Financial authorities have drawn a knife to illegal short selling. On the 29th, the Financial Services Commission, the Financial Supervisory Service, the Supreme Prosecutors’ Office, and the Korea Exchange held a ‘Meeting for the Elimination of Illegal Short Selling with Relevant Institutions’ and discussed related measures.
This meeting was prepared to discuss the necessity of detecting and strengthening capital market disturbances such as illegal short selling and market manipulation linked to short selling in a situation where investor distrust in the short selling system is growing along with the recent decline in global stock markets.
In addition, in response to the recognition that prompt institutional improvement is necessary for problems raised by investors, we discussed countermeasures.
“It is very difficult to secure trust in the capital market without eradicating illegal short selling and illegal activities using short selling,” said Kim Joo-hyun, chairman of the Financial Services Commission. Improvements must be carried out quickly.”
Lee Bok-hyeon, head of the Financial Supervisory Service, said, “As the securities crime amalgamation unit has recently been restored, we will actively respond to illegal short selling through Fast Track*.”
At the meeting, it was decided to detect and punish illegal short selling, and to secure the system related to short selling.
First, in order to detect and punish illegal short selling, plan investigations on unfair trade related to short selling will be strengthened. To this end, an investigation theme and target item are selected, and a planned investigation is initiated as soon as the suspect is discovered.
In addition, regular planning and supervision of non-borrowed short selling will be established and a real-time information sharing system related to illegal short selling will be established with related organizations.
In addition, the Southern District Prosecutors’ Office decided to actively utilize the fast-track procedure to deprive the criminal proceeds and hidden assets in case of serious cases.
The short selling system strengthens the monitoring of long-term and large-scale short selling investors. In the case of long-term borrowing and short selling for more than 90 days, the obligation to report detailed loan information to investors is imposed.
In addition, if the proportion of short selling is more than 30%, the extraction requirement has been newly established. As a result of this measure, overheating stocks increased by 13.%. If the stock price falls by more than 5% on the day of the ban on short selling, the period of prohibition on short selling is automatically extended.
In addition, the short-selling collateral ratio for individual investors will be reduced from 140% to 120%, and individual investors who meet the requirements for professional investors will be encouraged to trade with no restrictions on the repayment period.
The financial authorities said, “We will immediately implement the task of detecting and punishing illegal short selling, and will make sure that tasks that require revision of laws and regulations can be implemented within the year.”
