Punishment for Illegal Short Selling Likely to Be Strengthened
In its work report to the Presidential Transition Committee on March 29, the Ministry of Justice said it would establish a monitoring system to eradicate illegal naked short selling, introduce stricter punishments on illegal short sellers, and make capital market regulations more practical and effective.
“The illegal short selling monitoring and cooperative investigation system will be run by the prosecution, the Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange,” the committee explained.
The establishment of the system is what the Financial Services Commission gave up halfway last year. “The system is technically possible, but the cost is astronomical,” former FSC Chairman Eun Sung-soo said in February last year, adding, “Simultaneous and excessive information input may lead to system overload and trading delay.”
The Presidential Transition Committee is also planning to beef up criminal punishment of illegal short selling by enforcing the Financial Investment Services and Capital Markets Act more thoroughly. According to the act revised in late 2020, the minimum and maximum prison sentences in the case of illegal short selling are one year and 50 years, respectively.