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Photo Caption: Korea Exchange. [Photo courtesy of Korea Exchange] |
[Alpha Biz= Kim Jisun] A total of 464 cases of unfair trading have been uncovered in Korea’s capital markets over the past five years, with more than half involving fraudulent transactions and short selling. Notably, 64 financial institutions were penalized for illegal naked short selling, underscoring persistent challenges in curbing market misconduct.
According to data submitted by the Financial Supervisory Service (FSS) to Rep. Heo Young of the National Assembly’s Political Affairs Committee on the 29th, 464 violations of the Capital Markets Act were identified between 2020 and September this year. During the same period, 80.3% of the 578 suspicious trading cases flagged by the Korea Exchange and referred to the FSS were confirmed as unfair trading.
By category, fraudulent transactions accounted for the largest share with 122 cases (26.3%), followed by short selling with 119 cases (25.6%), insider trading with 86 cases (18.1%), and market manipulation with 58 cases (12.5%). Combined, fraudulent trading and short selling represented 51.9% of all violations.
Disciplinary measures included 173 cases referred to investigative agencies, 106 warnings, 100 criminal indictments, and 85 fines. Of these, 273 cases—or 58.8% of the total—were serious enough to potentially result in criminal prosecution.
Illegal naked short selling has been particularly concerning. From 2023 to September this year, 64 financial institutions were fined for placing sell orders without borrowing shares, a clear violation of law. The recurrence of such practices has fueled debate over the effectiveness of regulatory sanctions.
Meanwhile, whistleblower activity has surged, with 12,258 reports filed during the same period. However, only 407 cases (3.3%) were pursued as formal investigations. Rewards paid to whistleblowers whose reports contributed to enforcement totaled KRW 438.75 million, averaging KRW 1.08 million per case.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
