Securities Firm Analyst Sentenced for Illegally Gaining 500 Million Won through 'Self-Recommendation of Stocks'

Recommended Stocks Bought in Advance
2 Years 6 Months Prison Sentence in First Trial
Triple Illicit Gains '1.5 Billion Won Fine'

A former securities firm analyst who was prosecuted for illegally profiting about 500 million KRW by issuing reports recommending stocks he had purchased in advance was sentenced to prison in the first trial.

On the 18th, the Criminal Division 11 of the Seoul Southern District Court (Presiding Judge Jeong Doseong) sentenced former securities firm analyst A (44), who was indicted for violating the Capital Markets Act and other charges, to 2 years and 6 months in prison and a fine of 1.5 billion KRW, approximately three times the amount of the illegal profits. The court also ordered the confiscation of about 490 million KRW.

Seoul Nambu District Court

The court stated, "The illegal profits of 490 million KRW obtained by the defendant were generated through multiple 'scalping' acts over 8 years and 9 months, and external factors do not appear to have played a significant role." Scalping refers to ultra-short-term trading where stocks are bought and sold repeatedly within 2 to 3 minutes, or when an investment advisor buys stocks just before recommending them and immediately sells them once the price rises to gain profits.

It continued, "Although the defendant is a first-time offender and has resigned from his job, he borrowed a friend's mobile phone and account to evade the Capital Markets Act and company regulations as an analyst, and the trading period and amount of illegal profits are not insignificant," explaining the sentencing rationale.

Additionally, A's use of securities accounts and mobile phones registered under other people's names for trading was also problematic. The prosecution applied charges of violating the Electronic Financial Transactions Act and the Telecommunications Business Act against A. However, profits of 25 million KRW generated through a friend's account were excluded from the illegal profit amount.

During the period of the crime, A worked at three securities firms and was even selected as a 'Best Analyst' in his field. He continued issuing purchase reports until early last year but resigned in March of the same year after a financial regulatory investigation began.