South Korea Fines Investment Banks for Short-Selling Violations
South Korea's financial regulator has fined JPMorgan Chase & Co., Morgan Stanley, UBS Group AG, and Nomura Holdings Inc. for allegedly breaching short-selling regulations.
Investigation and Penalties
An investigation launched in 2023 found 14 banks in violation. The penalties were finalized ahead of the lifting of a short-selling ban next month. The Financial Services Commission (FSC) made the decision after a meeting on Wednesday. The size of the fines remains undisclosed.
Crackdown on Short-Selling Abuses
The action reflects South Korea's commitment to combatting perceived abuses in short-selling. The ban, imposed in November 2023, aimed to address excessive market volatility. Authorities have focused on illegal "naked" short-selling, where shares are sold without being secured.
Previous Penalties
In December 2023, Barclays Plc and Citigroup Inc. were fined for alleged illegal short-selling. BNP Paribas and HSBC Holdings Plc were also penalized. HSBC was later acquitted by a Korean court. Credit Suisse Group AG affiliates incurred fines in 2023.
Industry Response
Representatives from Morgan Stanley, JPMorgan, and UBS declined to comment. Nomura declined to provide a statement.
Significance
The fines underscore the seriousness with which South Korea views short-selling violations. They also come as the country prepares to reintroduce the practice, which has been criticized for its impact on retail investors and market stability.