[News Terms] Can Stock Manipulation Be Prevented? 'Market Alert System'

The Korea Exchange Market Surveillance Committee has decided to include stocks whose prices have abnormally risen due to long-term price manipulation as subjects of investment warnings going forward. Previously, only stocks that surged sharply in a short period were subject to this, but as repeated long-term price manipulation incidents such as the so-called 'Ra Deok-yeon incident' and the 'Youngpoong Paper price manipulation' occurred, the market surveillance function has been strengthened.

The Market Alert System is a system that issues alerts for stocks suspected of speculative or unfair trading or those whose prices have abnormally surged. It consists of three stages of measures: 'Investment Caution Stocks → Investment Warning Stocks → Investment Risk Stocks.'

On the morning of October 20th, Yoon Mo and Lee Mo, who are suspected of market manipulation related to unfair trading allegations involving Youngpoong Paper, appeared at the Seoul Southern District Court in Yangcheon-gu for a pre-arrest detention hearing.
[Image source=Yonhap News]

In the past, most cases of unfair trading involved short-term price surges. The Market Alert System has taken action based only on short-term (3-day, 5-day, 15-day) price fluctuations. However, recently, cases have repeatedly occurred where prices were driven up over several years to evade surveillance.

From now on, if two conditions are simultaneously met?▲ the stock price has risen more than 200% in the past year and the current price is the highest in the last 15 days, and ▲ the purchase involvement rate considering the price influence of the top 10 accounts in the last 15 days exceeds a certain level for more than 4 days?the Exchange will announce the designation of the stock as an Investment Warning Stock. Furthermore, if the same reason occurs again within 10 days, the Exchange will designate the stock as an Investment Warning Stock. However, ▲ stocks in the KONEX market, ▲ newly listed stocks or stocks that have not passed one year since the application date based on market price, and ▲ stocks already designated as Investment Warning Stocks due to ultra-long-term or unhealthy conditions within the last 30 business days may be excluded from the application.

If designated as Investment Warning or Investment Risk Stocks, measures such as suspension of trading, 100% collection of entrusted margin, and restrictions on credit transactions may be implemented.

Currently, Ra Deok-yeon and his group, who are on trial for stock price manipulation, are known to have driven up eight stocks over 2 to 3 years. In the Youngpoong Paper price manipulation case under prosecution investigation, the stock price rose more than 700% over one year.

The Exchange plans to revise related regulations after a 20-day public consultation this month and implement these measures within the year. A representative of the Exchange stated, "We have prepared supplementary measures as new types of unfair trading cases that evade surveillance through long-term price increases have occurred," adding, "We will raise awareness about stocks with a high likelihood of unfair trading and actively respond to various types of unfair trading to contribute to investor protection."