Decision to Impose Fines After Comprehensive Investigation
"Uncertainty Over Short Selling Regulations Resolved"
The financial authorities conducted a comprehensive investigation into illegal short selling by global investment banks (IBs) and imposed a total fine of 83.65 billion KRW on 13 institutions.
The Securities and Futures Commission under the Financial Services Commission announced on the 12th that, following the decision to impose fines on one global IB that violated short selling regulations, the comprehensive investigation and sanctions on illegal short selling by global IBs, which lasted about 1 year and 4 months, have concluded.
The Financial Supervisory Service investigated 14 top global IBs in domestic short selling transactions from November 2023 to determine violations of short selling regulations, uncovering regulatory violations in 13 of them.
The Securities and Futures Commission, which took over the case, has imposed fines reaching several tens of billions of KRW on these institutions.
According to the financial authorities, violations of short selling regulations by global IBs were mainly due to inadequate operation of independent trading units or arbitrary interpretation and application of stock borrowing contracts.
Some IBs submitted sell orders recognizing stocks as available for sale even though only the possibility of borrowing the stocks was confirmed (naked short selling), and some placed sell orders before the return of loaned stocks was finalized.
The Financial Services Commission expects that from the 31st, with the implementation of improvements to the short selling system including the establishment of computerized systems and the participation of many global IBs in computerization, continuous monitoring of short selling transactions will be conducted.
The Financial Services Commission stated, "The risk of recurrence of short selling regulation violations has significantly decreased," and added, "Uncertainty related to short selling regulations has been resolved, which will also enhance foreign investors' accessibility to the Korean market."
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