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South Korea’s financial watchdog has announced its intention to impose hefty fines on two Hong Kong-based investment banks. The investment is for their involvement in naked short-selling. This illicit activity is expected to lead to record penalties.
Naked Short-Selling Violations Unveiled
According to the Financial Supervisory Service (FSS), the two unnamed investment banks executed naked short-selling transactions. With one totaling 40 billion won ($29.58 million) and the other 16 billion won. Naked short selling, a practice where investors sell shares without proper borrowing or assurance of borrowability, is explicitly prohibited by South Korea’s Capital Markets Act.
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Extended Periods of Misconduct
These violations occurred over extended periods, with one bank engaging in such activities for nine months through May 2022, while the other did so for five months through December 2021. As a result, the FSS anticipates that the fines imposed on the banks will reach unprecedented levels.
Crucial Measures to Prevent Recurrence
The FSS emphasized the significance of preventing the recurrence of such violations, particularly as they run counter to the South Korean authorities’ efforts to create a more welcoming environment for foreign investors. The watchdog has also pledged to scrutinize the practices of other investment banks exhibiting similar behavior.
This regulatory action underscores South Korea’s commitment to maintaining the integrity of its financial markets and ensuring a level playing field for all investors.
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Disclaimer: Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
