Lee Bok-hyun, Financial Supervisory Service Chief: "Comprehensive Investigation of 10 Global IBs... Zero Tolerance for Illegal Short Selling"

Domestic Custody Securities Firms Also Scheduled for Investigation on Operational Issues

Financial Supervisory Service Governor Lee Bok-hyun announced on the 5th at the Government Seoul Office after concluding the temporary Financial Services Commission meeting that a special short-selling investigation team will be launched.
[Image source=Yonhap News]

On the 5th, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), stated at a joint briefing on the 'Complete Ban on Short Selling' held at the Government Seoul Office that “the special investigation team of the FSS, which will be launched on the 6th, plans to conduct a full-scale investigation on about 10 global investment banks (IBs) that account for a significant portion of short selling transactions.” He added, “We will strictly punish illegal short selling by applying a zero-tolerance policy, including maximum fines and criminal penalties.” He also explained that they will encourage global IBs to improve their internal systems to prevent the recurrence of naked short selling.

The FSS will launch a special short selling investigation team with 20 personnel starting from the 6th, aiming to conduct a full investigation into illegal short selling by global IBs.

Governor Lee said, “To restore market confidence, it is necessary to conduct a full investigation of global IBs, strictly punish violations, and implement institutional improvements to fundamentally prevent naked short selling.” He explained, “Recently, two global IBs were caught engaging in intentional naked short selling, confirming the illegal activities of global IBs that had long been suspected in the market, which is a very serious matter.” He continued, “The global IBs caught this time neglected systems that allowed naked short selling for a long period and interfered with fair price formation,” adding, “This has further heightened suspicions that illegal short selling is widespread.”

The FSS is currently conducting investigations on some global IBs. The special investigation team plans to conduct a full investigation on about 10 global IBs that account for a significant portion of short selling transactions.

Governor Lee stated, “We will strictly punish illegal short selling by applying a zero-tolerance policy, including maximum fines and criminal penalties,” and also mentioned that they plan to investigate domestic securities firms that accept short selling orders to check for compliance with laws and regulations and operational issues.

Governor Lee added, “We will encourage global IBs to improve their internal systems to ensure that naked short selling never occurs again,” and “Investigations into illegal short selling will continue even during the short selling ban period, and we will closely monitor unfair trading practices such as market manipulation that may arise due to the ban in cooperation with the stock exchange.”

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