Crimes related to unfair transactions in South Korean capital markets will be subject to stricter penalties under a strengthened rule presented by the financial authority Tuesday to root out dishonest behaviors.

Under rules laid out by Financial Services Commission (FSC) Chairman Kim Joo-hyun during a forum at the Korea Exchange headquarters in Seoul, the FSC will raise penalties up to twice the amount of illegitimate gains and restrict capital market transactions for up to 10 years. The FSC will also remove stock manipulators from the system and ring an alarm on get-rich-quick schemes.

The forum was attended by officials from the FSC, Financial Supervisory Service, Korea Exchange, and the Seoul Southern District Prosecutor’s Office.

“As the head of the financial authority, it hurts me greatly that market manipulation forces have boldly disrupted our capital market for a long time,” Kim said.

“Stock manipulation will be punished and illegitimate gains will be forfeited much more strictly once the revised capital markets act passes the National Assembly,” he added.

Kim also said that the FSC will “promote measures to freeze accounts that are suspected of stock price manipulation, with the goal of proposing a bill within this year in consultation with relevant institutions such as the Ministry of Justice.”

The FSC is expected to consider freezing the accounts associated with stock manipulation in addition to increasing penalties and eliminating those involved from the system through restrictions on capital market transactions and appointment of executives at listed companies.



There were also discussions on specific plans for legislation on the method of calculating illegitimate gains that has been criticized for being too soft.

The main idea is to have the suspects be responsible for calculating and vindicating unfair trade profits instead of the prosecution.

Currently, the prosecution has been involved in proving the amount of illegitimate gains but a revision in the capital markets act will have the offenders to explain their wrongdoings.

“It is not shifting the burden of proof completely to offenders, but it is about holding them liable for explaining why the amount of illegitimate profits must be lowered,” said Ki No-seong, an official from the Seoul Southern District Prosecutor’s Office.

Some participants in the forum raised concerns about the challenges after the law revision.

“It remains to be seen whether the bill that shifts the burden of proof for illegitimate gains to the suspect will be approved as it is given the attitude of the Constitutional Court of Korea,” said Seong Hye-hwal, a professor at the Inha Law School.

“The Constitutional Court strongly advocates the protection of suspects’ human rights in imposing punishment or penalties,” he said.

The Professor noted that the financial authority should come up with reasonable measures for different types of cases in stipulating specific schemes for the estimation in the enforcement decree to avoid unconstitutionality and convince the court.

By Choi Hee-seok and Choi Jieun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]