Citi Fine of 4.7 Billion KRW
Reduced from the 90 Billion KRW Fine Proposed by the FSC
The Securities and Futures Commission (SFC) imposed fines of 13.67 billion KRW and 4.72 billion KRW on global investment banks Barclays and Citi, respectively, for allegations of naked short selling. This is a significant reduction from the total fine of 90 billion KRW initially proposed by the Financial Supervisory Service (FSS).
On the 18th, the SFC, under the Financial Services Commission, held a regular meeting and finalized these sanctions. The principle is to borrow stocks before short selling, but naked short selling, which involves borrowing stocks after the fact ('post-borrowing'), is prohibited.
Previously, the FSS finalized a sanction plan imposing fines of 70 billion KRW and 20 billion KRW on Barclays and Citi, respectively, for large-scale naked short selling and forwarded it to the SFC. The suspected illegal short selling transaction amounts were reported to be around 100 billion KRW for Barclays and 50 billion KRW for Citi.
In particular, while the FSS insisted on imposing the largest fine ever on Barclays, the SFC significantly adjusted the fine considering the lack of intent and Barclays' efforts to prevent illegal short selling on its own.
The financial authorities plan to complete the ongoing comprehensive investigation into illegal short selling within this year and prepare for the resumption of short selling by the first quarter of next year.
Meanwhile, the Financial Services Commission has consecutively lost lawsuits filed by foreign financial firms such as ESK Asset Management and Kepler Cheuvreux, global IBs, who contested the fine decisions.
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