South Korea fines two global banks for short-selling rule breaches

SEOUL (Reuters) – South Korea’s financial regulator said on Friday that it would fine two unnamed global investment banks and one local brokerage a record 26.5 billion won ($20.41 million) in total for naked short selling.

Naked short selling of stocks – in which an investor short sells shares without first borrowing them or determining they can be borrowed – is banned by the Capital Markets Act in South Korea.

The Financial Services Commission (FSC) said in a statement that the violations were serious enough to harm trust of investors and capital market rules, so it had decided to impose “record-level” penalties.

The FSC said it would report the cases involving these banks to prosecutors.

Bloomberg News reported earlier that the watchdog had recommended imposing a fine of at least $7.67 million each on HSBC Holdings and BNP Paribas for naked short selling, citing two people familiar with the matter.

HSBC and BNP Paribas did not respond to Reuters’ requests for comment.

Last month, South Korea re-imposed a full ban on short-selling until the end of June 2024 to create a “level playing field” for retail and institutional investors.

($1 = 1,298.1700 won)

(Reporting by Ju-min Park; Editing by Susan Fenton)