Kim Byung-wook, "To Prevent Illegal Short Selling, 'Prevention, Surveillance, and Strengthened Post-Penalties' Must Be in Place"

[Asia Economy Reporter Oh Ju-yeon] Ahead of the ban on short selling ending in March, a closed-door party-government meeting was held on the 29th at the National Assembly between Eun Seong-su, Chairman of the Financial Services Commission, and members of the Democratic Party belonging to the National Assembly's Political Affairs Committee. During this meeting, Democratic Party lawmaker Kim Byung-wook released a press statement titled 'Fact Check on the Short Selling Electronic System' and provided additional explanations regarding illegal (naked) short selling.

Kim Byung-wook, chairman of the Democratic Party's Capital Market Special Committee and secretary of the National Assembly's Political Affairs Committee, stated that to prevent naked short selling, a three-pronged approach of prior prevention, real-time monitoring (surveillance), and strengthened post-penalties must be established.

[Image source=Yonhap News]

Kim explained that these measures are included in the proposed amendments to the Capital Market Act and its enforcement decree.

First, Kim said, "To block naked short selling in advance, an obligation has been imposed to record and retain securities lending transaction information, which serves as the basis for borrowing, and to immediately submit it to financial authorities." He explained that the principle is to conclude securities lending contracts through an electronic information processing device (electronic system) that records and retains securities lending transaction information (such as the securities lending item and quantity, contract date and time, settlement date and time, counterparty, lending period, and fee rate) immediately upon contract conclusion, thereby establishing institutional safeguards for prior prevention.

He also conveyed that a real-time short selling monitoring system by stock item has been established, and a special inspection team for illegal short selling has been newly created to enable real-time surveillance and supervision of short selling.

Kim mentioned, "Along with this, the existing penalty provisions for illegal short selling, which were only fines, have been strengthened by introducing 'penalties within the amount of short selling orders' and 'imprisonment of one year or more or fines of three to five times the amount of unjust gains'."

Kim stated, "Until now, the short selling market in Korea's stock market has been called a tilted playing field, and individual investors' dissatisfaction has been significant." However, he added, "Since we are currently checking whether the systems prepared so far can be properly implemented in the market and whether the supporting systems are well established, there should be no spreading of misinformation based solely on past practices that would cause market instability."

This content was produced with the assistance of AI translation services.