The Financial Services Commission (FSC) will overhaul its whistleblower reward program to strengthen incentives for insiders to report unfair trading and accounting fraud.
Under the current framework, payouts are capped at KRW 3 billion for unfair trading and KRW 1 billion for accounting fraud – levels widely viewed as insufficient to encourage insiders to come forward. In addition, rewards are unavailable if reports are filed with other enforcement authorities, such as the National Police Agency.
To sharpen incentives, the FSC will:
(i) abolish all caps on whistleblower rewards;
(ii) provide rewards of up to 30% of recovered illicit gains or penalties; and
(iii) make whistleblowers eligible for rewards regardless of which government agency first receives the report.
Key Measures
1. Uncapped Whistleblower Rewards for Market Manipulation and Accounting Fraud
Under the current framework, even when a tip leads to the recovery of billions of won in illicit gains, rewards remain subject to fixed caps. Given that sophisticated offenses such as market manipulation and accounting fraud are often difficult to detect without insider information, the existing limits fail to adequately compensate informants for the risks involved, thereby weakening reporting incentives.
The FSC will therefore abolish reward caps through amendments to the Enforcement Decrees under the Financial Investment Services and Capital Markets Act (FSCMA) and the External Audit Act. The revisions reaffirm the government’s commitment to ensuring that market manipulation and accounting fraud are detected without exception and subject to severe sanctions.
2. Rewards of Up to 30% of Recovered Gains or Penalties
The current reward formula is complex, making it difficult for potential whistleblowers to estimate in advance how much they may receive. In addition, the bracket-based structure has resulted in reward payments that are not commensurate with the amount of recovered illicit gains.
The revised framework will link payouts to the amount recovered, allowing rewards of up to 30% of illicit gains or penalties, calibrated to the whistleblower’s contribution.
To encourage reporting of smaller cases, minimum rewards will be introduced: KRW 5 million for unfair trading and KRW 3 million for accounting fraud. Even where no administrative fine is imposed, discretionary rewards of up to KRW 5 million for unfair trading and KRW 3 million for accounting fraud may be granted if the report is deemed to merit a reward.
The FSC will consider establishing a dedicated fund, potentially financed by penalties collected from offenders, to ensure stable funding and faster payouts.
3. Rewards Payable Regardless of Reporting Channel
Currently, rewards are available only for reports filed directly with the FSC, the Financial Supervisory Service, the Korea Exchange, or the Korean Institute of Certified Public Accountants. This creates unnecessary procedural barriers for potential whistleblowers.
Under the revised framework, reports submitted to other authorities - such as the National Police Agency or the Anti-Corruption and Civil Rights Commission – will also qualify for rewards if the report is subsequently shared or referred. The FSC plans to establish an inter-agency consultative mechanism to facilitate referrals and information sharing.
Expected Impact
The FSC expects the overhaul to reinforce its firm stance against market abuse that undermines fairness and trust in the capital markets. Stronger incentives will facilitate earlier detection and dispel the perception that offenders can reap windfalls if they evade detection. The FSC will also ensure that whistleblowers are fully protected from retaliation under applicable laws, including the Public Interest Whistleblower Protection Act.
Legislative Timeline
The FSC has proposed amendments to the enforcement decrees of the FSCMA and the External Audit Act, along with related reward rules. The proposal will be open for public comment from February 26 to April 7, with implementation expected as early as the second quarter of this year.
* Please refer to the attached PDF for details.