By Yoon Ja-young
Staff Reporter
Stock price riggers and inside traders will face fines and securities companies will have to share information on individuals who commit securities fraud, the Financial Supervisory Service (FSS) announced Thursday.
FSS Governor Kim Jong-chang said the regulator is preparing stronger measures to deter unlawful conduct and improve the market's integrity.
``Clearly, one lesson to learn from the credit crisis is that no market can function without investor confidence,'' Kim said in a keynote speech to the Euromoney Korean Capital Markets Congress held in downtown Seoul.
There has been growing demand that Seoul, which wants to become a financial hub in East Asia, should effectively deal with illicit transactions on the capital market ahead of the implementation of the Capital Market Consolidation Act next year.
``We will give securities companies information on individuals who commit securities fraud and ask that they share with each other information on all suspicious trading activity,'' the governor said.
According to the FSS, the number of illicit trading cases reported to the regulator totaled 202 last year, growing 22 percent from the previous year. Among stock price rigging cases handed over to the prosecution, the ratio of those who had committed the same crime previously is rising each year.
If the securities firms share information, the stock price riggers or inside traders will have difficulty in buying stocks on credit or finding work at securities companies.
Kim also said the regulator is considering fines on insider traders. ``We are going to adopt stiff monetary penalties for insider trading and other unlawful activities. Moreover, we also intend to exercise our investigation authority aggressively to deal with all unlawful activities that undermine market integrity,'' the governor said.
Currently, courts not the financial regulator determine penalties on stock price riggers. Hence, it took a long time before they were punished, and often the money earned from the fraud was much bigger than the penalties.
The regulator said timely punishment for fraud would help improve market transparency.
Kim said the regulator would work closely with the Korea Exchange, the stock market operator, regarding investigations.