© Reuters. FILE PHOTO: A currency dealer walks past electronic boards showing the Korean Composite Stock Price Index (KOSPI) and the exchange rate between the U.S. dollar and South Korean won at a dealing room of a bank, in Seoul, South Korea, March 16, 2023. REUTE
SEOUL (Reuters) – South Korea’s financial market watchdog on Thursday urged foreign firms trading on the country’s stock market to strengthen internal controls to prevent illegal naked short-selling.
The Financial Supervisory service (FSS) conveyed the message in a meeting with compliance officers from 23 foreign investment banks.
Naked short-selling of stocks – in which an investor short sells shares without first borrowing them or determining they can be borrowed – is banned by the Capital Markets Act in South Korea.
So far this year, the FSS has counted 24 cases of illegal short-selling, mostly by foreigners, compared with 28 for the whole of 2022 and 14 in 2021.
South Korea has made various regulatory reforms for its stock market this year, including heavier penalties for naked short-selling violations.
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