Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
FSS mulls criminal punishment for illegal short selling by foreign firms
Financial Supervisory Service (FSS) Governor Lee Bok-hyun speaks during an Assembly audit held at FSS headquarters in Yeouido, Seoul, Tuesday. Yonhap
By Anna J. Park
FSS governor denies rumors of his candidacy for general election in audit
Financial Supervisory Service (FSS) Governor Lee Bok-hyun has vowed to push for heavier punishment for illegal short selling practices conducted by some global investment banks in Korea. Lee said he finds it problematic that some foreign institutional investors routinely engage in naked short selling, despite knowing such practices are illegal.
"The FSS aims to impose much heavier penalties than in the past on those responsible for illegal short selling. I think criminal punishment may also be possible, and we will look further into whether it's possible to impose criminal charges on executives or employees of the foreign firms," Lee said during the National Assembly's on-site audit held at FSS headquarters in Seoul, Tuesday.
Lee's remarks came in response to two lawmakers' questions on the financial authority's handling of illegal short selling practices.
Rep. Yun Ju-keyng from the ruling People Power Party (PPP) and Rep. Back Hye-ryun from the main opposition Democratic Party of Korea (DPK) asked for the FSS chief's stance over the recently uncovered major illegal short selling practices conducted in 2021 and 2022 worth 56 billion won ($41.3 million) by BNP Paribas and HSBC.
“I think a deeper consideration at the fundamental level is necessary, as the impacts from current illegal short selling practices are too serious, such as distortion of the market, to be simply viewed as individual cases,” Lee said.
Answering a similar question from PPP Rep. Yoon Han-hong on 14 million Korean retail investors' anger over differentiated short selling rules applied to institutional investors and individual investors, the FSS governor vowed once again to look closely into the matter.
“While it is true that short-selling has a positive function in the market, it is also now known that extensively conducted unfair short-selling practices have made the local stock markets an unlevel playing field, and it is also considered to be one of the causes of the so-called 'Korea discount.' Thus, the FSS will look into various policy options to address the matter," Lee said.
Lee added that there's no disagreement that the advancement of the local financial system is necessary to gain the trust of foreign investors and others overseas. Yet, he said he personally thinks that unfair short selling practices in the market here have damaged trust so greatly that more special measures are needed.
"However, the primary decision-making authority on short selling rules lies with the Financial Services Commission (FSC). In addition, the government's overall position should also be determined prior to making changes to the specific rules. Thus, it is difficult for me to come up with a clear conclusion at this point," Lee explained.
The National Assembly audit was centered on the topic of short selling, as over 50,000 people have signed an official petition on the National Assembly website calling for the improvement of the short selling system.
Financial Supervisory Service (FSS) Governor Lee Bok-hyun speaks during a parliamentary audit held at the headquarters of the FSS in Yeouido, Seoul, Tuesday. Yonhap
Meanwhile, Lee distanced himself from rumors of his candidacy in next year's general election. DPK Rep. Park Sung-joon asked during the audit whether he would run for office next year, and Lee flatly denied the rumor.
"As I have said repeatedly, I believe that my current role at the FSS is necessary for stabilizing the market until the end of this year or next, although the work I am currently doing is insufficient," Lee said.
Despite the former prosecutor-turned FSS chief's continual denials, rumors of his intention to run in the general election next April continue.