South Korea Fines Global Banks $11 Million for Short-Selling Violations
South Korea’s financial watchdog is set to impose fines totaling 16 billion won ($11 million) on four major financial institutions—JPMorgan Chase & Co., Morgan Stanley, UBS Group AG, and Nomura Holdings Inc.—for alleged short-selling rule violations, according to a report by Maeil Business Newspaper.
Regulatory Crackdown on Short-Selling
The Financial Services Commission (FSC) has been investigating potential breaches of short-selling regulations, particularly illegal “naked” short-selling, where shares are sold without being secured in advance. The ban on short-selling, implemented in November 2023, was part of government efforts to curb market manipulation.
While an FSC spokesperson declined to comment when contacted by Bloomberg, the commission acknowledged on its website that discussions regarding the banks’ alleged violations are ongoing.
Representatives from JPMorgan, Morgan Stanley, and UBS declined to issue statements, while a Nomura spokesperson stated the firm was unable to comment on the matter.
Previous Enforcement Actions
South Korean regulators have been stepping up enforcement against violations of short-selling regulations:
- December 2023: Barclays Plc and Citigroup Inc. were fined 13.7 billion won and 4.7 billion won, respectively, for alleged violations.
- Earlier in 2023: BNP Paribas and HSBC Holdings Plc faced a combined 26.5 billion won penalty for similar infractions. However, in February 2024, a Korean court cleared HSBC of wrongdoing.
- Credit Suisse Group AG affiliates were also penalized 27.1 billion won in total.
Breakdown of the Latest Fines
According to Maeil Business Newspaper, the FSC’s latest round of penalties includes:
- Nomura Holdings Inc.: 9.8 billion won
- UBS Group AG: 3.7 billion won
- JPMorgan Chase & Co.: 1.4 billion won
- Morgan Stanley: 1.3 billion won
The FSC held a meeting this week to deliberate on these fines, with final decisions expected before the short-selling ban is lifted next month.
Future of Short-Selling Regulations
The South Korean government has taken a strict stance on enforcing market rules while preparing to reintroduce short-selling. The trading practice remains controversial, particularly among retail investors, who argue that it contributes to market instability and volatility.
If the regulatory actions are upheld, they will reinforce South Korea’s commitment to ensuring compliance with financial market regulations, even as short-selling gradually returns.
