Illicit stock short selling subject to tougher penalties starting April

[Photo by Financial Services Commission]

Illicit short sale in South Korea would be subject to entire seizure of the profit and purchase of new issues after short selling could cost maximum penalty of 500 million won ($465,704) in South Korea from April.

The Financial Services Commission (FSC) made public of the notice of amendments to the short sale regulation in the capital market act after the practice becomes normalized in March after a year-long ban.

The announcement came after the revision was passed at the National Assembly¡¯s plenary session on Dec.9.

Under the revised law, investors who illegally sell stocks short will fined to the value of the short order.

The authorities will confiscate the ill-gotten gains, and violators could also face a jail time of one or more years or penalties of more than three to five times the amount of the profit.

Investors who participate in new share issuance after selling stocks short will be subject to a penalty of up to 500 million won ($465,704) or 150 percent of illicit gains.

If investors sell stocks short from the day when the company discloses its plan on new stock offering to the final pricing day, they will be banned from joining the offering.

Investors who sign borrowing agreements for short sale must keep the contract details for five years. They must hand in the information such as stocks sold short, transaction volume, borrowing duration and fees to the authorities at their request. Investors who fail to submit the information will be fined up to 100 million won. The penalty for companies is capped at 60 million won and for individuals at 30 million won.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]