The Financial Supervisory Service aims to reinforce the perception that stock price manipulation leads to financial ruin by immediately converting urgent and major unfair trade practices into investigations conducted by the Capital Market Special Judicial Police (Special Investigators) under the Financial Supervisory Service, which possess compulsory investigation authority, thereby accelerating the process. It will also closely scrutinize large-scale rights offering (paid-in capital increase), treasury stock disclosures, and other matters to strengthen protection of shareholders' rights and interests.
The Financial Supervisory Service announced its major achievements and future plans on the 13th to mark the first anniversary of Lee Chan-jin's appointment as Chairman, scheduled for the 14th.
First, the Financial Supervisory Service plans to actively convert urgent and major unfair trade practices into Special Investigators' investigations to firmly embed the perception that stock price manipulation leads to financial ruin in the capital market. Since the introduction of investigative authority for the Special Investigators last April, the Financial Supervisory Service can now directly handle the entire process from market monitoring to planning investigations and compulsory investigations, enabling faster prosecution. Urgent and major unfair trade practice cases will be transferred to the Special Investigators for one-stop processing from investigation to prosecution, ensuring severe measures are taken.
The Financial Supervisory Service's Special Investigators have already converted two cases involving the use of non-public information and prior trading into investigative cases in June last year and conducted searches and seizures last month, among other compulsory investigations. In this manner, major cases under administrative investigation will be swiftly converted into compulsory investigations by actively utilizing the Special Investigators' investigative authority.
The 'Joint Task Force for Eradicating Stock Price Manipulation,' established to conduct joint investigations with relevant institutional investors, started with 36 members (20 from the Financial Supervisory Service) in July last year and expanded to 90 members (55 from the Financial Supervisory Service) as of late June. The task force has investigated major cases such as long-term market manipulation by super-rich individuals and the use of non-public information by senior executives of securities firms for public purchases, transferring them to the Prosecution Service.
For unfair trade practitioners, the goal is to confiscate illegal profits through administrative fines and implement market exit measures such as trading restrictions and limitations on appointing corporate officers of listed companies, thereby fundamentally blocking stock price manipulation.
To protect investors, disclosure supervision for rights offering (paid-in capital increase), treasury stock, and other matters will be strengthened. The plan is to continuously identify and promote institutional improvements such as revising disclosure forms to ensure that the intent of the Commercial Act revision regarding shareholders' duty of loyalty is implemented on the ground.
Previously, the Financial Supervisory Service has closely scrutinized large-scale rights offering (paid-in capital increase) and mergers among affiliated companies where conflicts of interest between shareholders are highly likely, and has checked the appropriateness of disclosures in business reports related to treasury stock. A representative case involved Hanwha Solution's large-scale rights offering (paid-in capital increase), where the Financial Supervisory Service requested corrections regarding its justification; ultimately, Hanwha Solution reduced the scale of capital increase. In line with the mandatory destruction of treasury stock, the company reviewed treasury stock disposal plans (123 companies) and implementation status of acquisition, disposal, and destruction (234 companies).
For the pharmaceutical and bio industries, where disclosure complexity is high, comprehensive improvement measures for disclosures have also been prepared to enhance readability and block exaggerated or false reporting. The core measure requires separating contract amounts into advance payments, milestones (stage-by-stage technology export fees), and royalties to prevent performance from being inflated by disclosing only total contract sizes.
Additionally, for important companies where there is concern about significant investor losses and companies with high incentives for accounting fraud, the Financial Supervisory Service will conduct ongoing checks on accounting irregularities and launch swift and fair supervision and sanctions.
The Financial Supervisory Service has also announced plans to review applications for additional approval of venture investment companies issuing promissory notes to activate venture capital supply in the financial investment industry. Currently, seven venture investment companies have received approval to issue promissory notes, and reviews will proceed for additional application requests. This year, venture investment companies must allocate at least 10% of their promissory note fundraising scale to venture capital supply, and the scope of businesses recognized as venture capital will be expanded to alleviate industry burdens. The Financial Supervisory Service has also announced plans to relax regulations on the soundness framework for venture investment companies at a reasonable level.
The Financial Supervisory Service will review the shareholder rights and voting right exercise systems in the asset management industry to support the establishment of the Stewardship Code. It plans to hold explanatory sessions for public and private asset management companies, provide guidance on inspection criteria, and support trusteeship activities by asset managers. Regarding the virtual asset market, the policy of 'strict crackdown on unfair trade practices' was reaffirmed. Market supervision and investigation functions based on AI (artificial intelligence) will be enhanced, including the introduction of text analysis features using LLMs (large language models).
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