Gov't to provide guidelines before resuming short selling

By Jun Ji-hye

Financial Services Commission Vice Chairman Kim So-young vowed, Monday, to make every effort to communicate with foreign investors and provide accurate explanations before resuming stock short selling.

He noted the government has received numerous requests from foreign investors for regulatory clarity, as it is working on fundamental improvements to systems related to short selling during its ban period, which is scheduled to last until next March 30.

“We are striving to enhance foreign investors’ understanding of Korea’s short selling regulations by providing comprehensive and detailed guidelines on the criteria for determining naked short selling,” Kim said during a press briefing for foreign correspondents in Seoul.

The country’s ban on short selling was put in place last November, and was originally set to expire at the end of June. But it was pushed back to next March 31.

As part of efforts to improve the system, the government in June announced plans to establish a computerized monitoring system to monitor for illegal short selling practices, to unify short selling transaction conditions for individuals and institutions and to strengthen sanctions and penalties for illegal short selling.

In September, a revision to the Capital Markets Act passed the National Assembly, and follow-up measures are now underway for the improvement.

In order to provide clear information to investors, particularly foreign investors, and to support regulatory compliance, Kim stated that the government has been providing both Korean and English guidelines as well as tailored consulting services regarding the changes.

“To advance the capital market, it is most important to create an environment where both domestic and foreign investors can invest with confidence, which means restoring trust,” Kim said. “For trust to take root, it is essential to establish a sound market order.”

He stressed that the government would uphold a zero-tolerance policy on unfair trading, strengthening both preemptive monitoring and post-sanctions.

“In addition to fines, additional effective sanction measures are set to be introduced next April, including restrictions on financial investment product transactions, limitations on the appointment of executives in listed companies and the ability to freeze suspicious accounts,” he said.

Kim acknowledged that the domestic stock market has shown a relatively weaker performance compared to major global markets recently, and added that it is important to view market changes from a longer-term perspective.

“The advancement of the capital market and the Corporate Value-up Program are not one-time events but national tasks that will be pursued steadily and persistently,” he said.