UBS, ESK sanctioned for violating short-selling rules

The Korea Times

The Korea Times

Finance

Tue, September 26, 2023 | 08:24

Companies

UBS, ESK sanctioned for violating short-selling rules

Posted : 2023-03-12 16:53

Updated : 2023-03-17 16:15

The Financial Services Commission in central Seoul / Yonhap

By Anna J. Park

Korea's financial regulators recently imposed a total of 6 billion won ($4.5 million) worth of penalties on two foreign financial companies ― UBS and ESK Asset Management ― for violating local short-selling rules.

It is the first time that the financial authorities actually imposed penalties on financial firms for violating short-selling regulations, since the country's capital market act was revised in April 2021 to strengthen short-selling rules.

Financial regulators are also currently investigating 10 other local and foreign financial companies for similar violations.

According to industry sources, the Securities and Futures Commission (SFC), a decision-making body under the top financial regulator, the Financial Services Commission (FSC), decided last Wednesday to impose fines of 2.18 billion won for UBS and 3.87 billion won for ESK due to illegal short-selling practices.

UBS AG was caught by the financial authorities for naked short-selling. The company placed orders in 2021 to sell 7.3 billion won worth of shares of a local company, without even holding the shares. Ordinarily, traders must borrow stock before they can sell it short. ESK Asset Management was also fined over the naked short-selling of 25.1 billion won worth of orders for a local company.

An FSC official explained that the decision was made following several in-depth discussions on the reasonable level of sanctions.

Prior to the revision of the capital market act in April 2021, violations concerning short-selling regulations mostly saw companies face penalties or disciplinary warnings from financial regulators. With the revision, financial authorities are now capable of imposing stricter sanctions and criminal punishment.

Back in February, five other financial firms ― Credit Suisse, Munich Ergo Asset Management, Bellevue Asset Management, Lingohr Asset Management and Invesco ― were each fined 45 million to 75 million won by local financial authorities for violating short-selling rules in the country. But the fines imposed on the five companies in February were categorized as slight violations, differing from the major sanctions dealt on the two firms in March.

According to main opposition lawmaker Lee Jung-mun, 93.7 percent of 127 people fined or who had received disciplinary warnings by the Financial Supervisory Service (FSS) from 2010 to 2022, were foreign nationals.

annajpark@koreatimes.co.kr