Virtual Asset User Protection Act Also Passes the Plenary Session Threshold
The amendment to the "Financial Investment Services and Capital Markets Act (Capital Markets Act)" imposing punitive fines for unfair trading practices such as stock price manipulation passed the plenary session on the 30th. The "Virtual Asset User Protection Act," which regulates unfair trading of virtual assets and protects users, also cleared the plenary session hurdle.
The Capital Markets Act was passed in the plenary session with 260 votes in favor and 5 abstentions out of 265 members present. The amendment includes provisions to impose fines up to twice the amount of profits gained or losses avoided through unfair practices such as using undisclosed material information, market manipulation, and fraudulent trading. The amendment also stipulates that the method for estimating unjust gains will be determined by subtracting total costs from total revenue.
Previously, the Capital Markets Act was brought to the Legislation and Judiciary Committee plenary meeting on the 20th, but deliberations were postponed due to issues raised regarding the amount of fines and liability. After reconsideration on the 29th, it was passed. During the committee discussions, provisions from the government's original draft that required the defendant to prove price fluctuations caused by external factors were deleted. This reflects concerns about placing the burden of proof on the defendant. Additionally, when stock price manipulation is detected but there are no unjust gains or it is difficult to calculate them, the cap on fixed fines was adjusted from 5 billion KRW to 4 billion KRW.
The "Virtual Asset User Protection Act" bill also passed the plenary session with 265 votes in favor and 3 abstentions out of 268 members present.
This bill prioritizes the application of the Capital Markets Act to virtual assets with securities characteristics and establishes grounds for imposing liability for damages and fines in cases of unfair trading of virtual assets. The bill stipulates that if unfair trading occurring abroad affects the domestic market, the law will apply. It defines the use of undisclosed material information, market manipulation, and fraudulent trading as unfair practices punishable by imprisonment of at least one year or fines up to 500 million KRW.
Following the legal amendments, virtual asset service providers will be required to deposit or entrust customer deposits, subscribe to insurance or mutual aid to prepare for incidents such as hacking or system failures, and generate and store records of virtual asset transactions. However, the class action-related provisions were temporarily removed in the Legislation and Judiciary Committee, reflecting the Financial Services Commission's opinions.
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