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Photo = Financial Supervisory Service |
[Alpha Biz= Paul Lee] On Wednesday, the Financial Services Commission's Securities and Futures Commission announced the imposition of fines on one global IB for violating short selling regulations. This marks the conclusion of a 1-year and 4-month-long investigation and regulatory action against illegal short selling by global IBs.
The Financial Supervisory Service (FSS) focused its investigation from November 2023 on the top 14 global IBs involved in short selling transactions in Korea. It found violations by 13 of these firms. As a result, the Securities and Futures Commission imposed a total fine of 83.65 billion KRW. The short selling transactions of these 14 firms account for 90% of all foreign short selling.
The main causes of the violations by global IBs include inadequate management of independent trading units and improper practices such as arbitrary interpretation and application of stock borrowing contracts.
Some IBs mistakenly recognized the availability of stocks for borrowing as the saleable balance, leading them to submit sell orders without actually borrowing the stocks (naked short selling). The borrowing contracts were only finalized after the sell orders were submitted, based on the quantity needed for settlement. There were also cases where employees mistakenly entered incorrect stock quantities or tickers in the balance management system.
The Financial Services Commission expects continuous monitoring of short selling transactions, as an improved system will be implemented starting on the 31st, with many global IBs participating in the computerized system.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
