SEOUL (Reuters) - South Korea's stock market watchdog said on Sunday it found two Hong Kong-based investment banks had engaged in naked short-selling, which would likely result in record fines.
The two unnamed investment banks made naked short-selling transactions of a total 40 billion won ($29.58 million) and 16 billion won, respectively, the Financial Supervisory Service (FSS) said in a statement.
Naked short selling of stocks - in which an investor short sells shares without first borrowing them or determining they can be borrowed - is banned by the Capital Markets Act in South Korea.
The violations by the global banks were over long periods, for nine months through May 2022 and five months through December 2021, respectively, and expected to result in record amounts of fines, the FSS said.
The FSS said such violations, which came against authorities' efforts to provide a more favourable environment for foreign investors, should be prevented from recurring and that it would also look into practices at other similar investment banks.
($1 = 1,352.2100 won)