217 Stocks, 330 Cases of Illegal Short Selling... "Foreigners Excluded from Surveillance"

On the 7th, officials from the Citizens' Coalition for Economic Justice in Jongno-gu, Seoul, held a press conference urging the Financial Services Commission to disclose information on illegal short selling and calling for improvements to the short selling system and regulations. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Ji Yeon-jin] From 2012 to 2019, there were 330 cases of illegal short selling, and 11,885,644 shares across 217 stocks were used for naked short selling.

The Citizens' Coalition for Economic Justice (CCEJ) held a press conference on the morning of the 7th at the CCEJ auditorium and announced that this was revealed through partial disclosure of information requested from the Financial Services Commission (FSC) regarding damages caused by illegal short selling. Additionally, among 115 financial companies caught for illegal short selling by the FSC from 2010 to February this year, 108 (94%) were foreign firms. The CCEJ pointed out, "Selling stocks without borrowing them, that is, naked short selling, is clearly illegal under current law. However, in our stock market, as long as unsettled incidents do not occur and the financial authorities do not catch them, naked short selling by foreigners is an open secret."

The CCEJ criticized that although the government established a ‘Securities Lending Contract Confirmation System’ when partially resuming short selling on the 3rd of last month, it only allows simple storage and inquiry of lending contracts, and foreigners are excluded from monitoring. Considering that 94% of illegal short selling detected by financial authorities over the past 12 years involved foreigners, the CCEJ said this is merely a hollow ‘fake improvement plan.’ They further criticized, "The short selling system and framework provide excessive short selling privileges to capital-free speculative forces, which discriminates against genuine shareholders who make long-term investments or capital contributions."

According to the FSC, the proportion of foreign short selling during the one month after the resumption of short selling was 84.7%, which is 21.8 percentage points higher than in 2019 before short selling was banned due to COVID-19. This was due to a 22.4% decrease in short selling transactions by domestic institutional investors. The CCEJ demands a ban on securities lending for short selling by the National Pension Service, similar to Japan and the Netherlands, and plans to file an administrative lawsuit requesting disclosure of financial institutions caught for illegal short selling and the affected stocks.

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