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FSC to freeze accounts suspected of unfair trading, illegal short selling

Published: 14 Apr. 2025, 18:08

Currency traders watch monitors near a screen showing the Korea Composite Stock Price Index at the foreign exchange dealing room of the KEB Hana Bank headquarters in central Seoul on April 14. [AP/YONHAP]

Korea will begin freezing accounts suspected of being used for unfair trading or illegal short selling under a new regulatory framework that takes effect on April 23, the Financial Services Commission (FSC) announced Monday.

The revised decree of the Financial Investment Services and Capital Markets Act, approved during a Cabinet meeting, allows the FSC to request a payment suspension on accounts believed to be linked to certain unfair trading practices. Financial companies must comply with these requests for up to one year.

The new rules also introduce expanded restrictions on individuals involved in market manipulation or other violations.

Offenders may face up to a five-year ban from trading financial investment products. The same five-year restriction applies to executives of listed companies and financial firms found to have engaged in misconduct.

“This reform will help minimize the concealment of unfair gains and reduce incentives for market abuse,” the FSC said. “It will also support investor protection and strengthen fair market practices.”

Under the revised rules, the government may lift payment suspensions only under limited conditions, such as when another legal measure like a court-ordered seizure or provisional disposition has already taken effect or when investigative authorities withdraw the suspension request.

Financial institutions that fail to comply with a suspension order may face fines of up to 100 million won ($70,000). Those that fail to notify the account holder or the FSC after enforcing the order may incur an additional fine of up to 18 million won ($12,700).

The law also raises penalties in cases where violators significantly impact market prices or submit false documents to conceal or downplay their actions. In such cases, the FSC may impose the maximum five-year trading ban.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.

BY JEONG JAE-HONG [[email protected]]