Lee Bok-hyun, Financial Supervisory Service Chief: "Investigating Naked Short Selling... Market Oversight Is the Financial Authorities' Duty"

Financial Supervisory Service Governor Lee Bok-hyun is taking a commemorative photo with attendees at the Big Tech and Fintech Industry Meeting held on the 30th at Prot One in Mapo-gu, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporters Ji Yeon-jin and Lee Min-woo] Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), stated on the 30th, "We have already been conducting extensive investigations in cooperation with the Korea Exchange regarding naked short selling."

After a meeting with the fintech industry held at Prot One in Mapo-gu, Seoul, on the morning of the same day, Governor Lee told reporters, "We are also focusing on investigating unfair trading practices that disrupt the market combined with short selling."

Earlier, the FSS reportedly began a special inspection of Morgan Stanley on the 22nd. Morgan Stanley is known to have the largest volume of short selling in the domestic stock market, and the FSS plans to conduct a special inspection of Merrill Lynch as well. Short selling is an investment technique where stocks are borrowed and sold in anticipation of a price decline, then repurchased to return the borrowed shares. Naked short selling, where stocks are sold without borrowing, is illegal and subject to penalties.

Governor Lee said, "If certain players hold too large a portion in a specific market, there is a general question about whether that market operates efficiently. If there is no market distortion after inspection, that itself can be explained, but it is the supervisory authority’s duty to examine markets where concerns exist."

He added, "For example, unless there is special insider information, predictions in a market may be similar, and other institutions, individuals, or corporations may want to participate in the short selling market together. However, if it is concentrated in specific institutions, there is also a need to look at improving the market system related to why fair opportunities are not given to others or to expand participation opportunities efficiently."

He continued, "There are various concerns in the market that some achieve excess profits by taking short positions in certain assets while managing portfolios in other ways in different asset management areas, so we have an obligation to inspect such matters."