Cases of intentional violations of the purpose of loss compensation
Ten overseas securities firms were imposed a total fine of 685 million won for violating the ban on short selling without borrowing.
The Securities and Futures Committee under the Financial Services Commission held a regular meeting on the 24th and decided to impose such a fine.
Short selling is an investment technique that realizes profit by borrowing and selling stocks when a stock price is expected to decline, and then buying and repaying stocks when the stock price goes down.
It is illegal to sell the stock without borrowing it beforehand.
According to the Jeungsun Committee, it was found that these securities companies sold securities they did not hold in the process of trading domestic listed stocks from January 2018 to July 2019.
The target of this measure also included cases in which, despite knowing that they do not own the stock, they intentionally submitted a non-borrowing short sale order and bought and settled the sold stock through an overtime mass sale method.
A brokerage company did not accidentally fulfill a customer’s order to buy shares, so when the customer lost money, they sold the shares they didn’t own so that the customer could buy them.
However, since this brokerage company sold unborrowed shorts to compensate for customer losses, it suffered losses through the short selling itself.
In addition, cases where the sold stocks were not reflected in the balance and were misrepresented as being held, and a sell order (secondary sale) was made again, a sell order was made by mistaking the listing and stocking date of new stocks with a rights offering, and mistaking the ownership of stocks. Examples were included.
The Jeung Seon Committee explained, “It was determined that there was a’significant violation’ for submitting an order without fulfilling its duty of care as a financial company and imposed a fine.”
The financial authorities plan to shorten the inspection cycle for non-borrowing short sales from 6 months to 1 month, and take prompt action in cases that are caught.
The investigation into the violation of the domestic market maker (securities company) short selling law is also planned to be completed in next month.
The financial authorities also emphasized that from April 6th, penalties and penalties for illegal short selling will be introduced, and the storage of loan transaction information for short selling purposes will be mandatory.
[표] Measures taken as a result of the survey on non-borrowing short sale (unit: million won)
┌───┬───────┬────┬──────┬──────┬──────┐
│ Company │ Violation period (month) │ Violation │ Violation amount │ Profit and loss │ Penalty │
│ │ │Item (piece)│ │ │ │
├—-┼——–┼—-┼——┼——┼——┤
│ 1 │ January 2018 │ 3 │ 15 │ 3 │ 97 │
│ │ ~June 2018 │ │ │ │ │
├—-┼——–┼—-┼——┼——┼——┤
│ 2 │ August 2018 │ 1 │ 1,800 │ 290 │ 48 │
├—-┼——–┼—-┼——┼——┼——┤
│ 3 │ April 2019 │ 1 │ 1.25 │ △41 (loss) │ 48 │
├—-┼——–┼—-┼——┼——┼——┤
│ 4 │ May 2019 │ 1 │ 93 │ 9 │ 36 │
├—-┼——–┼—-┼——┼——┼——┤
│ 5 │ May 2019 │ 1 │ 141 │ △4 (loss) │ 60 │
├—-┼——–┼—-┼——┼——┼——┤
│ 6 │ May 2019 │ 1 │ 1,266 │ △80 (loss) │ 72 │
├—-┼——–┼—-┼——┼——┼——┤
│ 7 │ May 2019 │ 4 │ 61 │ △2 (loss) │ 180 │
│ │ ~2019.September │ │ │ │ │
├—-┼——–┼—-┼——┼——┼——┤
│ 8 │ July 2019 │ 1 │ 52 │-│ 36 │
├—-┼——–┼—-┼——┼——┼——┤
│ 9 │ July 2019 │ 1 │ 1,333 │-│ 36 │
├—-┼——–┼—-┼——┼——┼——┤
│ 10 │ July 2019 │ 2 │ 763 │-│ 72 │
└───┴───────┴────┴──────┴──────┴──────┘
/yunhap news