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Illegal short-selling practices to be cracked down

Posted July. 29, 2022 07:58,   

Updated July. 29, 2022 07:58


Investors who committe illegal short-selling will be directly subject to prosecutorial investigation without going through investigation from the financial authorities.

The Financial Services Commission, the Financial Supervisory Service, the Supreme Prosecutors’ Office, and the Korea Exchange held a meeting on Thursday and released measures to curb illegal stock short-selling activities. The gist of the new measures is to tighten scrutiny and strengthen punishment of wrongful short-selling practices and stock-price manipulation in relation to short-selling. President Yoon Suk-yeol delivered instructions to the relevant institutions, including the financial authorities and the prosecution, urging them to stamp out illegal practices of short-selling without fail and devise measures in this regard.

Following these measures, the FSS will immediately undertake an investigation if it finds out allegations of unfair trade practices in connection with short-selling. Such illegal short-selling practices will be also subject to investigations by the Joint Investigative Team on Stock Crimes under the Seoul Southern District Prosecutors’ Office, without the administrative investigation procedure by the financial institutions, which is dubbed as a ‘fast track procedure.’

In the meantime, the margin threshold for short-selling for retail investors will be lowered from 140 to 120 percent, in response to the criticism that the Korean stock market is an “unlevel playing field,” where the margin threshold for short-selling applicable to institutions and foreign investors is significantly lower (105-120 percent) compared to those applied to retail investors.

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