'BNP Paribas and HSBC Hong Kong Branch Accused of Hundreds of Billions Illegal Short Selling'

Global investment banks (IB) BNP Paribas and HSBC, caught conducting illegal short selling worth hundreds of billions of won in the domestic stock market, have been reported to the prosecution.

[Image source=Reuters Yonhap News]

According to the legal community on the 4th, lawyers Kim Cheol of Lee Kang Law Firm and Park Sang-heum of Our Law Firm filed complaints with the Seoul Southern District Prosecutors' Office the day before against BNP Paribas and HSBC's Hong Kong branches for violating the Capital Markets and Financial Investment Business Act.

In the complaint, they claimed, "The amount of illegal naked short selling by the accused is in the hundreds of billions of won, which undermines the legislative intent of the Capital Markets Act and fundamentally infringes on the fairness of the capital market." They added, "We request the prompt assignment of the case to the Securities and Financial Crime Joint Investigation Unit and swift acquisition and analysis of materials through cooperation with the Financial Supervisory Service and criminal judicial cooperation with Hong Kong authorities."

Earlier, the Financial Supervisory Service identified that BNP Paribas' Hong Kong branch conducted naked short selling worth 40 billion won on 101 stocks, including Kakao, from September 2021 to May last year. It also uncovered that Hong Kong HSBC engaged in naked short selling worth approximately 16 billion won on nine stocks, including Hotel Shilla, from August to December 2021. Naked short selling refers to short selling without borrowing the stocks in advance.

Article 180 of the Capital Markets Act prohibits all short selling except for borrowed short selling.