Illegal Short Selling Fines Increased 4 to 6 Times... Lee Bok-hyun "Strict Response to Illegal Activities"

Institutional Investor Loan Repayment Period 90 Days
Must Be Repaid Within 12 Months

Chu Kyung-ho, floor leader of the People Power Party, is speaking at the 'Improvement of the Short Selling System for Market Order Establishment' bipartisan council held at the National Assembly on the 13th. Photo by Hyunmin Kim kimhyun81@

Fines for illegal short selling will be increased from 3 to 5 times the amount of unjust gains to 4 to 6 times. Additionally, the repayment period for institutional investors' securities lending will be changed to 90 days. The extension period will also be limited, requiring repayment within 12 months.

On the 13th, Lee Bok-hyun, Governor of the Financial Supervisory Service, after attending the 'Short Selling System Improvement for Market Order Establishment' civil-party-government council held at the National Assembly in Yeouido, stated, "Although criminal punishment is not applied for negligence in illegal short selling, if there is strong illegal intent, strict punishment will be enforced, and the illegally obtained gains will be recovered. This is the core of today's announcement."

Governor Lee added, "I hope there is no misunderstanding that short selling will be excessively punished," and emphasized, "It is important to note that we will still respond strictly to illegal activities."

Meanwhile, on the same day, the People Power Party held a civil-party-government council and unveiled measures to improve the short selling system, including the Illegal Short Selling Detection System (ISDS). Along with the previously announced ISDS system establishment, plans to enhance individual investors' access to short selling and strengthen criminal penalties were also announced.

The repayment period for institutional investors' securities lending (short selling) transactions will be shortened to 90 days, and the number of extensions will be limited. Accordingly, securities lending transactions must be repaid within 12 months. Furthermore, the collateral ratio will be unified at 105%. However, for KOSPI 200, the collateral ratio for individual investors will be lowered to 120%, improving conditions more favorable than those for institutional investors.

Finally, criminal penalties will also be strengthened. Currently, fines for illegal short selling are about 3 to 5 times the amount of unjust gains, but this will be increased to 4 to 6 times. If intentionality in illegal short selling is confirmed, imprisonment will be possible, and trading restrictions, account payment suspensions, and restrictions on executive appointments will be imposed.