Under the proposed new fee system, the sellers of public funds will directly charge investors, allowing the investors to know the exact cost associated, which, in turn, may promote more competition between the sellers, according to the FSC. (image: Pixabay/CCL)
SEOUL, Jan. 3 (Korea Bizwire) – The vice chief of South Korea’s financial regulator said Wednesday authorities will set up a computerized system to crack down on naked short selling, in a bid to promote a level playing field for stock investments.
Kim So-young, vice chairman of the Financial Services Commission (FSC), said the country will work to lift the temporary ban on stock short selling by developing its system to prevent naked short selling, which is illegal in South Korea.
“The government recently exposed illegal naked short selling committed by global investment banks (IBs) over an extended period of time and imposed the largest fine in history,” Kim said in a meeting attended by top financial policymakers, including those from the Financial Supervisory Service and the Korea Exchange.
“The government will deal more sternly with such practices since these repeated violations hinder our goal of developing our capital market,” he added, according to a transcript of his remarks released by the FSC.
The financial regulator imposed a temporary ban on stock short selling in early November. The steps are currently effective until the end of June, but FSC Chairman Kim Joo-hyun has hinted at an extension of the ban, pending on the development of a new system that can effectively prevent illegal short selling.
“(FSC) will work to develop an operating system aimed at preventing naked short selling without fail, and push for forward-looking reforms of the system to reestablish fairness in the stock short selling system,” the FSC vice chairman told the meeting.
Wednesday’s meeting was held to discuss ways to promote public funds, which the FSC vice chairman said can provide “key investment opportunities” to the general public.
“I believe public funds can help individual investors in that they may be used to make money at a reasonable cost,” Kim said. “As ordinariness, in fact, forms the backbone of a society, I hope public funds can become key investment opportunities for the people by being both safe and profitable.”
To this end, the financial regulator will push for nine reform measures, which will include the introduction of a new fee system for those who sell public funds.
Currently, those who sell public funds, such as banks, receive a certain percentage of their sales from fund managers as fees, which the FSC said may encourage the sellers to focus only on the amount they sell, while possibly neglecting or ignoring the risks associated with the products they sell.
Under the proposed new fee system, the sellers of public funds will directly charge investors, allowing the investors to know the exact cost associated, which, in turn, may promote more competition between the sellers, according to the FSC.
(Yonhap)
