Financial Supervisory Service Issues Illegal Short Selling Warning Amid Middle East Crisis

Financial Supervisory Service recently issued a warning regarding the increased volatility in financial markets caused by the unstable situation in the Middle East, which may lead to illegal short selling activities. They called for thorough legal management of such behaviors that could damage market trust.

On the 13th, the Financial Supervisory Service convened an emergency meeting at its headquarters in Yeouido, Seoul, bringing together compliance officers from 21 major securities firms. The meeting was led by Vice Chairperson Lee Seung-yu of the Disclosure and Investigation Department. The main goal was to prevent naked short selling (selling shares without borrowing them first) and to avoid market chaos caused by erroneous trades.

The Financial Supervisory Service specifically urged the industry to strengthen the calculation process for available short sale balances and to enhance the blocking of excessive short sale orders. These measures aim to prevent naked short selling at the order stage, highlighting recent cases that resulted from simple mistakes or errors. The authorities emphasized the need to thoroughly check internal controls to ensure such incidents do not recur.

Subsequently, the Financial Supervisory Service called for an inspection of the stability of short selling computer systems to prevent large-scale violations during massive data processing. They also urged prompt reporting of illegal activities to authorities once detected. The agency clearly stated that if illegal short selling disrupts the market, strict measures will be taken through swift investigations.

This trend may indicate that future regulations and monitoring related to short selling will be strengthened amid unstable international situations or market conditions. Ultimately, these measures aim to enhance market transparency and safety.