South Korea Lifts Whistleblower Reward Caps in Crackdown on Market Manipulation & Accounting Fraud

Key Takeaways

• Reward Caps Eliminated: The FSC will abolish payout limits previously set at $2.08 million (KRW 3 billion) for unfair trading and $692,700 (KRW 1 billion) for accounting fraud.
• Up to 30 Percent of Recoveries: Whistleblowers will be eligible for rewards of up to 30 percent of recovered illicit gains or penalties, calibrated to their contribution.
• Minimum Payments Introduced: Minimum rewards of about $3,463 (KRW 5 million) for unfair trading and $2,078 (KRW 3 million) for accounting fraud will apply, with discretionary payouts possible even when no fine is imposed.
• Broader Reporting Eligibility: Whistleblowers will qualify for rewards regardless of which government agency first receives the report, removing prior procedural barriers.

Deep Dive

South Korea’s Financial Services Commission is preparing to dramatically expand financial incentives for whistleblowers, scrapping long-standing payout caps and tying rewards directly to the scale of illicit gains recovered in market manipulation and accounting fraud cases.

The move marks one of the most aggressive revisions to the country’s whistleblower framework in years and signals a clear intent to rely more heavily on insiders to surface complex financial misconduct.

For years, the reward system operated under strict ceilings. Payments were capped at roughly $2.08 million (KRW 3 billion) for unfair trading cases and about $692,700 (KRW 1 billion) for accounting fraud. Critics have argued that those limits were out of step with the size of modern enforcement cases and insufficient to offset the professional and personal risks faced by insiders.

That is now set to change.

No More Caps and Up to 30 Percent of Recoveries

Under proposed amendments to enforcement decrees under the Financial Investment Services and Capital Markets Act and the External Audit Act, the FSC will abolish all reward caps.

Instead, whistleblowers will be eligible for up to 30 percent of recovered illicit gains or penalties, with payouts calibrated to reflect the individual’s contribution to the case.

The Commission also acknowledged that the existing bracket-based formula has been overly complex, making it difficult for potential informants to estimate what they might receive. Linking rewards directly to recovered amounts is intended to create both clarity and proportionality.

In practical terms, a case involving billions of won in recovered gains would no longer run into an artificial ceiling.

Minimum Rewards and Discretionary Payments

To ensure smaller but meaningful cases are not ignored, the revised framework introduces minimum rewards.

Whistleblowers in unfair trading cases will be eligible for at least about $3,463 (KRW 5 million), while accounting fraud cases will carry a minimum of approximately $2,078 (KRW 3 million).

Even if no administrative fine is ultimately imposed, the FSC may still grant discretionary rewards of up to $3,463 (KRW 5 million) for unfair trading or $2,078 (KRW 3 million) for accounting fraud if the report is deemed worthy.

The regulator is also considering establishing a dedicated reward fund, potentially financed by penalties collected from offenders, to ensure stable funding and faster payouts.

Opening the Door to More Reporting Channels

Another significant shift removes a procedural barrier that has limited eligibility.

Currently, whistleblowers must report directly to specific bodies (including the FSC, the Financial Supervisory Service, the Korea Exchange, or the Korean Institute of Certified Public Accountants) to qualify for rewards.

Under the revised approach, reports submitted to other government agencies, such as the National Police Agency or the Anti-Corruption and Civil Rights Commission, will also qualify, provided the information is shared or referred. The FSC plans to establish an inter-agency consultative mechanism to facilitate referrals and coordination.

The change effectively broadens the gateway for eligibility and removes the risk that a technically misplaced report could disqualify a whistleblower from compensation.

A Signal on Market Integrity

The FSC said the overhaul is designed to reinforce its stance against market abuse that erodes fairness and trust in capital markets. Market manipulation and accounting fraud, particularly sophisticated schemes, often depend on insiders staying silent. The regulator is betting that stronger financial incentives, paired with protections under the Public Interest Whistleblower Protection Act, will shift that calculus.

The proposal will be open for public comment from February 26 through April 7, with implementation expected as early as the second quarter of 2026.

If adopted as planned, the reforms would represent a decisive pivot toward incentive-driven enforcement, one that puts a higher price on silence and a potentially much higher reward on speaking up.

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