1. Reason for the Amendment

To recover illegal profits from parties engaged in unfair trading or illegal short-selling activities, protect investors, and maintain sound trading practices, the amendment to the "Capital Markets and Financial Investment Business Act" introduces the account suspension system, executive appointment and reappointment restrictions for listed companies, and trading restrictions on financial investment products. The amendment was enacted on October 22, 2024, and aims to reflect these provisions in the subordinate regulations as delegated by the law.

2. Main Provisions

a. Suspension of Accounts Suspected of Unfair Trading or Illegal Short Selling (Enforcement Decree Article 377-2, Regulation Articles 19, 28-2, 36, 38, 39)

• Defines procedures for financial companies to execute account suspension measures, reasons for lifting the suspension, and procedures for deciding to lift the suspension when requested for accounts suspected of engaging in unfair trading or illegal short selling.

b. Trading Restrictions on Financial Investment Products and Executive Appointment/Reappointment Restrictions (Enforcement Decree Article 377-3, Regulation Articles 28-3, 55-3, Annex 2-4, Annex 3)

• Establishes the requirements for imposing trading restrictions on financial investment products and restrictions on executive appointments and reappointments, along with detailed criteria for calculating the period of these restrictions.

• Specifies transactions exempted from the trading restriction orders, related procedures, and submission requirements, and includes financial companies in the list of corporations subject to executive appointment/reappointment restrictions.

c. Grounds for Disciplinary Actions Against Financial Investment Firms and Their Employees (Enforcement Decree Annex 5)

• Defines the grounds for disciplinary actions, such as license revocation for non-compliance with account suspension measures and failure to refuse transactions for parties subject to trading restrictions, which could result in the dismissal of employees or suspension of their duties.

d. Authorization for the Handling of Sensitive Information and Personal Identification Numbers (Enforcement Decree Article 387-2)

• Allows the Financial Services Commission, the Financial Supervisory Service, the Korea Exchange, financial investment-related agencies, financial investment firms, and financial companies to process personal data or personal identification numbers when handling matters related to account suspension or restriction orders, in cases where it is unavoidable.

e. Delegation of Authority or Outsourcing of Duties (Enforcement Decree Annex 20)

• Assigns certain tasks, such as receiving notifications from financial companies regarding account suspension measures and receiving notifications from financial investment firms about trading requests from individuals subject to trading restrictions, to the Financial Supervisory Service.

f. Criteria for Imposing Fines and Calculating Unjust Gains for Penalties (Enforcement Decree Annex 20-2, Annex 22, Regulation Annex 2-2)

• Establishes criteria for imposing fines on parties who fail to comply with legal obligations regarding account suspension or restriction orders.

• Improves the calculation of unjust gains for penalty imposition by considering the degree of involvement of the violator in the violation when determining the unjust gains.