Rep. Yoon Hanhong Proposes Amendment to Capital Markets Act to Improve Short Selling System

The First Bill of the 22nd National Assembly: Strengthening Penalties and Sanctions for Illegal Short Selling

On the 5th, Yoon Han-hong, Chairman of the National Assembly’s Political Affairs Committee, proposed the first bill of the 22nd National Assembly, which is a partial amendment to the “Capital Markets and Financial Investment Business Act” (hereinafter referred to as the Capital Markets Act), aiming to significantly improve the short selling system that has long been criticized as a “tilted playing field.”

Yoon Hanhong Congressmember.

The short selling system has been criticized for being unfair due to differences in transaction conditions between institutional/foreign investors and individual investors in terms of repayment periods and collateral ratios, as well as for the lenient penalties imposed for illegal short selling. Furthermore, with numerous cases of habitual illegal short selling uncovered last year and a temporary ban implemented until March next year, the need for reform of the short selling system has been consistently raised.

The amendment to the Capital Markets Act proposed by Chairman Yoon fundamentally aims to address unfairness and protect investors by improving the short selling system. The main points include establishing an electronic short selling system to completely block naked short selling, unifying transaction conditions between institutional/foreign investors and individual investors by limiting the repayment period for stock lending for short selling purposes, raising fines for illegal short selling, and introducing harsher imprisonment penalties based on the amount of unjust gains, thereby strengthening punishment and sanctions.

In particular, regarding the establishment of an electronic short selling system, which individual investors have continuously demanded, the financial authorities explained that the internal balance management system required for institutional and corporate investors will be completed within this year, and the central monitoring system at the Korea Exchange will be completed by March next year.

Chairman Yoon stated, “With this improvement to the short selling system, we expect to correct the tilted playing field and create an investment environment that everyone can trust,” adding, “I will pour my active attention and support into ensuring the swift passage of the amendment so that we can take a leap forward to an advanced capital market.”

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