"Investigation Underway for Top 10 Companies"
Following the large-scale illegal short selling by global investment banks (IBs) such as BNP Paribas and HSBC detected last October, additional illegal short selling worth around 50 billion KRW by two global IBs has been uncovered.
On the 14th, the Financial Supervisory Service (FSS) announced that, following last year's detection of large-scale illegal short selling, it conducted a full investigation targeting the top global IBs in domestic short selling transactions and found violations of short selling regulations by two global IBs.
Company A submitted naked short selling orders for two stocks from March to June 2022. The company submitted sell orders based on an excessively reported balance due to duplicated borrowing records. It also submitted sell orders for stocks that were provided as collateral externally and thus restricted from disposal. As a result, a shortage of settlement quantity occurred the day after the trading, but the company repeatedly settled by borrowing afterward.
Company B submitted naked short selling orders for three stocks from January 2022 to April 2023. During the process of managing stock balances through inter-departmental lending and trading within the company, owned stocks were double-counted, and sell orders were submitted based on an overstated balance.
The FSS is expanding the investigation period and stock items, considering the possibility of repeated similar violations. While promptly initiating disciplinary procedures against these short selling regulation violations, the FSS plans to swiftly proceed with investigations on the remaining global IBs as well.
An FSS official explained, "Additional illegal short selling allegations may arise for companies currently under investigation."
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