• SK FSS announced investigation results re illegal short selling by two global investment banks (IBs) as well as its future plan to prevent reoccurrence.

Investigation Results

• Found that two Hong Kong-based global IBs providing prime brokerage services have conducted short selling without owning stocks and borrowing them after selling.
• One IB did not input loan details into the system while borrowing stocks through interdepartmental loans, submitted selling orders based on the overstated balance.
• The other IB concluded swap-selling contracts based on the borrowable stock quantity rather than the borrowed stock quantity which was previously confirmed.

Future Plan

• SK FSS will take strict action through Securities and Futures Commission's deliberation, request the two IBs to devise effective measures to prevent reoccurrence.
• Expand investigations on major global IBs conducting similar businesses.
• Closely cooperate with overseas supervisory authorities when necessary to crack down on illegal short selling by financial investment companies located overseas.
• Strengthen inspections on domestic securities houses receiving orders from global IBs, particularly re the process of receiving short selling orders, possibility of recognizing illegal short selling orders, take strict action if any violations are discovered.