If you are caught making an illegal short sale (non-borrowing short sale) starting on the 6th, you will be charged a fine up to 100% of the order amount.
The Financial Services Commission announced that the revised bill of the’Capital Markets and Financial Investment Business Act (Capital Markets Act)’, which reinforces penalties for short selling, will take effect from this day.
The enforcement of the amendment made it possible to impose criminal penalties and fines for illegal short selling, which had only been imposed fine for negligence.
For illegal short selling, a penalty may be imposed within the range of the order amount, and imprisonment for one year or more or a fine of 3 to 5 times the amount of unfair profit may be imposed.
It also included a ban on the participation of short-selling powers in the capital increase.
In the past, short selling forces were pulled down by short selling to listed companies that participated in a capital increase.
Since then, the price of issuance of new stocks has decreased due to a fall in stock prices, and then the company has participated in capital increase to repay the borrowed stocks to earn profits.
According to the amendment, those who short-sell shares from the day after the announcement of the plan for a capital increase to the date the issue price is determined are restricted from participating in the capital increase.
If you violate this, you will have to pay a penalty equivalent to 1.5 times the unfair profit.
In addition, when a loan contract for the purpose of short selling is concluded, information such as the date and time of the contract, counterparty, item, quantity, etc. must be stored through an information communication processing system that cannot be forged or altered.
In case of violating these obligations, a legal fine of 60 million won (non-corporate 30 million won) is imposed.
Meanwhile, the financial authorities will partially resume short selling for the KOSPI 200 and KOSDAQ 150 stocks from May 3, after finishing the final system improvement and preparation work.
The Financial Services Commission plans to test-operate an integrated lending system to expand individual short selling on the 20th.
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