Unprofitable Choice
The Securities and Futures Commission of the Financial Services Commission imposed a pecuniary penalty of 6.05 billion won (US$4.58 million) on two securities companies that committed naked short selling.
The Financial Investment Services and Capital Markets Act of South Korea was revised in April 2021 so that illegal short sellers will face pecuniary penalties instead of fines. The two companies have become the first such case. At present, naked short selling is illegal in South Korea, unlike covered short selling.
Previously, illegal short selling in the South Korean stock market was detected infrequently and violators could go almost unpunished. This is because the maximum fine according to the act before the revision was 100 million won (US$75,694).
According to the amended act, the maximum pecuniary penalty is equal to the amount of illegal short selling. In addition, violation may lead to at least one year in prison or a fine equivalent to 300 to 500 percent of the illegal profit or avoided loss.