Pocketed 1.2 billion won using information on a celebrity’s participation in a capital increase; Securities and Futures Commission (SFC) files complaint against insiders and others with Serious Crimes Investigation Agency

[Financial News] Participants in a paid-in capital increase and their acquaintances, who made more than 1.2 billion won in illicit gains using undisclosed information, including information about a celebrity’s participation in a large-scale capital increase, were referred to investigative authorities.
The Securities and Futures Commission (SFC), under the FSC, said it had decided at its 19th regular meeting on the 28th to file complaints against and refer insiders and others to the Serious Crimes Investigation Agency in connection with two cases involving the use of material nonpublic information, and to impose administrative fines.
According to the FSC, listed company E, which participated in a third-party allotment of new shares involving a change of control at listed company A, employees of E’s affiliates, and their acquaintances are suspected of making illicit gains of about 1.25 billion won by using information related to the capital increase in stock trading after learning it through their work or receiving it from others.
Investigators found that they believed a celebrity’s participation in a large-scale capital increase, a change of control, improvements in the company’s financial condition and the possibility of pursuing new businesses would boost the share price, and that they used the information or passed it on to people around them. After conducting search and seizure operations against the suspects, the FSC confirmed relevant indications through digital forensic analysis and questioning.
Stock trading using material nonpublic information was also uncovered during the acquisition of control of listed company I. K, an inside director of company J, which had agreed to acquire control of I, passed information about the agreement to transfer control to an acquaintance, L. L is suspected of trading I shares using the information and then passing it on to relatives M, N and O. The illicit gains made by the information provider and the first recipient were estimated at about 100 million won.
The second recipients of the information, M, N and O, are also suspected of making about 100 million won in illicit gains by trading I shares using the information they received. The SFC notified the Serious Crimes Investigation Agency about K and L on suspicion of violating the ban on using material nonpublic information, and imposed administrative fines on M, N and O for market-disruptive conduct.
Under the Financial Investment Services and Capital Markets Act, not only first recipients who receive material nonpublic information directly, but also second recipients who receive it from them and use it to trade may be subject to sanctions. The use of material nonpublic information can be punished by a fixed-term prison sentence of at least one year or a fine of up to six times the illicit gains. Market-disruptive conduct by second recipients can be subject to an administrative fine of up to 1.5 times the illicit gains.
The FSC and the Financial Supervisory Service said, “We will respond firmly to unfair trading in the capital market using undisclosed information,” and urged compliance with relevant laws and regulations and stronger internal controls.

[email protected] Lee Jeong-hwa Reporter