[Exclusive] President Lee Criticizes "Illegal Short Selling, Is This Acceptable?"... Presidential Office Summons Financial Authorities in Four and a Half Hours

Policy Chief Kim Yongbeom Convenes Financial Authorities on June 11
Discusses Systematic Measures to Eradicate Unfair Trading Practices

President Lee Jaemyung convened financial authorities just four and a half hours after pointing out the unfairness and lack of transparency in the domestic capital market at the Korea Exchange. The presidential office quickly moved to ensure that the president's concerns would lead to concrete policy improvements by the financial authorities.

According to the presidential office on June 12, Policy Chief Kim Yongbeom summoned financial authorities to the Yongsan presidential office the previous day. The purpose was to discuss the capital market improvement measures that President Lee had promised earlier that day at the Korea Exchange. The meeting was attended not only by representatives from the Korea Exchange, but also by senior officials from the Financial Services Commission and the Financial Supervisory Service. Participants discussed in detail how to systematically eradicate unfair trading practices in the capital market.

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The meeting was reportedly arranged urgently. The event presided over by the president ended at 11:30 a.m., and the meeting was held at around 5:00 p.m., just four and a half hours later. It appears that the discussion table was quickly set up after President Lee voiced his critical view on the punishment and monitoring system for illegal transactions in the capital market. One official who attended the meeting explained, "Since the president has given a direction, we needed to discuss it quickly," adding, "We reviewed ways to implement what he instructed."

President Lee has already announced a 'one-strike-out' policy to expel anyone who commits an illegal act in the capital market, even if it is only once. While speaking with employees at the Korea Exchange, President Lee stated, "If there are legal violations, there must be sanctions, and we must improve or eliminate any practices that are institutionally neglected." He added, "Today will be the first day we clearly show that anyone who tries to play games in the Korean stock market will be completely ruined."

There was also criticism that the penalties for those who commit illegal acts in the capital market are too lenient. Currently, it takes about 280 days for the Securities and Futures Commission to take action on cases of unfair trading. The recidivism rate for such cases is widespread, averaging over 29%. President Lee, citing illegal short selling as an example, responded, "How can this be acceptable?"

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President Lee emphasized, "(For illegal short selling,) the basic response will be to suspend business, and if the act is repeated or on a large scale, the entity will be expelled altogether." He added, "Institutions that commit illegal acts to profit at the expense of individual investors' tears and hardship should not be allowed to do business in Korea."

The background to President Lee's order for strong measures in the capital market lies in his long-standing pledge for the 'KOSPI 5000 era' since his candidacy. President Lee believes that for stock prices to rise, unfairness, lack of transparency, controlling shareholder systems, abuses by major shareholders, and misuse of management rights must all be eliminated from the market.

President Lee stressed, "If we make it possible for people to receive interim dividends and earn living expenses through stock investment, and establish it as an alternative investment comparable to real estate, it will also make it easier for companies to raise capital," adding, "This will create a virtuous cycle for the entire Korean economy."