'Korea's SEC' is up and running — and already facing roadblocks

Korea's regulatory bodies formed a task force to tackle stock manipulation, aiming for streamlined investigations and enforcement.

Vice Chairman Kwon Dae-young of the Financial Services Commission, left, and other participants unveil the nameplate of the joint task force on eradicating stock manipulation at the Korea Exchange in Yeongdeungpo District, western Seoul, on July 30. [YONHAP]

The Financial Services Commission (FSC), the Financial Supervisory Service (FSS) and the Korea Exchange (KRX) launched a joint task force on stock manipulation Wednesday, aiming to streamline the punishment process by integrating functions previously divided across the three institutions.

The new team, described as a preliminary Korean version of the U.S. Securities and Exchange Commission (SEC), is a “one-stop” mechanism for handling unfair practices in the capital market.

The task force announced it had already launched new investigations upon its establishment.

“We will finalize the selection of roughly four priority cases for investigation during today’s meeting,” Lee Seung-woo, deputy vice governor of the FSS and acting head of the task force, said at a news conference. “We aim to show early results that demonstrate the consequences of market manipulation.”

President Lee Jae Myung had also warned during a June 11 visit to the KRX that “those who toy with the stock market will be ruined.”

A key feature of the task force is the dismantling of institutional barriers between the FSC, FSS and KRX. A shared office has been established at the KRX and staff from the three institutions — responsible for screening, investigation and enforcement — have been seconded to work as one team. By consolidating investigative personnel and powers, the team is expected to significantly shorten the typical one-year timeline for processing stock manipulation cases.

With Lee emphasizing a “one-strike” approach to financial crime, the task force plans to prioritize recent high-profile cases involving financial industry insiders.

“We’ve eliminated spatial separation, information silos and fragmented authority,” said Kwon Dae-young, vice chairman of the FSC at the launch ceremony. “Our goal is to upgrade the market surveillance system by incorporating artificial intelligence technology and enabling direct tracking of individual manipulators. We will also work closely with law enforcement to ensure swift and forceful criminal penalties.”

Despite the launch, challenges remain for the task force to evolve into a body like the U.S. SEC, which has consolidated power to investigate and penalize unfair practices in capital markets.

Calls are growing in Korea to bolster investigative capabilities with properly empowered and experienced personnel. While the FSC has formal authority to conduct compulsory investigations — such as executing search and seizure orders and summoning suspects — it lacks personnel and practical experience.

The FSS, by contrast, has more investigators and years of experience but no authority to conduct raids or compel testimony.

Experts say that if Korea is to build a full-fledged version of the SEC, the task force must secure experienced personnel with enforcement authority. One proposed solution is to incorporate FSS investigators into the new agency and grant them the necessary powers.

However, transferring enforcement authority to FSS staff would require converting them from private sector employees into public officials, a move likely to spark institutional resistance.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY KIM NAM-JUN [kim.minyoung5@joongang.co.kr]