Former Hana Securities CEO Lee Jin-kook Acquitted, Analyst in Front-Running Case Convicted

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\rAccording to Financial News, former Hana Securities CEO Lee Jin-kook, whose securities account was used in front-running trades by an in-house analyst, has had his acquittal finalized by the Supreme Court of Korea. However, the analyst, who was accused of using the former CEO’s and his own mother-in-law’s accounts to earn profits through front-running, had his conviction upheld. On the 3rd, the legal community said the Supreme Court Third Division, presided over by Noh Kyung-pil, Associate Justice of the Supreme Court of Korea, recently overturned an appellate ruling that had found Hana Securities analyst Lee (surname) not guilty of violating the Financial Investment Services and Capital Markets Act through fraudulent unfair trading, and remanded the case to the Seoul High Court. The court, meanwhile, confirmed the lower court’s acquittal of former CEO Lee Jin-kook.
Analyst Lee was indicted on charges that, from February 2017 to September 2019, he engaged in front-running using the account of then Hana Securities (then Hana Financial Investment) CEO Lee Jin-kook, allowing the CEO to gain about 139.6 million won in profit. He was also accused of using his mother-in-law’s account for front-running between January 2018 and April 2020, generating about 13.9 million won in profit for her. Lee had been selected as a “Best Analyst” by major economic newspapers from 2014 to 2020.
Lee prepared equity research reports on specific companies, then, before the reports were released, had other employees managing the former CEO’s or his mother-in-law’s accounts buy shares in the relevant stocks. After the reports were published, he had them sell the shares to realize profits.
The court of first instance ruled that these actions constituted fraudulent unfair trading in violation of the Financial Investment Services and Capital Markets Act. It sentenced Lee to one year in prison, suspended for two years, imposed a fine of 10 million won, and ordered 120 hours of community service.
In contrast, the appellate court held that there was no statutory obligation to disclose in research reports either an analyst’s buy recommendation or a third party’s shareholdings, and therefore found him not guilty on the fraudulent unfair trading charge. However, it found him guilty of using job-related information, revoked the fine imposed by the lower court, and reduced the community service order to 80 hours.
The Supreme Court of Korea nevertheless upheld the acquittal of former Hana Securities CEO Lee Jin-kook, concluding that there was insufficient evidence that he had ordered or requested the front-running trades.
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hwlee@fnnews.com Lee Hwan-joo Reporter