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Photo = Yonhap news |
[Alpha Biz= Reporter Kim Sangjin] On December 18, South Korea's financial authorities announced fines for global investment banks Barclays and Citigroup for engaging in naked short selling. Barclays was fined KRW 13.67 billion, and Citigroup was fined KRW 4.72 billion. These fines were significantly lower than the initial total proposed fine of KRW 90 billion by the Financial Supervisory Service (FSS).
The Securities and Futures Commission (SFC), under the Financial Services Commission (FSC), held a regular meeting and confirmed these sanctions. Naked short selling involves selling stocks without borrowing them first, which is illegal in South Korea. While regular short selling involves borrowing stocks before selling, "post-borrowing" or "naked short selling" (selling stocks without borrowing them beforehand) is prohibited.
The FSS had initially recommended penalties of KRW 70 billion for Barclays and KRW 20 billion for Citigroup, based on suspected illegal short selling worth KRW 1 trillion for Barclays and KRW 500 billion for Citigroup. Despite these proposed amounts, the SFC reduced the fines significantly, considering that neither institution acted with intent, and both made efforts to prevent illegal short selling.
Since the implementation of criminal penalties and fines for violations of the ban on naked short selling in April 2021, 42 cases have been penalized, amounting to a total of KRW 635.6 billion in fines. In July 2024, the SFC imposed fines of over KRW 271 billion on two former Credit Suisse affiliates for similar violations. However, foreign financial institutions like ESK Asset Management and Kepler Cheuvreux have lost lawsuits against the financial authorities regarding these penalties.
The financial authorities plan to complete a full investigation into illegal short selling by the end of the year and prepare for the resumption of short selling by the first quarter of 2024.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
