Toughens Punishment for Naked Shorting
The Financial Supervisory Service is expanding its measures against illegal short selling. It recently set up a task force and initiated inspections at securities companies to that end.
The first inspection targets are foreign securities companies, where the frequency of short selling targeting South Korean stocks has been particularly high and yet punishment has been mild. The most severe punishment ever is the 7.5 billion won fine imposed on Goldman Sachs Seoul in May 2018 for a naked short selling of no less than 40.1 billion won.
Such a slap on the wrist is unlikely to be repeated as the Financial Supervisory Service is expanding its monitoring while raising its levels of punishment. It is also looking into Korea Investment & Securities, which faced a fine of one billion won early this year for short selling rule violation. On-site inspections are likely to be conducted soon at Korea Investment & Securities and other domestic securities companies that violated the same rules at least once, including Meritz, Shinhan and KB.
The Financial Supervisory Service also introduced a fast track so that cases that require investigations and may be subject to criminal punishment can be sent directly to the prosecution without passing through the Korea Exchange, the Securities and Futures Commission and the Financial Services Commission.