Seoul, South Korea - The Financial Services Commission's Securities and Futures Commission in South Korea announced a record fine of 26.5 billion won (US$20.3 million) against BNP Paribas and HSBC for illegal naked short selling. This fine is the largest imposed on financial companies since the introduction of penalties for short selling violations in April 2021.
According to Yonhap News Agency, both global investment banks will also be referred to prosecutors for breaching short selling regulations. This decision comes amid South Korean financial authorities' efforts to curb illegal short selling, including a temporary ban on stock short selling until the latter half of the next year. BNP Paribas' Hong Kong unit reportedly engaged in naked short selling orders worth 40 billion won for 101 stocks, including shares of Kakao Corp., from September 2021 to May 2022. The Securities and Futures Commission accused the company of knowingly placing short selling orders with the potential for ongoing violations. Similarly, HSBC allegedly conducted naked short selling orders valued at 16 billion won for nine Korean stocks between August and December 2021. In South Korea, short selling involves selling borrowed shares to profit from a price drop, while naked short selling, the sale of shares without borrowing them first, is illegal.