[Edaily Marketin Reporter JI YEONG-EUI ] It has been confirmed that Directional, a securities lending platform company, and its CEO have been reported to the police on charges of unlawfully disclosing S&P Global’s paid, non-public securities lending data to the public. They are accused of violating the Trade Secrets Protection Act by processing non-public data—provided by S&P for internal testing purposes—into information such as stock-specific lending fee brackets and volume distributions, and then posting it on their website.

According to the investment banking (IB) industry on the 25th, Directional and its CEO, Lee Yoon-jeong, were reported to the police on the 28th of last month on charges of violating the Act on the Prevention of Unfair Competition and the Protection of Trade Secrets. The complaint reportedly stated that they had disclosed securities lending data—provided by IHS Markit (now S&P Global) for internal testing purposes—to the public.

In the past, Directional processed non-public data provided by S&P Global for internal testing (trial) purposes and posted it on its website. The disclosed data included the range and distribution of securities lending fee rates by stock, and the screen displayed the phrase “Powered by Markit” along with the logo to indicate the source.

The issue is that the data Directional disclosed without authorization consists of high-value, specialized financial information provided exclusively to S&P’s paying customers. Stock-specific borrowing fees and volume distributions are key indicators for gauging the supply and demand of borrowed shares and trading price levels. The unauthorized processing and publication of non-public data without a formal commercial contract constitutes a violation of another company’s intellectual property rights and trade secrets. Critics point out that Directional’s internal controls and compliance procedures—which should have verified authorization to use external data in advance—failed to function properly.

Evidence of Directional’s lax internal control management is also evident in its past promotional practices for institutional services. Evidence has also emerged that Directional promoted its institutional services for an extended period as if it had already been authorized to provide them—even before it was designated as an “innovative financial service” for institutional clients. Past login screens for institutional users displayed the phrases “Provides access to securities lending for over 100 institutional investors” and “Financial service provider licensed by the Financial Services Commission” side by side.

However, at that time, securities lending services for institutional investors were not included in the scope of Directional’s designation as an Innovative Financial Service. The Innovative Financial Service designation Directional received in 2019 was limited to individuals and general corporations, and services for institutional investors were not added until April 2025. Since the phrase “Financial Services Commission-licensed provider” was displayed on the institutional service screen, there is a high likelihood that institutional users would mistakenly believe that Directional had received authorization or approval from the Financial Services Commission for institutional securities lending as well. This raises questions about whether compliance procedures—which are intended to accurately reflect the scope of the Financial Services Commission’s designation in external promotional materials—were properly implemented.

With Directional receiving preliminary authorization on the 31st of last month to act as a securities lending broker for professional investors, the adequacy of the financial authorities’ review process has also come under scrutiny. It has been confirmed that the Financial Services Commission and the Financial Supervisory Service had received complaints and written opinions regarding the unauthorized disclosure of data and suspicions of unlicensed operations related to institutional services. Consequently, questions are being raised as to whether the financial authorities properly verified the adequacy of Directional’s internal controls during the preliminary authorization process.

Directional explained, “We were not aware that we had been accused. We recall that back in 2019, due to a lack of securities lending fee information in our retail service, we provided a range of fee rates (using S&P data).” They added, “After being contacted by Markit (S&P), we immediately removed the data, apologized, and resolved the matter.”

They further clarified, “We did not indicate that we were designated to provide services to institutional clients; rather, we simply informed users that Directional is an Innovative Financial Business Operator designated by the Financial Services Commission,” adding, “We provided the same explanation in response to previous complaints.”