Price Manipulation, the Genuine Omission Offense, and the Scope of an Agent — Requirements in Three Supreme Court Decisions under the Financial Investment Services and Capital Markets Act

Question

The first question of this white paper, which addresses the scope of the constitution of the offense of violating the former Financial Investment Services and Capital Markets Act, concerns whether orders for contracts for difference, which are over-the-counter derivatives and not listed securities themselves, constitute the conduct and object of the offense of market manipulation. Where orders pass through a securities company and lead to trading in listed securities at a substantial ratio and are then immediately followed by execution in the form of matched orders, it is necessary to determine whether the form and the substance of the conduct diverge.

Next, the character of the offense of violating the reporting obligation for changes in large-scale shareholdings is at issue. If it is a genuine omission offense whose constituent elements can be realized only by omission, interpretations may conflict as to whether conspiracy with a person having no such obligation leads to joint principal offender liability, and as to how far the scope of punishment extends where only some of the persons to whom the obligation is jointly imposed have failed to perform it.

Finally, the issue is whether a person who intermediated or brokered a contract of a listed company qualifies as an agent within the meaning of the prohibition on the use of material nonpublic information. If the criterion is the substance of performing the work on behalf of the corporation under a mandate or entrustment, rather than the form or title, then one must ask where the boundary of that substance lies.

Material to check

The first materials to be checked are the original texts of the three judgment decisions provided by the Korea Law Information Center. Only by reading together the specific wording of the provisions cited in the judgments, the scope of findings as to the facts, and the differences between the assessments of the court below and the Supreme Court can one distinguish the Holdings from the limits of the majority opinion.

As to the provisions concerning the market manipulation issue, Article 176, paragraph (1) and Article 176, paragraph (2), subparagraph 1 of the former Financial Investment Services and Capital Markets Act, together with the penalty provisions of Article 443, paragraph (1), subparagraph 4 and Article 443, paragraph (1), subparagraph 5, should be checked. Since the Financial Investment Services and Capital Markets Act in question is the one prior to its amendment by Act No. 20531 on October 22, 2024, the pre-amendment wording that was applicable at the time of the conduct in the case must be taken as the standard.

As to the reporting obligation issue, Article 147, paragraph (1) and Article 147, paragraph (4), Article 445, subparagraph 20, and Article 30 of the Criminal Act must be placed together. The pivotal points of the determination are the extent to which the persons upon whom the obligations respectively imposed by Article 147, paragraph (1) and paragraph (4) overlap, and which provision's violation Article 445, subparagraph 20 makes subject to punishment.

As to the material nonpublic information issue, Article 174, paragraph (1) of the former Financial Investment Services and Capital Markets Act, prior to its amendment by Act No. 12947 on December 30, 2014, and the penalty provision of Article 443, paragraph (1), subparagraph 1, should be checked. In addition, only by placing alongside them the purpose provision of Article 1 of the Financial Investment Services and Capital Markets Act, which sets out market fairness and investor protection, can one explain the rationale of the interpretation reading the concept of agent broadly under a substantive criterion.

Possible readings

One interpretation emphasizes the strictness of the wording and the object of the conduct. Since the prohibition of the offense of market manipulation is directed at conduct concerning transactions in listed securities and the like, orders for contracts for difference, being over-the-counter derivatives, differ as to their object in form, and extending application merely on the ground of the flow of orders through a securities company is regarded as destroying the predictability of the scope of punishment.

The other interpretation gives priority to substance in light of the purpose of the prohibition on market manipulation. Because market manipulation concerning transactions in listed securities and the like may affect a multitude of persons and render the securities market as a whole unsound, it is regarded as making no difference in substance from direct trading where trading in listed securities is expected at a substantial ratio and the structure leads through a securities company immediately to matched orders.

Interpretations also diverge as to genuine omission offenses and agents. A strict interpretation holds that recognizing a person without the obligation as a joint principal offender undermines the principle of responsibility in omission offenses, while another interpretation holds that the criminal liability of participants should be recognized in light of the substance of conspiracy and the sharing of roles. As to agents, views divide between one narrowly viewing the authority of representation under the law and one broadly viewing performance of work on behalf of another under a mandate or entrustment.

What the decisions held

Supreme Court Judgment 2025Do21859 held that price manipulation carried out through orders for contracts for difference (CFDs) constitutes offences in violation of Article 176(1) and Article 176(2), subparagraph 1, of the former Financial Investment Services and Capital Markets Act. Although the orders were for over-the-counter derivatives, the Court found that, given that trading in listed securities was expected at a substantial ratio and that the orders immediately led, through the securities companies, to matched-trade orders, there was no difference in substance even though the defendants had not directly engaged in matched trades in listed securities. The basis for this determination was the purpose of the prohibition, namely that price manipulation affects many persons and can render the securities market as a whole unsound.

Supreme Court Judgment 2021Do11110 characterised the offence of violating the duty to report changes in large shareholdings of shares, etc. in a stock-listed corporation as a genuine omission offence, and held that where several persons on whom the duty is jointly imposed conspire and none of them performs it, they may be liable as co-principals. Holding that co-principal liability does not arise with a person who bears no such duty, it delineated the persons bound by the duty under Article 147 of the Financial Investment Services and Capital Markets Act and the scope of application of Article 30 of the Criminal Act by reference to where the duty lies. This is a determination that narrowly confines the persons liable for an offence whose elements can be realised only by omission.

Supreme Court Judgment 2021Do11654 held that an agent under Article 174(1), subparagraph 1, of the former Financial Investment Services and Capital Markets Act is a person who, regardless of form or title, performs the corporation's business on its behalf pursuant to a mandate or entrustment. Such a person is not limited to one who has been granted authority of agency under the Civil Act, makes declarations of intent, and directly produces their effects for the corporation; the Court held that a broker or intermediary who has in fact performed business, such as advising on contract terms or taking part in negotiations, may also be an agent. The scope of persons subject to the prohibition on using and communicating material non-public information was thereby broadened on a substantive basis.

Practical checklist

First, in anticipation of cases where the form and the substance of the conduct diverge, the order path and the execution structure must be preserved as evidence. The ratio at which orders for over-the-counter derivatives lead to trading in listed securities, the processing flow of the securities company, and whether they are immediately connected to matched orders bear directly on the substantive determination of whether the offense of market manipulation is constituted.

Second, the persons subject to the obligation must first be identified. Only after confirming upon whom the obligation to report changes in large-scale shareholdings is imposed can one determine whether the counterparty to the conspiracy is a person bearing the obligation, and whether joint principal offender liability with a person without the obligation arises also diverges at precisely this point in the sequence.

Third, in determining whether a person qualifies as an agent, the existence of the mandate or entrustment relationship and the degree of performance of the work on behalf of another must be confirmed in documents. The frequency and scope of advice on the terms of a contract or involvement in negotiations, and whether the work was performed with intent for the corporation, must be corroborated by records.

Fourth, the chronological scope of the applicable statute must be confirmed. Since the Financial Investment Services and Capital Markets Act applied to each matter is the pre-amendment version, the time of the conduct must be compared with the date of amendment, and only by checking the penalty provisions as well can the scope of punishment be made predictable.

Glossary

A genuine omission offence is an offence whose elements can be realised only by omission. In a structure such as the offence of violating a reporting duty, where the elements are realised by not performing a certain act, where the duty lies marks the limit of liability.

Matched trades are a form of trading prohibited as one type of price manipulation under Article 176(1), subparagraphs 1 and 2, of the former Financial Investment Services and Capital Markets Act. The Financial Investment Services and Capital Markets Act prohibits price manipulation in transactions in listed securities and the like, thereby protecting against effects on many persons and safeguarding the soundness of the securities market as a whole.

An agent, for the purposes of the provision prohibiting the use of material non-public information, does not narrowly refer to authority of agency under the Civil Act. Any person who, pursuant to a mandate or entrustment, performs the relevant business on behalf of the corporation with the intention of acting for it may be included, regardless of form or title.

Sources and limitations

This white paper was prepared solely on the basis of the judgment texts of Supreme Court Decision 2025Do21859, Supreme Court Decision 2021Do11110, and Supreme Court Decision 2021Do11654, examined on the Korea Law Information Center, and the provisions cited in those judgments. This white paper is not legal advice but a general research resource, and does not provide any legal determination or opinion on a particular matter.

The scope of the materials used is limited to the three decisions, the provisions of the Financial Investment Services and Capital Markets Act cited therein, and Article 30 of the Criminal Act. Facts not appearing in the judgment texts, discussions at each instance, the parties' contentions, and other determinations rendered thereafter were excluded from review, so separate confirmation of the latest statutes and precedents is needed before practical application.

Points left open

One of the remaining issues is the criterion for recognizing a case in which it is difficult to calculate the profit gained from market manipulation. Supreme Court Decision 2025Do21859, while setting out the requirements for constitution of the offense, did not expressly clarify the criterion for determining the difficulty of calculating profit, so there is room for interpretation to diverge at the stage of applying the penalty provisions.

In addition, the scope of constitution of joint principal offender liability where a plurality of persons upon whom the obligation is jointly imposed conspired but only some failed to perform the obligation, and the specific criteria for finding that work was performed in substance beyond intermediation or brokerage, remain open. The criteria set out by Supreme Court Decision 2021Do11110 and Supreme Court Decision 2021Do11654 show only a direction and did not fix the borderline.

When to reconsider

This brief should be reviewed again if amended text of Articles 176, 174 and 147 of the Financial Investment Services and Capital Markets Act enters into force or the related subordinate regulations are revised. In particular, because Articles 176 and 443 of the former Financial Investment Services and Capital Markets Act applied in 2025Do21859 are the versions before their amendment by Act No. 20531 of 22 October 2024, the provisions must first be distinguished according to the time of the conduct.

If subsequent judgments are delivered on the standard for when profits are difficult to calculate or on the scope of co-principal liability for genuine omission offences, the relevant parts will be updated. In addition, if the technical structure of actual order routing changes so that the way contracts for difference are linked to trading in listed securities differs, the factors in the substantive assessment will need to be restated.

Statutes referred to

• 구 자본시장과 금융투자업에 관한 법률(2024. 10. 22. 법률 제20531호로 개정되기 전의 것) 제176조 제1항, 제176조 제2항 제1호, 제443조 제1항 제4호, 제443조 제1항 제5호, 형법 제30조
• 자본시장과 금융투자업에 관한 법률 제147조 제1항, 제147조 제4항, 제445조 제20호, 형법 제30조
• 구 자본시장과 금융투자업에 관한 법률(2014. 12. 30. 법률 제12947호로 개정되기 전의 것) 제174조 제1항, 제443조 제1항 제1호, 제1조

Decisions referred to

• 대법원 2026. 5. 20. 선고 2025도21859 판결 · Decision ledger
• 대법원 2022. 1. 13. 선고 2021도11110 판결 · Decision ledger
• 대법원 2025. 12. 4. 선고 2021도11654 판결 · Decision ledger

Verification status

The original texts of the relevant provisions and the judgment texts of Supreme Court Decision 2025Do21859, Supreme Court Decision 2021Do11110, and Supreme Court Decision 2021Do11654 were cross-checked on the Korea Law Information Center as of 2026-10-15. This white paper cites only the three decisions addressed in it.