SOUTH KOREA Law and Practice Contributed by: Soo Bong Jung, Jinwook Song, Jinwon Choi and Jiyoung Sohn, Bae, Kim & Lee LLC
per year in aggregate may face up to three years of imprisonment or a criminal fine of up to KRW30 mil - lion. The company may incur a criminal fine of up to KRW30 million. Conflict of Interest Prevention Act (CIPA) In May 2022, the CIPA became effective, aimed at preventing conflicts of interest in the public sector. Under the CIPA, public officials and officers/employ - ees of public corporations may face up to seven years in imprisonment or may be subject to a criminal fine of up to KRW70 million if they obtain personal gains through the use of official secret or non-public insider information acquired during the course of performing their work. 3.3 Anti-Bribery Regulation There is no legal obligation for a company to prevent bribery and influence peddling, nor to establish and maintain a compliance programme. However, in practice, proactive steps to prevent mis - conduct and deter recurrence through the establish - ment of internal controls and compliance programmes are recognised by the investigative authorities and the courts. These may significantly influence the scope and manner of the investigation as well as the final sentence. The existence of a robust compliance sys - tem can be used as evidence of due care and supervi - sion to prevent criminal misconduct and may, in cer - tain cases, exonerate the company. 3.4 Insider Dealing, Market Abuse and Criminal Banking Law The Financial Investment Services and Capital Mar - kets Act (FISCMA), which regulates financial invest - ment businesses in general, outlines the regulations restricting insider dealing, market abuse, and over - seeing criminal banking law. The FISCMA sets forth penal provisions for violations related to insider trad - ing restrictions, pricing rules, and other improper trad - ing activities such as market manipulation and unfair trading. Insider Trading The FISCMA generally prohibits the use of material non-public information by specified insiders – includ - ing major shareholders, officers and employees – in
the trading of the subject company’s securities and disclosing such information to outside third parties. More specifically, the prohibition covers the use of material non-public information in relation to: • the sale or trading of securities of a publicly listed company; • the initiation or discontinuance of a tender offer for the company’s stock or other securities; or • the acquisition or disposition of the company’s stock or other securities related to such stock in bulk. This prohibition also applies to a tender offeror, a pro - spective acquirer or seller of subject securities, and their respective executives and shareholders. In addition, the FISCMA was amended in July 2015 to prohibit certain activities deemed to result in distur - bances to “market order”. These amendments regu - late market activities that result in such disturbances, which in effect expands the scope of the prohibition on insider trading by including the use of material non- public information acquired indirectly (second-hand) or through improper means, such as hacking. In relation to violations of the prohibition on insider trading, the perpetrator may face imprisonment rang - ing from one year to a life sentence, depending on the amount of profits or avoided losses, and a criminal fine assessed based on the following formula: • KRW500 million, if the profits or avoided losses cannot be accurately assessed or if the amount equivalent to five times the profits or avoided losses is KRW500 million or less; and • an amount between three and five times the profits or avoided losses from the misconduct. Market Manipulation The FISCMA prohibits the seeking of profits through the manipulation of supply and demand, and, ulti - mately, the prices of securities or exchange-traded derivatives through means intended to mislead others. Such means include: • wash-trades;
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