The Korea Stock Investment Association (Han Tu-yeon), a group of individual investors, operates buses with words such as’Abolition of short selling’ and’Dismantling of the Financial Services Commission’ to campaign against short selling in Sejongno, Seoul on the afternoon of the 1st. yunhap news
Financial authorities have found ten financial companies that have been selling illegally and imposed fines of hundreds of millions of dollars.
The Securities and Futures Committee under the Financial Services Commission held a regular meeting on the 24th and decided to impose a fine of 685 million won on 10 overseas financial companies that violate the ban on short selling without borrowing under the Capital Markets Act. The found financial companies were found to have sold unowned securities for 16 stocks in the process of trading domestic listed stocks from January 2018 to July 2019.
Short selling is an investment method that borrows and sells stocks that are expected to drop in stock prices, and then buys them back at a cheaper price when the stock price actually goes down to make a profit. In Korea, borrowing short selling by borrowing stocks with margin payment is allowed, but unborrowing short selling, which is first sold without borrowed stocks, is illegal.
According to a financial authority investigation, it was revealed that the found financial company deliberately submitted a non-borrowing short sale order and bought and settled the sold stock through an overtime mass sale method, knowing that it did not own the stock. The financial company is an overseas trading broker, and after making a short sale of the stock to compensate for the loss to the counterparty, the financial authorities and the Korean exchange were caught.
There have also been cases of illegal short selling due to neglect of balance management. The financial company was caught by selling its stocks and ordering them to sell again because it was mistaken for holding them because the stocks sold were not reflected in the balance. There was also a case of submitting a sell order for shareholders who participated in the capital increase due to the incorrect listing and stocking date of new stocks. Jeungseon Committee pointed out that “as a financial investment company, we have not fulfilled our obligations of caution, such as not checking the available quantity before submitting a sell order.
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. An official from the financial authorities said, “As penalties and penalties for illegal short selling have been introduced from April 6th, special attention is needed to prevent illegal acts.”
Jeonghyun Kim reporter [email protected]
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