Securities Commission Refers Insiders Who Gained Unfair Profits Using Undisclosed Information to Investigation Agency

Insiders who made illegal profits by using undisclosed information, such as large-scale paid-in capital increases involving changes in management control, have been caught by authorities.

The Securities and Futures Commission announced during its regular meeting today (October 28) that it has filed complaints with and notified the Serious Crimes Investigation Agency regarding participants in a paid-in capital increase and others who acquired unfair profits by using undisclosed material information related to a large-scale paid-in capital increase involving changes in management control.

Executives and employees of other listed companies and affiliates who participated in a large-scale paid-in capital increase involving a change in management control at Company A, along with their acquaintances, are suspected of obtaining about 1.25 billion won in unfair profits by learning or receiving undisclosed material information related to the capital increase through their duties and utilizing it.

Authorities found that they utilized and passed on the undisclosed information in the expectation that the fact of a celebrity participating in the large-scale capital increase, management control changes due to a third-party capital increase, improved financial conditions, and the possibility of pursuing new businesses using surplus funds would significantly drive up stock prices.

The Financial Services Commission confirmed the related circumstances through a comprehensive process involving searches and seizures, digital forensic analysis, and questioning.

In a separate case, executives and information recipients of a listed company's stock and management acquisition corporation were notified to the Serious Crimes Investigation Agency on suspicion of violating the prohibition on using undisclosed material information.

Person C, an internal director of an unlisted corporation that decided to acquire management control of listed Company B through stock transfer and a paid-in capital increase, passed on undisclosed information regarding the management transfer contract to an acquaintance (primary information recipient) to use in trading Company B shares.

The acquaintance is suspected of using this undisclosed information to trade Company B shares and passing it on to three relatives (secondary information recipients) to use, thereby acquiring approximately 100 million won in unfair profits.

The three relatives, who are secondary information recipients, were subject to fines for market-disturbing activities.

According to the Financial Services Commission, not only company executives and employees, but also individuals who have entered into or are negotiating contracts with a company, can face criminal punishment—such as imprisonment with labor for one year or more or a fine of up to six times the unfair profit—under the Capital Markets Act if they use undisclosed material information learned in connection with their duties or allow others to use it.

Those who receive such information can also face administrative fines of up to 1.5 times the unfair profit for market-disturbing activities.

(Photo: Provided by Financial Services Commission, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.