Shinhan Asset Management, Pareto Securities fined for illegal short selling

The lobby of Financial Services Comission in Seoul, Sept. 9, 2025. Korea Times file

The Securities and Futures Commission under the Financial Services Commission (FSC) has imposed a combined 3.97 billion won ($2.69 million) in fines on six domestic and foreign asset managers and securities firms for engaging in naked short selling, market watchers said Monday. Naked short selling refers to the practice of short-selling shares without first borrowing them from another party.

The large scale of fines, the first since the full resumption of short selling last March, is indicative of a tougher regulatory stance in the coming months, reflecting a policy shift toward “zero tolerance” enforcement.

Previous similar violations have been sanctioned, but penalties were negligible in size and impact.

The authorities’ stringent measures are meant to illustrate that Korea’s short selling market is not only open but strictly managed, an approach intended to bolster investor confidence while strengthening the market’s credibility on the global stage.

According to government sources, Shinhan Asset Management was fined 370.6 million won after authorities found it had placed sell orders for 5,000 shares of EcoPro stocks it did not own.

The heaviest penalty was imposed on Norway-based Pareto Securities, which was fined 2.26 billion won for selling 178,879 shares of Samsung Electronics common stocks without holding them.

Others sanctioned include Canada’s Alberta Investment Management Corp. (546.9 million won), U.S.-based Invesco Capital Management (532.3 million won), Northern Trust’s Hong Kong operation (141.7 million won) and Singapore’s GIC Private Limited (120.6 million won).

The FSC said most of the violations were identified during a comprehensive investigation of global investment banks and asset managers conducted ahead of the resumption of short selling last March.

Although the probes had concluded earlier, the fines were finalized this year and disclosed publicly after legal procedures were completed.

The tougher sanctions come as regulators move to strengthen oversight infrastructure.

Authorities said they are operating a full-scale real-time detection system for naked short selling and expanding around-the-clock monitoring of short sale transactions.

These measures coincide with the government’s broader pledge to eradicate illegal short selling, a practice that has long fueled distrust among retail investors.

The drive goes beyond the domestic market.

Korea’s handling of short selling is being closely watched by global index providers, particularly Morgan Stanley Capital International (MSCI), as the country seeks inclusion in the MSCI Developed Markets Index.

MSCI has upgraded its assessment of Korea’s short selling accessibility from “needs improvement” to “positive,” after the full resumption of short selling last year.

Most of the illegal short selling cases sanctioned this time occurred in 2022 and 2023, just before the short selling ban was put in place from November 2023 to March 2025.

During the ban, financial authorities conducted a full-blown investigation into 14 global investment banks to uncover violations.