Financial watchdog hits 6 firms with $2.7M in fines for illegal short selling

Korea’s financial watchdog has imposed nearly 4 billion won in fines on six local and foreign financial firms for illegal short selling, the largest single batch of penalties since the practice resumed last year.

The headquarters of the Financial Services Commission in the government complex in Jongno District, central Seoul [NEWS1]

Korea’s financial watchdog has imposed nearly 4 billion won ($2.7 million) in fines on six local and foreign financial firms for illegal short selling, the largest single batch of penalties since the practice resumed last year.

The Financial Services Commission’s Securities and Futures Commission approved fines totaling 39.7 billion won against one domestic asset manager and five foreign financial companies, according to financial authorities on Monday.

Although the commission decided on the sanctions on Oct. 15 last year, the penalties only became public last month after authorities completed procedures to disclose which firms were involved.

Since short selling resumed in March of last year, regulators had previously imposed only small fines worth tens of millions of won, making this the first case in which penalties of tens of billions of won were handed down at once.

Shinhan Asset Management was sanctioned with a fine of 370 million won for naked short selling after regulators found it placed sell orders for 5,000 shares of EV battery materials firm EcoPro in March 2023, valued at about 1.85 billion won, without holding the shares.

Norwegian brokerage Pareto Securities received the heaviest penalty among foreign firms. Regulators determined that the company placed sell orders for 178,879 shares of Samsung Electronics common stock on Nov. 23, 2022, worth about 10.9 billion won, without owning the shares. Authorities imposed a fine of 2.26 billion won.

Other firms fined included Canada’s Alberta Investment Management Corporation, which received a 546.9 million won penalty, and U.S.-based Invesco Capital Management, fined 532.3 million won. Northern Trust Company of Hong Kong was fined 141.7 million won, while Singaporean sovereign wealth fund GIC Private Limited received a penalty of 120.6 million won.

Korea’s financial authorities previously fined 13 global investment banks a combined 83.6 billion won following a comprehensive investigation into illegal short selling conducted between November 2023 and March of last year.

Since the resumption of short selling, regulators have operated a real-time naked short-selling detection system to monitor transactions on an ongoing basis.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom. BY KIM DA-YOUNG [kim.juyeon2@joongang.co.kr]