Financial Services Commission to Promote Long-term Securities Lending Information Reporting Obligation for Short Selling

[Asia Economy Reporter Ji Yeon-jin] A plan is being promoted to report securities lending transactions exceeding 90 days to financial authorities for short selling. The government has decided to comprehensively reform capital market systems and practices to the level of advanced countries, including this measure.

On the afternoon of the 8th, Financial Services Commission Chairman Kim Ju-hyun reported to President Yoon Seok-yeol that they would comprehensively reform capital market systems and practices to the level of advanced countries, including these measures.

According to the FSC's work report, penalties for illegal short selling and related acts will be strengthened, mandatory reporting of securities lending transactions exceeding 90 days will be imposed, and institutional improvements such as expanding the designation of overheated short selling stocks will be implemented this year. Short selling is an investment technique where stocks are borrowed and sold, then later repurchased to return. Typically, the price of shorted stocks falls before repurchasing, and foreigners and institutions have no time limit. When financial authorities check reports on large holdings of short selling balances, they must request securities lending information to verify naked short selling.

Accordingly, the government plans to strengthen monitoring of securities lending information to utilize it when inspecting illegal short selling. The financial investment business regulations will be revised to mandate reporting to financial authorities if stocks borrowed for short selling exceed 90 days, using this as a clue to detect suspicious unfair trading such as market manipulation.

Additionally, listing reviews for subsidiaries separated physically will be strengthened, and shareholder protection measures such as granting stock purchase rights to shareholders opposing splits will be established. Furthermore, major shareholders and executives of listed companies will be required to disclose disposal plans in advance when selling stocks, penalties for unfair trading will be introduced, and legislation to restrict securities trading will be pursued. Chairman Kim Ju-hyun emphasized, "We will resolve Korea discount factors by enhancing international consistency in investment-related procedures and disclosures," and added, "To promote competition and increase efficiency in the capital market, we will allow the establishment of alternative trading platforms."