SK Government Now Bolsters Guidelines Before Lifting Short Selling Ban

November 13, 2024

South Korea’s government now bolsters its guidelines before lifting its short selling ban, according to the Financial Services Commission Vice Chairman.

Kim So-young, Vice Chairman of the Financial Services Commission, pledged on Monday to enhance communication with foreign investors and provide clear explanations before the resumption of stock short selling.

He acknowledged that the government has received many requests from foreign investors seeking regulatory clarity as it works on significant improvements to short selling systems during the current ban, which will last until March 30.

“We aim to improve foreign investors’ understanding of South Korea’s short selling regulations by offering comprehensive and clear guidelines on identifying naked short selling,” Kim stated during a press briefing for foreign media in Seoul.

The short selling ban was implemented last November and was initially set to end in June but has now been extended to March 31.

To improve the regulatory framework, the government announced in June plans to create a computerized monitoring system to detect illegal short selling, unify transaction conditions for individuals and institutions, and strengthen penalties for violations.

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In September, the National Assembly passed a revision to the Capital Markets Act, and follow-up measures are currently being implemented for further improvements.

To ensure that investors, especially those from abroad, receive clear information and regulatory support, Kim mentioned that the government has been providing guidelines in both Korean and English, along with tailored consulting services regarding the changes.

“To develop the capital market, it is crucial to create an environment where both domestic and foreign investors can invest with confidence, which means restoring trust,” Kim emphasized.

“For trust to flourish, a sound market order must be established.”

He underscored that the government would maintain a zero-tolerance stance on unfair trading, enhancing both proactive monitoring and penalties.

“In addition to fines, effective sanction measures will be introduced next April, including restrictions on financial investment product transactions, limitations on executive appointments in listed companies, and the ability to freeze suspicious accounts,” he noted.

Kim also recognized that the domestic stock market has lagged behind major global markets recently, stressing the importance of viewing market changes from a long-term perspective.

“The advancement of the capital market and the Corporate Value-up Program are ongoing national priorities that will be pursued consistently and persistently,” he concluded.

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