South Korea’s stock market regulatory authority announced on Sunday that it had identified two Hong Kong-based investment banks involved in naked short-selling, and it is anticipated that they will face record fines.
According to the statement from the Financial Supervisory Service (FSS), the two unnamed investment banks conducted naked short-selling transactions, amounting to a total of 40 billion won ($29.58 million) and 16 billion won, respectively.
Naked short selling of stocks, a practice in which an investor short sells shares without securing them or verifying their availability for borrowing, is prohibited under South Korea’s Capital Markets Act.
These violations by the global banks occurred over extended periods, spanning nine months through May 2022 and five months through December 2021, and are expected to result in substantial fines, as indicated by the FSS.
The FSS emphasized the need to prevent the recurrence of such violations, which run counter to the government’s efforts to create a more attractive environment for foreign investors. Furthermore, the authority stated its intention to examine the practices of other similar investment banks.