South Korea FSC and FSS Fine 13 Global Investment Banks KRW 83.65 Billion for Illegal Short-Selling

South Korea's Financial Services Commission (FSC) and Financial Supervisory Service (FSS) said on 12 March 2025 that penalties imposed on 13 global investment banks over the course of their investigation totalled KRW 83.65 billion — approximately USD 58 million — after the Securities and Futures Commission decided the final sanction that day. The sanctions conclude a 16-month investigation into illegal naked short-selling conducted by major international financial institutions in Korean equity markets.

Naked short-selling — the practice of selling shares short without first borrowing or arranging to borrow the underlying securities — is prohibited under the Korean Capital Markets Act. The FSC and FSS determined that the 13 banks had engaged in such practices.

SHORT-SELLING BAN

Korean authorities imposed a full ban on short-selling for all investors in November 2023, pending a comprehensive regulatory review; the ban was due to be lifted on 31 March 2025.

REVISED CAPITAL MARKETS ACT AND FUTURE OVERSIGHT

In parallel with the enforcement action, a revised Capital Markets Act was due to take effect before short selling resumed on 31 March 2025, introducing enhanced provisions to improve short-selling oversight and transparency across Korean financial markets. The new legislation includes mandatory internal systems for institutions to prevent naked short-selling, a central detection system (NSDS) and strengthened penalties for violations.