The Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange launched a joint response team on stock market manipulation and held the newly created team’s signboard unveiling ceremony on July 30. The joint response team is a collaborative operation of the three organizations set up at the KRX, and it aims to bolster the initial response function of KRX’s market surveillance committee.

Prior to the signboard unveiling event, Chairman Kwon Dae-young of the Securities and Futures Commission (SFC) held talks with the staff of the newly created team and reaffirmed the importance of stamping out unfair trading activities in capital markets.

A Summary of Opening Remarks by SFC Chairman

Putting an end to stock market manipulation can be seen as a start of building confidence in the market. Stock manipulation should be caught at any cost, and when detected, the violator should be subject to economic sanctions surpassing the level of unfairly gained profits, and the manipulator should not be able to engage in securities transactions or serve as an executive of a listed company. Simply put, the violator should be effectively barred from capital markets.

With the establishment of a joint response team, the physical, informational, and jurisdictional separation and division previously existing between the three organizations have been effectively removed. The planned introduction of AI technology and upgrading KRX’s market surveillance system to make surveillance more individual-focused rather than account-based will also help the operation of the joint response team. The financial authorities will also seek to enhance cooperation with investigative authorities to make sure that follow-up criminal investigations take place more swiftly and effectively.

With regard to the recent cases involving employees of financial companies, authorities will make sure to bring severe punishment against them. At the same time, financial companies should strengthen self-inspection and make sure to strictly adhere to internal control measures.

The use of undisclosed information to gain illegitimate profits is unacceptable for employees of financial companies since they possess information advantage over retail investors. In this regard, financial companies should bolster internal rules—with the establishment of a code of conduct, for instance—and make sure that self-corrective measures are functioning effectively.

Along these measures, the financial authorities will seek measures that will help to more quickly force out poorly performing companies from stock markets, because these companies may turn into a source of market abuse in unfair trading activities and hold back the growth of capital markets going forward.

Lastly, the role of capital market is growing ever more significant amid deepening international competition over investments. The joint response team’s launch today will open up a new era, a new beginning of our capital market.

Further Plan

The FSC, the FSS, and the KRX plan to continuously work to ensure a seamless implementation of the strengthened and diversified administrative sanctions mechanisms, seek further advancement and improvements in KRX’s market surveillance system, and pursue regulatory reforms required under the comprehensive plans to stamp out unfair trading activities announced earlier. The authorities will make continuous efforts to make sure that the “one strike out” principle becomes effectively entrenched in the market.

* Please refer to the attached PDF for details.