From the 6th of next month, a fine of up to 60 million KRW for failure to retain short-selling information

[Asia Economy Reporter Ji Yeon-jin] Starting from the 6th of next month, if a securities lending contract for the purpose of short selling is not concluded and the securities lending transaction information is not retained for 5 years, a fine of up to 60 million KRW will be imposed.

The Financial Services Commission announced on the 30th at the Cabinet meeting that the amendment to the Enforcement Decree of the Capital Markets Act, which includes punishment standards for illegal short selling, has been passed.

The amendment to the Enforcement Decree calculates the criteria for imposing fines on illegal short selling by comprehensively considering the short selling order amount and the repetitiveness of the violation, and the amount of fines is also calculated according to the imposition rate and weighting reduction standards specified in the Financial Services Commission's notice.

Also, when concluding a securities lending contract for the purpose of short selling, the contract date and time, counterparty, item, quantity, and other securities lending transaction information must be retained for 5 years, and a system that prevents tampering or alteration through information and communication processing devices must be established. Procedures and standards to prevent illegal access must be prepared and retained.

If violated, a fine of 60 million KRW will be imposed on corporations, and 30 million KRW on non-corporate entities.

If short selling of the relevant stock occurs from the day after the public announcement of a paid-in capital increase plan until the day the issue price is determined, participation in the paid-in capital increase will be restricted. Violations of this will result in a fine of up to 1.5 times the unfair profits, up to 500 million KRW.

However, exceptions will be recognized if, after the last short sale and before the issue price determination, the short selling quantity or more is purchased in the securities market or liquidity is supplied through market making for the purpose of not unfairly influencing the paid-in capital increase issue price through short selling.

The Financial Services Commission stated, "The temporary ban on short selling due to COVID-19 is scheduled to partially end on May 2, but the amended law will take effect from April 6," and added, "We ask investors and financial investment industry stakeholders to be careful not to violate the law due to confusion about the implementation timing."

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