18 financial firms sanctioned for short-selling violations

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FSS vows to strengthen inspections on illicit short-selling practices

By Anna J. Park

Financial authorities caught 18 financial companies, both local and foreign, for breaking short-selling rules and imposed 1 billion won ($782,000) in fines or penalties.

The Securities and Futures Commission (SFC) of the Financial Services Commission (FSC) sanctioned 18 companies as well as individuals for violating short-selling restrictions or rules during its regular meeting held last Friday, according to the official meeting records.

Short-selling refers to a trading technique in which stocks that are expected to decline in value are borrowed and sold, and then repurchased at a lower price to repay the borrowed stocks, thereby making a profit. As the technique involves risks of incurring potential losses, short-sellers have taken various moves to seek undeserved gains by breaking rules on such practices when the stock price continues to rise.

Charged with breaking short-selling restrictions, QUANTin Asset Management was imposed a fine of 350 million won, while PFM Asset Management was hit with a penalty of 286 million won, among other firms that received a lower amount of penalties.

QUANTin Asset was caught by the authorities in March 2021, as it submitted a short-selling order of 5,570 shares of SK ie technology from a wrong selling account.

On violating short-selling reporting and disclosure obligations, the SFC also imposed penalties of 24 million won on Valuesystem Asset Management, 36 million won on Shinhan Securities, 30 million won on Samsung Hedge Asset Management, 66 million won on Link Asset Management, and 6 million won on Beyond Asset Management.

Specifically, Valuesystem Asset Management delayed reporting the net positions of their short-selling on 30 stock items for four trading sessions over a span of July 2018 to June 2019. Shinhan Securities was also found to have delayed reporting the net positions of their short-selling on 99 stocks for five sessions over the period of July 2018 to June 2022.

In addition, the SFC has notified Pictet Wealth Management a fine of 69.9 million won, one million won for K-Fin Asset Management, as well as 1.3 million won on KTG Asset Management for violating short-selling restrictions.

Financial authorities have been taking a strict stance on illegal short-selling and have pledged to take swift action to impose penalties. The Financial Supervisory Service (FSS) plans to promptly enforce sanctions against those suspected of engaging in illicit short-selling practices by immediately reporting them to the SFC. The state-run financial watchdog agency is also strengthening the level of sanctions against naked short-selling.

The FSS also plans to intensify inspections to see whether there have been cases of abusing short-selling rules, such as mass short-selling It also plan unfair trading practices. It also plans to focus inspections on cases of malicious naked short-selling targeting stocks that show much market volatility recently.