First Public Disclosure of Illegal Short Selling Corporations... 'Five Foreign Firms Including Invesco and Credit Suisse'

[Asia Economy Reporter Lee Seon-ae] The Securities and Futures Commission under the Financial Services Commission has publicly disclosed the corporate names of five foreign financial investment companies for the first time for violating capital market unfair trade regulations such as illegal short selling. The Securities and Futures Commission decided to disclose the previously anonymized corporate names to enhance the effectiveness of sanctions.

On the 10th, the Securities and Futures Commission announced that at the regular meeting held on December 14 last year, it decided to impose fines of several tens of millions of won on five foreign securities firms.

This is the first time that the financial authorities have publicly disclosed the real names of corporations sanctioned for violations of naked short selling. Credit Suisse, MEAG Hong Kong, Bellevue Asset Management, Invesco Capital Management, and Lingohr & Partners Asset Management were subject to sanctions. Credit Suisse and four others were each fined 45 million won, while Invesco Capital Management was fined 75 million won.

Credit Suisse violated short selling restrictions in 2021 by selling 4,235 shares of GS Construction common stock that it did not own. It was found that they mistakenly submitted sell orders by pre-depositing shares to be received through exercising conversion rights on GS Construction overseas convertible bonds, misidentifying them as sellable shares.

Bellevue Asset Management sold 100 shares of Celltrion Healthcare common stock, Lingohr & Partners sold 114 shares of Huons common stock, Invesco Capital Management sold 24 shares of Bukwang Pharmaceutical common stock and 173 shares of HL Biotech common stock, and MEAG Hong Kong sold 106 shares of Celltrion Healthcare common stock, all without ownership.

Previously, the Financial Services Commission announced that it would disclose individuals or corporations violating capital market unfair trade practices such as illegal short selling. This applies without exception to foreigners. This real-name disclosure policy has been applied since the Securities and Futures Commission meeting held on December 14 last year, and the relevant resolution has been posted on the Financial Services Commission website.

Until now, the Securities and Futures Commission has disclosed violations such as short selling restrictions but anonymized the sanctioned parties. This measure was taken considering that detailed information about violators could be misused by third parties. However, as demands to enhance the effectiveness of sanctions against illegal short selling and other unfair capital market trades have increased recently, real-name disclosure was decided. The Financial Services Commission stated, "Disclosing the identities of those subject to sanctions for short selling regulation violations is expected to reduce illegal activities in the capital market."

However, the companies sanctioned this time only received fines rather than penalties because they violated regulations before the revision of the enforcement decree. A Financial Services Commission official explained, "Since the violations were due to minor errors such as simple notation mistakes rather than market manipulation, and the motives and results of the illegal acts were minor, relatively small fines were imposed."