JPMorgan, UBS, Nomura face South Korea short-selling fines: report

SOUTH Korea’s financial regulator is imposing fines on JPMorgan Chase, Morgan Stanley, UBS Group and Nomura Holdings for allegedly violating the country’s rules on short-selling stocks, the Maeil Business Newspaper reported.

South Korean authorities previously announced that they found 14 banks in breach of short-selling rules after launching an investigation in 2023, the report said, citing an unidentified official. The penalties are expected to be finalised before a ban on short-selling is lifted next month. The ban was put in place a little more than a year ago to weed out improprieties.

The Financial Services Commission (FSC) held a meeting on Wednesday (Feb 12) to make the decision, according to the report, which did not mention the size of the penalties. It also did not mention if the FSC plans to announce the decision. An FSC spokesperson declined to comment.

The regulatory action, if confirmed, would underscore South Korea’s resolve to crack down on entities seen as violating short-selling rules, even as it prepares to re-introduce the trading technique. The practice, which is unpopular with retail investors, has been criticised for causing excessive market volatility.

The government imposed the ban since November 2023 as part of efforts to rein in what it considers to be abuses in the system. Authorities have particularly targeted illegal “naked” short-selling, which involves selling shares without securing them first.

Representatives at Morgan Stanley, JPMorgan and UBS declined to comment. A spokesperson for Nomura said the firm is not able to comment.

In December, Barclays and Citigroup were fined 13.7 billion won (S$9.5 million) and 4.7 billion won, respectively, for alleged naked short selling.

BNP Paribas and HSBC Holdings were fined a combined 26.5 billion won in 2023 for allegedly breaching the rule. HSBC was acquitted on Feb 11 by a Korean court of charges that it engaged in illegal short-selling.

Two affiliates of Credit Suisse Group also paid 27.1 billion won in total last year. BLOOMBERG