A currency dealer works in the trading room of Hana Bank’s headquarters in Seoul on March 10, 2020. (Yonhap)
SEOUL, Oct. 13 (Korea Bizwire) — A majority of investors who were discovered to have committed illegal short-selling turned out to be foreigners. However, the amount of fines levied on them was negligible.
According to an analysis of the data that Rep. Kim Byung-wook from the ruling Democratic Party received from the Financial Services Commission, the volume of naked short selling transactions uncovered since 2017 totaled 171.3 billion won (US$148 million).
Naked short selling refers to the practice of short selling shares without borrowing them. It’s legal in the U.S., but illegal in South Korea.
The cases of naked short selling that resulted in fines during the period from January 2017 to September this year numbered 32. Of the total, 31 cases were committed by foreign financial institutions and pension funds.
The number of cases where more than 100 million won in fines were levied stood at only four, followed by 24 cases where the fine was less than 100 million won and three cases that resulted in a simple disciplinary warning.
“Unlike foreign stock markets, individual investors account for a high share of 60 to 70 percent of the South Korean stock market. In the short-selling market, however, foreigners take up the majority share of 60 to 70 percent,” Kim said.
Ashley Song (ashley@koreabizwire.com)
