Making cheats think twiceProsecutors, financial and securities authorities are scurrying to come up with strong action to rein in stock manipulations after an order from President Park Geun-hye. The Financial Supervisory Service is poised to imitate the National Tax Service and raise rewards for tips on illegal shenanigans in the stock market to 1 billion won ($ 897,948) from the current 100 million won. Sharp hikes in rewards helped tax authorities catch tax cheats.
But what raises our interest is whether or not to empower FSS officials with the ability to investigate financial crimes. The Justice Department and prosecutors suggest separating the FSS capital investigation department while the financial authority demands investigative power first, such as authority to check phone and communication records before any reorganization.
Stock manipulation is one of the most sophisticated types of crime. It relies on information and technology skills and mechanisms like smartphones and the Internet. Under the privacy law, the FSS cannot access telecommunications records. It takes the financial watchdog an average of 148 days to investigate unfair and irregular stock trading via the Internet after notification from the stock exchange. Another 100 days are needed for the prosecutor to acquire search warrants and complete the investigation. Telecommunication companies store communication records of their clients for a year at best. Investigative authorities therefore usually cannot secure necessary evidence to press strong charges against financial criminals. Most alleged stock manipulators last year were released after paying penalties.
U.S. Securities and Exchange Commission employees can embark on raids and investigations upon suspicion of unfair or deceptive stock trading. The commission has independent arrest authority and is even allowed to wiretap or access e-mail communications when deemed necessary. White-collar criminal Bernard Madoff was slapped with a maximum sentence of 150 years in prison for his massive Ponzi scheme. We also need to crack down on stock manipulations and scams.
The FSS will have to undergo reorganization if necessary. Some employees of the independent body are resisting becoming public officials because of salary cuts that would ensue. But they are neglecting the role of the financial watchdog to ensure transparency and fairness of our financial markets. The court should also give heavy penalties to deter stock market frauds such as confiscation of ill-gotten gains and long jail terms. Then the cheaters would think twice.
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