Financial Regulator Discovers Illegal Short Selling by Two Global Banks

SEOUL, South Korea - The Financial Supervisory Service (FSS), South Korea's financial watchdog, revealed on Sunday that two major global investment banks have been involved in illegal short selling activities, amounting to over 50 billion won (approximately US$38 million). This significant financial misconduct has prompted swift action from the regulatory body.

According to Yonhap News Agency, the investigation uncovered that one of these banks had engaged in naked short selling of two different stock items between March and June 2022. The second bank was found to have conducted similar activities, involving three stock items, from January 2022 through April 2023. Naked short selling, a practice where the seller does not borrow the stock before selling it, is considered illegal in many jurisdictions due to its potential to manipulate market prices.

The FSS has announced its intention to impose penalties on these two banks promptly. Furthermore, the regulatory body has indicated that additional investigations are underway to scrutinize other global investment banks (IBs) for possible involvement in similar illegal activities.

An official from the FSS warned that more companies currently under investigation could face charges related to illegal stock short selling. This statement underscores the regulator's commitment to maintaining the integrity of the financial market and its zero-tolerance policy towards such illicit activities.

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