No More Stock Price Manipulation after Purchasing Insolvent Business

The investigation on unfair or illegal stock trades by the Financial Supervisory Commission will intensify especially for groups who made tremendous marginal profits through unfair stock trades after purchasing insolvent businesses.

When a business provides important information to its analysts, institutional investors, and the press, the information must be released to the public immediately according to the ‘fair disclosure’ principle.

The Financial Supervisory Commission released `a reform plan for investigation, announcement, and audit for the establishment of the public rule in the stock market` which included such measures.

According to the plan, FSC will prepare to investigate the incidents that create disorder in society immediately, changing its conventional methods and investigating the cases delivered from Korea Stock Exchange and Korea Securities Dealers Association on a first come, first serve basis.

FSC will carry out planned investigations on 12 items: 2 items from 6 areas of money games including M&A, Work-out, Release from controlled items, purchase of internal company stocks, transferring forfeited shares to a third person, and intervening in business restructuring by the stock price manipulation groups.

FSC is already investigating two suspicious items, collecting circumstantial evidences of illegal transactions. According to FSC, a Mr. Kim used money from a private loan to buy an insolvent business K and issued CP of 189.9 billion won and misappropriated it. The company K went bankrupt later.

Restructuring: Company S spread a rumor that it would restructure a company that it actually did not plan to purchase and made a great profit margin by adjusting the stock prices.

With regard to the strengthened audit, FSC will introduce a `partial audit system` that will audit specific items for which the possibility of window-dressing is high to increase the number of inspected business.

In addition, FSC will not allow one accounting corporation to serve one company with accounting supervision and consulting at the same time, learning the lesson from the U.S. `Enron Gate`.

eye@donga.com