Ban to Be Lifted on March 15 Next Year

Financial Services Commission Chairman Eun Sung-soo

The Financial Services Commission announced on Nov. 11 that it would lift its temporary short selling ban on March 15 next year as previously scheduled and that the expiration of the ban would be applied to every stock regardless of the market cap.

Earlier, the Financial Supervisory Service said last month that the ban should be maintained in the case of certain stocks as in Hong Kong. “Small-cap stocks that can be manipulated by a small number of investors need to be protected from short selling so that individual investors can be better protected,” it said at that time. The Financial Services Commission is opposed to this opinion and working on alternative protective measures, including individual investors’ more participation in short selling, market-making system improvement and stricter punishment on those committing illegal short selling such as naked short selling.

“We are considering applying criminal punishments and fines to illegal short sellers, one year or more in prison or a fine equivalent to 300 percent to 500 percent of illegal gains to be specific,” the commission explained, adding, “The stricter punishments are necessary to improve the order in the market and maximize the positive effect of short selling.” At present, illegal short selling is subject to a penalty of 100 million won or less.

The commission also said that the market-making system would be improved. “It is said that some securities companies conducted naked short selling even during the ban period,” it went on to say, continuing, “We are currently looking into market-making securities companies to find out whether it is true.”

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution