[Exclusive] Han투 Securities Short Selling Violation Fine of 1 Billion KRW... Largest Amount Among Domestic Securities Firms

12 Years of Domestic Institutional Short Selling Fines Totaling 1.2 Billion KRW
Hantoo Securities Violated Short Selling Restriction Rules

20% Fine Reduction Applied, Paid 800 Million KRW
FSS: "Failed to Display Short Selling on Hundreds of Stocks"

[Asia Economy Reporter Ji Yeon-jin] It was later confirmed that Korea Investment & Securities was fined 1 billion KRW for violating short-selling regulations. Although the Financial Supervisory Service (FSS) publicly discloses sanctions against financial institutions on its website, this sanction was omitted.

According to financial authorities on the 26th, Korea Investment & Securities was fined 1 billion KRW on February 9 by the Securities and Futures Commission for violating Article 180, Paragraph 1 of the Capital Markets Act, which contains short-selling restrictions. This fine is the largest since Goldman Sachs International was fined 7.548 billion KRW in 2018 for naked short selling, and it is the second largest fine Korea Investment & Securities has paid in the past five years, following the 2.92 billion KRW fine for incomplete sales related to Popfunding in April.

According to data received by Rep. Lee Jung-moon of the Democratic Party from the FSS, there have been eight cases of domestic institutional investors sanctioned for short-selling violations since 2010, with a total fine of 120 million KRW. The current fine imposed on Korea Investment & Securities far exceeds the total fines previously imposed on domestic institutions.

An FSS official explained, "In the process of borrowed short selling, it should have been marked as short selling, but it was simply marked as a sale. It was not naked short selling but a simple mistake; however, because the regulation was violated over a long period for hundreds of stocks, a large fine was imposed."

The relevant provision states, "No one shall engage in short selling or commission or accept such orders for listed securities in the securities market," prohibiting naked short selling without borrowing stocks and short selling not permitted by the enforcement decree. Article 208 of the enforcement decree requires investors who commission the sale of securities to notify the brokerage whether the sale is a short sale, which was violated in this case.

This information was disclosed in the first-quarter report of Korea Financial Group, the parent company of Korea Investment & Securities, and Korea Investment & Securities stated that it received a 20% reduction on the 1 billion KRW fine and paid 800 million KRW.

Since 2002, the FSS has publicly disclosed sanctions against financial institutions and their executives on its website for five years to enhance the effectiveness of sanctions. This month, five cases were posted, including Shinhan Bank, which was fined 5.71 billion KRW for the Lime Fund scandal, and Korea Development Bank, which was sanctioned for providing financial transaction information to the National Tax Service and courts without notifying the account holders upon their request. Korea Investment & Securities’ sanction related to the incomplete sales of Popfunding was posted in April. An FSS official said, "In the case of short selling, many violators are foreigners, so it was not disclosed."

As individual investors have increased in the domestic stock market, demands for disclosure of illegal short-selling information have surged. The Citizens’ Coalition for Economic Justice (CCEJ) filed an information disclosure request with the Financial Services Commission (FSC) to release the list of stocks affected by illegal short selling, but when the FSC refused, they filed a lawsuit at the Seoul Administrative Court to cancel the refusal. However, the FSC has not disclosed such information, citing that publicizing illegal short selling violates the confidentiality clause of the Financial Real Name Act.

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