South Korea’s financial regulators will have reinforced authority in investigating fraudulent stock trading, becoming closer to the surveillance systems used in the United States and Britain.

The Financial Services Commission of Korea is poised to set up the “investigation division,” which will be in charge of fast-track scrutiny of alleged stock manipulation, said regulatory officials on Wednesday.

“The authority comes from a close benchmarking of the U.S. Securities and Exchange Commission and the U.K. Financial Conduct Authority,” said a senior official.

While the “fair market division” at the FSC had monitored the overall irregular financial transactions involving stock rigging, the coming investigation division will exclusively crack down on stock rigging cases.

The new division will be launched through the FSC’s consultation with the Ministry of Security and Public Administration and approval procedures in the Cabinet.

In the same vein, the Financial Supervisory Service, an executive arm of the FSC, will establish the “special investigative department” for a wider scope of inquiries into unfair equity trading.

The FSS plans to hire some 40 employees with expertise in fields such as legal services, information technology and financial derivatives trading.

The FSC’s investigation division and the FSS’s special investigative department will have fast-track authority under which they can immediately launch probes into alleged stock scams and hand over suspects to the prosecution.

Currently, the two state regulators have to make inquiries into manipulation allegations for several months before they can file a compliant with the prosecution against suspects.

Further, under the Park Geun-hye administration’s commitment to weeding out unfair trading, the government is moving to grant “criminal authority” to FSC investigators monitoring the brokerage industry and some nongovernmental inspectors at the FSS.

Under the new authority, inspectors will be empowered to refer to mobile communication or Internet usage records and prohibit a suspect’s departure from the country.

In addition, an offender will be levied fines up to four times the value of his or her irregular stock gains. The tougher sanction will be finalized through indictment by the prosecution and a court verdict, in addition to imposing a possible prison sentence.

(kys@heraldcorp.com)

As inspectors from the FSS are not public servants, the authority will only be granted to figures who are dispatched to the FSC for joint probes.

In a bid to boost the whistle-blowing system, policymakers are sharply raising rewards.

A reward of up to 2 billion won ($1.75 million) will be given to anyone who reports dubious trading cases to the FSS or the Korea Exchange, compared with the current level of up to 300 million won.

By Kim Yon-se (kys@heraldcorp.com)