SFC Reports Management of Pharmaceutical and Electronic Components Firms to Prosecution

The Financial Services Commission's Securities and Futures Commission (SFC) announced on May 21 that it had reported and notified the prosecution of the management of a pharmaceutical company that used undisclosed material information related to new drug development, as well as the management of an electronic components manufacturer that engaged in unfair trading by making false, theme-based announcements of new business ventures.

On this day, the SFC held its '10th regular meeting' and resolved to report and notify the prosecution of the management of Pharmaceutical Company A and Electronic Components Manufacturer B for suspected use of undisclosed material information and unfair trading under the Act on Capital Markets and Financial Investment Services.

Employees and others at Pharmaceutical Company A are suspected of using undisclosed favorable information related to new drug development in February and March 2023 to purchase shares just before the public disclosure or to pass the information to acquaintances. They then allegedly sold shares as the stock price rose, gaining illicit profits amounting to hundreds of millions of won.

The SFC explained, "Due to insufficient physical separation of workspaces for disclosure and accounting personnel, material undisclosed management information was easily exposed," adding, "It was confirmed that the suspects exploited this to collect and use the undisclosed material information."

Additionally, the management of Electronic Components Manufacturer B is suspected of falsely announcing in June 2023 that they would pursue an overseas mineral development business unrelated to their main business. Despite only signing a formal memorandum of understanding (MOU) with an overseas joint venture, they exaggerated the possibility of securing mining rights and generating high profits in press releases. The management and others, who held shares in B, are accused of making false announcements and distributing them to the media, causing the stock price to surge sharply in a short period and gaining illicit profits amounting to billions of won.

The SFC stated, "They ensured that the false information about entering a theme-based new business was reported by numerous media outlets, including major domestic daily newspapers, causing general investors to believe that actual sales could be generated," adding, "In reality, there were no concrete plans or genuine intentions to pursue the business, such as securing mining rights, conducting economic feasibility assessments, or making investments."