FSC to halt accounts involved in unfair trading, illegal short selling

Korea will implement new regulations to freeze accounts suspected of involvement in unfair trading or illegal short selling starting April 23, according to the Financial Services Commission (FSC). The revised decree of the Financial Investment Services and Capital Markets Act, approved during a Cabinet meeting, empowers the FSC to request a payment suspension on accounts suspected of engaging in unfair practices, with financial companies required to comply with these requests for up to a year.

Under the new rules, individuals involved in market manipulation or other violations may face up to a five-year trading ban. This restriction extends to executives of listed companies and financial firms found to have engaged in misconduct. The FSC emphasized that these reforms aim to minimize the concealment of unfair profits and lessen incentives for market abuse, thereby supporting investor protection and promoting fair market practices.

Payments suspensions can only be lifted under limited conditions, such as when another legal measure like a court-ordered seizure or provisional disposition has been implemented, or when investigative authorities withdraw the suspension request. Failure by financial institutions to comply with a suspension order could result in fines of up to 100 million won ($70,000), with additional penalties of up to 18 million won ($12,700) if they neglect to inform the account holder or the FSC after enforcing the order.

The law also enforces stronger penalties in cases where violators significantly impact market prices or submit false documents to conceal or downplay their actions. In such instances, the FSC has the authority to impose a maximum five-year ban on trading.

Overall, these regulatory changes are intended to enhance market integrity and fairness, while reducing the chances of illicit trading practices. This move by the FSC is part of a broader effort to safeguard the interests of investors and maintain a level playing field in financial markets. The implementation of these new regulations underscores the Korean government’s commitment to combating financial misconduct and ensuring transparency and accountability in the trading landscape.

In conclusion, Korea’s decision to freeze accounts suspected of unfair trading and illegal short selling is a significant step towards enhancing market stability and protecting investors from fraudulent activities. By imposing stricter penalties and increasing oversight, the authorities aim to promote ethical conduct and uphold the integrity of the financial system. These measures demonstrate the government’s proactive approach to tackling financial malpractice and fostering a climate of trust and credibility in the financial sector.