request the suspension of securities trading if it deems it necessary to protect investors in cases of sudden changes in trading conditions or rumors during market surveillance."
However, this is the first time that a trading suspension has been implemented based on this provision. Given the unprecedented nature of the situation, it is unclear how long this trading suspension will continue. This is a matter that requires a 'policy decision' by the financial authorities and the exchange. If the investigation period into unfair trading extends, the suspension period may also be prolonged accordingly. On the day the first lower price limit was detected, the Korea Exchange's disclosure inquiry received uniform denials from the five companies, stating that "there are no confirmed matters related to unfair trading."
Considering that the stock prices of companies involved in La Deok-yeon’s stock price manipulation scandal, such as Samchully and Dow Data, have yet to recover, the authorities’ preemptive trading suspension is seen as necessary to protect investors. However, investors in the affected stocks express frustration over the uncertainty regarding the duration of the trading suspension.
Furthermore, questions have been raised as to why the authorities’ trading suspension measures were not applied when La Deok-yeon’s group’s stock price manipulation caused eight stocks to hit their lower price limits for the first time. A financial investment industry insider explained, "It is very unusual for the five stocks to have their trading suspended just one day after the crash," adding, "Individual investors who invested in these stocks are likely very anxious due to concerns that they might suffer even greater losses when trading resumes." The insider further stated, "The authorities should promptly conclude the investigation into price manipulation allegations and resume trading of these stocks to minimize individual investors’ losses."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
