South Korea has decided to impose a total fine of 26.5 billion won ($20.4 million) on two global investment banks and a local unit of an international company for involvement in naked short selling.
The mentioned amount of financial impact is the largest in the history of an Asian country. In this case, it implies a comparison with other fines, the decision which was made by South Korean regulators against the background of actions related to the category of illegal practices.
The Securities and Futures Commission, which operates under the Financial Services Commission (FSC), said on Monday, December 25, that the violations committed by global banks and the unit of an international company were serious and damaged market order and trust on the part of the investor community. The regulator also noted that naked short-selling transactions by three parties, which lasted for several months, were characterized as intentional.
Separately, the FSC announced its intention to apply to the prosecutor’s office with a request to investigate two international investment banks.
The regulator did not disclose information about the names of financial institutions and the local unit of an international company that were found to be involved in illegal practices. Officials said the relevant data would be available to the public in two months. It is worth noting that last week the media published information according to which South Korea is seeking at least 10 billion won from BNP Paribas and HSBC Holdings in the form of combined fines for naked short selling. In this case, it means selling shares without first borrowing them. In South Korea, the current legislative framework in sphere finance qualifies such actions as illegal practices.
Currently, the authorities of the Asian country are making efforts to oust illegal short-sellers from the local stock market. The decision to fine global investment financial institutions and the unit of an international company is a measure within the framework of the specified strategy.
In November, the South Korean authorities announced their intention to establish a complete ban on short sales by the end of June next year. At that time, information was also made public about the active involvement of global investment lenders in illegal naked short sales.
Also this year, the FSC imposed a cumulative fine of 2 billion won on three unnamed global hedge funds. The reason for this decision was violations of the legislation on capital markets, manifested in the form of illegal short sales and unfair transactions.
Back this year in South Korea, a fine of 3.9 billion won was imposed on Erste Asset Management, which became one of the first companies to face heavy fines due to the legal regulation of capital markets.
As we have reported earlier, South Korea Fines Google $32 Million.