The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) are set to revise their investigation procedures in line with the upcoming closure of the prosecutor's office next month. The special judicial police (SJP), which investigates stock price manipulation and other financial crimes, will shift from a system led by prosecutors to one based on mutual cooperation.
According to financial authorities on September 7, the FSC has announced an administrative notice for a revision of the 'Special Judicial Police Operational Rules for Capital Markets.'
The SJP, tasked with investigating unfair trading practices such as market manipulation and insider trading, is established within both the FSC and FSS. With the closure of the prosecutor's office on October 2, the Serious Crimes Investigation Agency (SCIA) will take over major crime investigations, while the Public Prosecution Service will handle prosecutions, leading to changes in the SJP's investigative methods.
Ongoing investigations will continue, with a financial authority official stating, “Investigations will proceed, but without prosecutor oversight.” The FSC and FSS have also conducted practical consultations during the revision process.
In the future, the SJP will seek guidance and advice from prosecutors instead of direct oversight. Procedures for handling seized items will change to request prosecutors' opinions, and the requirement for prosecutor oversight before releasing suspects or transferring cases will be eliminated. Notifications to prosecutors regarding the initiation of investigations will also change from 'reporting' to 'informing.'
The removal of prior oversight by prosecutors is expected to enhance the investigative autonomy of the SJP, allowing for quicker decision-making regarding the release of suspects and case transfers. However, as investigations and prosecutions will be separated, establishing a cooperative framework between the SJP and prosecutors in the Public Prosecution Service to avoid discrepancies in evidence and legal judgments will be a key challenge.
The process for transferring cases to initiate investigations will also change. The clause defining the scope of investigation initiation will be amended from 'cases directed by prosecutors' to 'cases referred to the SJP by the SCIA.' This will enable the SJP within the FSC and FSS to investigate cases transferred from the SCIA.
However, the criteria for dividing capital market cases, such as market manipulation, between the SCIA and the SJP will be clarified in subsequent regulations. A financial authority official noted, “The SJP has a limited scope of work, so it is likely that similar criteria will apply for case coordination between the SCIA and police, but it is difficult to predict definitively.”
The deliberation process for converting ongoing investigations into formal inquiries will also be enhanced. The written resolutions of the investigation deliberation committee, which determines whether to initiate an investigation, will be limited to cases where face-to-face meetings are practically difficult due to pandemics or natural disasters. A new procedure will also be established for the head of the relevant investigation department to report the results of the investigation transition to the chairman of the Securities and Futures Commission.
To ensure that there are no gaps in operations with the launch of the new investigation system, the FSC has shortened the notice period for this revision. The capital market investigation work regulations, which include inter-agency cooperation procedures, will also be revised. However, as related higher-level laws are also undergoing legislative notice, the final regulations may differ somewhat.
In conjunction with the closure of the prosecutor's office, legislation is also underway to expand the FSS's direct investigative scope to include illegal private financing. On September 4, Democratic Party lawmaker Kwon Chil-seung introduced a bill granting FSS employees the authority to investigate violations of the Money Lending Business Act and the Debt Collection Act. This aims to establish a basis for directly investigating illegal private financing and debt collection, separate from the procedural reforms of the existing capital market SJP.
* This article has been translated by AI.
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