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South Korea Plans to Fine Two Global Investment Banks for Naked Short Selling
(Bloomberg) -- South Korea’s financial watchdog is proposing the imposition of record fines on two global investment banks for “routinely and intentionally” engaging in naked short-selling, which is considered illegal in the nation.
The Hong Kong-based units of the two banks conducted naked short sales in several securities between 2021 and 2022, and could have reaped extra profits from them, the Financial Supervisory Service said in a statement on Sunday, without naming them.

BNP Paribas SA and HSBC Holdings Plc are the two banks, local media including the Korea Economic Daily reported. A BNP spokesman declined to comment, while an HSBC spokesman didn’t immediately provide a response. Naked short-selling is a practice that involves selling shares without even borrowing them first.

The proposed fines need to be finalized by a committee at the nation’s financial regulator Financial Services Commission, the FSS said, adding that the banks’ identities will be disclosed to the public after future proceedings. While authorities have uncovered and penalized money managers for illegal short-selling in the past, it’s the first time such violations have been found at global banks engaged in transactions in Korea, the FSS said.

“This is a serious problem,” Kim Jungtae, deputy governor at the FSS, told reporters. “For a long time, they have continued to do naked short-selling while they were aware that the practice is illegal in South Korea.”

An imposition of penalties will mark an extension of South Korea’s increased efforts in recent years to weed out illegal short-sellers from its $1.7 trillion stock market. Public perception of such trading practices in the Asian nation remains deeply negative. Local retail traders have staged protests against these activities from time to time and also made sporadic coordinated attempts to drive gains in stocks targeted by short sellers.

continue here : https://finance.yahoo.com/news/south-korea-plans-fine-two-030000006.html