Prosecutors. (Photo=Yonhap news)

 

[Alpha Biz=(Chicago) Reporter Kim Jisun] Prosecutors have indicted the Hong Kong subsidiary of the Global Investment Bank (IB) HSBC and three of its traders on charges of illegal naked short selling. This is the first case of indictment since the relevant criminal punishment rules were created.

The illegal short selling investigation team (team leader Kwon Chan-hyuk, chief prosecutor of the Financial Investigation Division 1) at the Seoul Southern District Prosecutors' Office said on the 28th that it has indicted HSBC's Hong Kong subsidiary and three traders belonging to the corporation on charges of violating the Capital Markets Act.

According to the prosecution, the defendants falsely notified the local branch securities department as if they had completed borrowing and disrupted the local capital market by issuing 320,000 shares of nine listed companies and short selling orders worth 15.8 billion won in total, even though they had not borrowed stocks from August to December 2021. This is the first time that an indictment has been made for related crimes since the Capital Markets Act was established in April 2021.

According to the prosecution's investigation, Korean securities firms confirmed whether stock borrowing was completed before ordering a public sale only in words, not objective data, and only acted as a conduit by operating a system that allows global investment banks to independently access the securities firm's computer network and place sale orders directly to the Korea Exchange.

The prosecution suspects that the HSBC Hong Kong corporation maliciously and intentionally avoided regulations, management and supervision under domestic law by periodically deleting server storage data at domestic branches that carried out borrowed short selling and storing all major data on overseas servers.

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