Financial authorities have taken legal action against four companies for allegedly profiting from insider information. The authorities also imposed fines on secondary information recipients for disrupting market order.
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) announced on September 16 that they had filed charges against the employees of a company planning a public offering, executives of a specialized venture capital firm, financial investors involved in acquiring shares and management rights of listed companies, and agents of bulk stock purchasers for violating the Capital Markets and Financial Investment Business Act.
According to the FSC, insiders from Company A, which is set for a public offering, and its affiliate Company B, including five individuals, are accused of using non-public information obtained in the course of their duties to trade Company B's shares from June 2024 to June 2025, or passing it on to 11 first-level information recipients, resulting in illicit gains amounting to several hundred million won.
During this process, five secondary information recipients also received non-public information and gained a total of 90 million won. Two executives from Company B, after being appointed, allegedly acquired and disposed of Company B's shares through accounts in their names or those of others, failing to report their ownership status as required.
The CEO of a specialized venture capital firm has also been reported for allegedly using critical non-public information to avoid losses amounting to several billion won.
Another financial investor from a different listed company is accused of passing on information obtained during the investment process to acquaintances for stock trading and avoiding losses upon learning of the impending contract cancellation.
A representative from a manufacturing company has also been reported for using non-public information to gain illicit profits for themselves and their relatives through accounts under different names.
The Capital Markets Act prohibits trading activities that utilize not only non-public important information but also non-public information regarding public offerings and bulk acquisitions or disposals, under separate regulations.
As a result, insiders, including employees of public offering candidates and bulk acquirers or disposers, who use non-public information obtained in the course of their duties for trading or allow others to use it, can face criminal penalties of over one year in prison or fines up to six times the amount of illicit gains, as well as administrative fines of up to double the illicit gains.
An FSC official stated, "Insiders and first-level information recipients, as well as those who receive non-public information from first-level recipients and trade based on it, can be subject to fines amounting to 1.5 times the illicit gains. Furthermore, executives and major shareholders of listed companies must report their ownership of company shares to the FSS within five days of becoming an executive or major shareholder, regardless of the name under which the shares are held. Failure to comply can result in criminal penalties of up to one year in prison or fines of up to 30 million won for violating the Capital Markets Act."
* This article has been translated by AI.
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