Financial authorities have decided to abolish the cap on rewards paid to whistleblowers who report stock price manipulation or accounting fraud. Instead, they will pay up to 30% of the illicit gains and fines that are detected and recovered. This effectively opens the way for cases in Korea similar to that of the United States, where a whistleblower was awarded as much as 370 billion won.
On February 25, the Financial Services Commission (FSC) announced that it will pre-announce legislation until March 7 on amendments to the Enforcement Decrees and subordinate regulations of the Capital Markets Act and the External Audit Act containing these measures. The key points of the amendments are to completely abolish the cap on whistleblower rewards, pay rewards of up to 30% of the illicit gains and fines that are detected and recovered, and strengthen cooperation mechanisms so that rewards can also be paid when reports are filed with other administrative agencies such as the National Police Agency. Following the necessary procedures, the amendments are expected to take effect as early as the second quarter of this year.
Currently in Korea, even if a person reports stock price manipulation or accounting fraud that leads to illicit gains amounting to hundreds of billions of won, the reward is capped at 3 billion won for unfair trading and 1 billion won for accounting fraud. In response, the FSC has decided to make clear once again the Lee Jaemyung administration’s firm policy of “...
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