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.
Korea Investment fined for improper short-selling
Korea Investment & Securities headquarters on Yeouido, Seoul / Courtesy of Korea Investment & Securities
By Anna J. Park
By Anna J. Park
Financial regulators imposed a penalty on Korea Investment & Securities earlier this year over the firm's short-selling practices that violated regulations.
According to an electronic disclosure system by the Financial Supervisory Service (FSS) on Thursday, Korea Investment & Securities stated that it was fined 1 billion won ($770,000) by the FSS and the Financial Services Commission (FSC) in late February for its wrongful short-selling practices carried out over three years from 2017 to 2020. The brokerage company actually paid 800 million won, as the financial authority gave it a 20 percent discount.
From February 2017 to May 2020, Korea Investment & Securities shorted some 140 million shares of 938 companies, but notated the transactions as selling, not as short-selling. It is a violation of the short-selling rules in the Capital Market Act. Nearly 20 percent of the shorted stocks were Samsung Electronics shares, followed by SK hynix and Mirae Asset Securities.
The FSS explained the act was considered a mistake, rather than naked short-selling, which is an illegal practice of shorting stocks while not borrowing actual stocks. That's why the company was only fined.
“The act was not naked short-selling, which is a grave illegal short-selling practice. It was simple negligence, omitting to mark short-selling transactions. The trading volumes were not large enough to exert downward pressure on stock prices,” an official from Korea Investment & Securities said.
The financial authorities put a ban on short-selling in March 2020 to protect the stock markets from the pandemic shock. The temporary ban was lifted partially in April last year, allowing 350 stocks listed on the main benchmark KOSPI and secondary Kosdaq markets to be shorted.
As of last month, the weight of short-selling transactions accounts for about 7.1 percent of the KOSPI's total transactions.