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President calls for 'one strike' policy to punish unfair stock trading

Published: 11 Jun. 2025, 20:06

President Lee Jae-myung speaks about eradicating unfair trading practices at a meeting with Korea Exchange (KRX) representatives at KRX offices in Yeouido, western Seoul, on June 11. [JOINT PRESS CORPS]

President Lee Jae-myung vowed Wednesday to implement a “one strike” rule for financial crimes in Korea’s stock market, signaling that anyone caught manipulating stock prices or engaging in unfair practices will face a permanent expulsion from trading.

The measure includes the confiscation of illicit profits through punitive fines.

President Lee made the remarks while speaking at a roundtable with working-level staff of the Korea Exchange’s (KRX) Market Oversight Commission at the agency's offices in Yeouido, western Seoul.

“The stock market is at the heart of a capitalist economy," Lee said. "Let this be the first day we make it absolutely clear that anyone messing around in Korea’s stock market will be ruined.”

His remarks came as the benchmark Kospi closed above 2,900 the same day for the first time in three years and five months.

Presidential spokesperson Kang Yu-jung speaks on President Lee Jae-myung's roundtable at Korea Exchange on June 11 at a press briefing in the presidential office in Yongsan, central Seoul, the same day. [JOINT PRESS CORPS]

The new enforcement mechanism was one of Lee’s key campaign pledges. He previously declared that he would usher in a “Kospi 5,000 era,” and sees market fairness as central to that goal.

Presidential spokesperson Kang Yu-jung said in a briefing the same day, “Even when unfair trades are caught, investigations in the stock market are slow and the penalties are too light. As a result, the recidivism rate exceeds 29 percent.”

She added that while the United States doesn’t use the “one strike” phrase, the country's Securities and Exchange Commission can permanently bar individuals from re-entering the market for crimes such as insider trading and market manipulation — a power not currently available to Korean authorities.

Lee also took a hard line on illegal short selling.

“If someone knowingly and intentionally engages in [illegal short selling], they should be barred from operating in Korea entirely. The basic rule should be to suspend their operations, and if it’s repeated or large in scale, they should be kicked out completely,” he said.

However, he added that abolishing short selling altogether wasn’t a viable option.

“There are a lot of problems with it, but that doesn’t mean we can scrap it,” he said.

President Lee Jae-myung presides over a meeting at the Korea Exchange in Yeouido, western Seoul, on June 11, to address measures against unfair practices in the stock market. [JOINT PRESS CORPS]

To support quicker enforcement, Lee ordered his aides to explore an expansion of the staffing and authority of the KRX's oversight unit, according to spokesperson Kang.

He also called for improved systems to detect new forms of unfair trading more swiftly. Investigations take so long, according to his administration, that illicit activity often continues unchecked during that time.

Alongside enforcement, Lee emphasized the need for Korean companies to increase dividends, calling it essential for reaching the Kospi 5,000 milestone.

“In other countries, people buy blue chip stocks, collect interim dividends and use that income for daily expenses, which helps boost domestic demand. But here, [companies] don’t even pay dividends,” he said.

“Our dividend payout ratio is even lower than China’s — and they’re a so-called communist country.”

The average dividend payout ratio in Korea from 2014 to 2023 was 26 percent, compared to 31 percent in China, according to Bloomberg.

Lee said the government was preparing tax and regulatory reforms to encourage higher dividends.

He pointed to a proposed revision to the Income Tax Act proposed by Democratic Party lawmaker Rep. Lee So-young that offers tax breaks by treating dividends from companies with payout ratios of 35 percent or more separately from comprehensive income.

“If companies are paying out solid dividends and it doesn’t cause serious damage to our tax base, then lowering [the tax] would be a good move,” Lee said.

Presidential chief of staff Kang Hoon-sik, right, and Korea Exchange CEO Jeong Eun-bo listen to President Lee Jae-myung during a meeting on eradicating unfair trading practices in the stock market at Korea Exchange's office in Yeouido, western Seoul, on June 11. [JOINT PRESS CORPS]

Before the roundtable began, Lee struck a casual tone with employees.

“Relax. Just think of me as your hyung [big brother],” he said. He also referred to himself as a “dormant ant,” using the Korean slang for a small retail investor.

Lee revealed that his first stock investment was in a speculative small-cap stock and later traded futures and options, only to suffer heavy losses during the 1997 Asian financial crisis.

He recalled, “My stock was a solid blue chip, but after some merger or spinoff, suddenly all I had left was a shell.”

The anecdote, he said, underscored the need to revise Korea’s Commercial Act.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 2,907.04 points on June 11, up 35.19 points, or 1.23 percent, from the previous trading session. [NEWS1]

Wednesday marked President Lee’s first public schedule since taking office on June 4. His decision to visit the Market Oversight Commission at the Korea Exchange was seen as symbolic. A senior official in the presidential office described it as “a reaffirmation of the administration’s commitment to cracking down on crimes that compromise the integrity of the capital market.”

Observers noted that the move may also aim to broaden his political footing by appealing to centrist voters and retail investors, who form a sizable and increasingly vocal constituency.

The Kospi closed at 2,907.04 on Wednesday, up 35.19 points, or 1.23 percent, from the previous session. It was the first time the index surpassed the 2,900 mark since January 14, 2022.

During his campaign, Lee had sought to align himself with investors, revealing his own domestic exchange-traded fund holdings on May 28 and declaring, “I will firmly support the stock market.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY YOON SUNG-MIN [email protected]]