The amendment to the Act on Capital Market and Financial Investment Business, which includes measures such as blocking naked short selling, unifying trading conditions for individual and institutional investors, and strengthening penalties for illegal short selling, passed the National Assembly plenary session on the 26th.
The amendment establishes a short selling electronic system to fundamentally block naked short selling and applies the same repayment period restrictions to institutions when entering securities lending contracts for short selling as those applied to individuals. This reflects concerns that institutional investors previously had no restrictions on the repayment period in securities lending transactions, unlike individual investors.
Additionally, the amendment provides grounds to impose restrictions (up to 5 years) on financial investment product trading and appointment as executives of listed companies for those who engage in illegal short selling or unfair trading practices, and allows measures such as account payment suspension.
It also stipulates that imprisonment penalties for illegal short selling will be increased according to the amount of unjust profits, and fines for illegal short selling and unfair practices will be raised from 3 to 5 times to 4 to 5 times the amount of unjust profits.
The financial authorities completely banned short selling from November last year after detecting large-scale naked short selling by global investment banks (IBs). The government plans to resume short selling from March 31 next year after establishing the short selling electronic system.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
