1.

Announcement of the Measures to Eliminate Unfair Trading Activities in Capital Market)

On July 9, 2025, the Financial Services Commission (the “FSC”), the Financial Supervisory Service (the “FSS”), and the Korea Exchange (the “KRX”) jointly announced proposed measures to eliminate UTAs. The key measures include the following:
 

(1)

Establishment of a Joint Investigation Team

On July 9, 2025, the FSC, the FSS, and the KRX announced a plan to establish the “Joint Response Team to Eliminate Stock Price Manipulation” (the “Joint Response Team”) with the primary objective of expediting the examination, investigation and imposition of administrative measures in response to suspected UTAs.

The Joint Response Team, consisting of four FSC officers, 18 FSS investigators, and 12 KRX personnel, will be headed by the Senior Deputy Governor of the FSS and is expected to initially focus on cases associated with repeat offenders, major shareholder(s) or executive(s) of listed companies, and/or use of false information through media resulting in losses incurred by a large number of investors.
 

(2)

Introduction of Account Holder-Level Surveillance of UTAs and Adoption of AI Technology

The regulators’ announcement on July 9, 2025 also includes details of the plan to improve the KRX’s market surveillance systems to substantially enhance efficiency in enforcement actions of suspected market manipulations.

The KRX currently carries out market surveillance activities at each “account” level, which makes it challenging to promptly detect UTAs carried out by the same party using multiple accounts. To strengthen its market surveillance activities, the KRX announced a plan to complete improvement of its surveillance systems to detect UTAs at each “account holder” level by October 2025.

In addition, the KRX plans to utilize artificial intelligence (“AI”) technology for market surveillance to strengthen its abilities to respond to increasingly sophisticated methods of UTAs.
 

(3)

Strengthened Enforcements Against UTAs: “One Strike Out” Principle

To prevent UTAs in the Korean capital market, the Korean financial regulators will seek to impose more significant monetary sanctions in excess of gains from the UTAs (up to two times the amount of unfair gains) to provide a stronger dis-incentive to engage in UTAs.

In addition, the Korean financial regulators plan to actively make use of non-pecuniary sanctions newly introduced under recent amendments to the Financial Investment Services and Capital Markets Act (the “FSCMA”) and its Enforcement Decree, together with the monetary sanctions. As noted in our earlier newsletter, non-pecuniary sanctions that could be imposed on individuals suspected of UTAs include, among others, restriction on trading of financial investment products for up to five years, restriction on appointment as executive of a listed Korean company or a Korean financial company, and suspension of trading accounts suspected of being utilized in connection with certain prescribed UTAs for a period up to one year.
 

(4)

Imposition of Stricter Monetary and Non-Pecuniary Sanctions Against Naked Short Sale

Major violations of short sale regulations linked to unfair trading activities may be subject to (i) administrative penalty of up to 100 percent of the short sale order amount, and (ii) stricter sanctions against the relevant institutional investor(s), including but not limited to suspension of business operation or restriction from trading financial investment products.

In addition, an account freeze order may be imposed on the accounts suspected of being used for placing intentional or grossly negligent naked short sale orders, especially if there are reasons to suspect that the “proceeds of naked short sale” may have been transferred overseas.
 

(5)

Timely Delisting of Underperforming Companies

To increase market confidence regarding the soundness of public companies whose shares are traded on the Korean stock markets, especially considering that underperforming companies may be more susceptible to market manipulative activities, the Korean financial regulators plan to strengthen the listing requirements and streamline delisting processes to seek timely removal and delisting of underperforming companies.
 

2.

Formation of a Task Force to Prevent UTAs in the Capital Market

On July 16, 2025, based on the PO’s initiative, a joint task force composed of officers and/or representatives from the Supreme Public Prosecutors’ Office (the “SPPO"), the FSC, the FSS and the KRX (the “Capital Market TF") was formed and held its inaugural meeting at the SPPO. A SPPO spokesperson indicated that the Capital Market TF would develop detailed measures to expedite investigations of suspected crime of market manipulation and to ensure integrity of such investigation.

While it remains to be seen how the activities of the Joint Response Team would differ from measures to be undertaken by the Capital Market TFT, the Joint Response Team will likely focus on administrative enforcements while the Capital Market TFT would focus on criminal investigations (e.g., “Fast Track” system to expedite commencement of criminal investigation) related to the cases involving suspected UTAs.