South Korea slaps record fines on Credit Suisse for short-selling violations

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In a turn of events, South Korea’s financial watchdog has slammed the gavel down on two subsidiaries of the erstwhile Credit Suisse group for their brazen short-selling antics. The Financial Services Commission (FSC) has announced record-breaking fines that are sure to send shockwaves through the financial world.

Naked short-selling isn’t just a catchy phrase; it’s a high-stakes gamble that involves selling shares without actually borrowing them or even confirming their availability for borrowing. It’s a forbidden fruit in South Korea, strictly outlawed by the Capital Markets Act. But for Credit Suisse AG and Credit Suisse Singapore Ltd., this wasn’t a deterrent. From April 7, 2021, to June 9, 2022, Credit Suisse AG indulged in these risky trades to the tune of 60.3 billion won. Not to be outdone, Credit Suisse Singapore Ltd. joined the fray with trades amounting to 35.3 billion won between November 29, 2021, and June 9, 2022.

The FSC’s response was swift and severe. Credit Suisse AG, now known as UBS AG following last year’s acquisition, has been slapped with a colossal fine of 16.9 billion won ($12.17 million). Meanwhile, Credit Suisse Singapore Ltd. faces a hefty penalty of 10.2 billion won. This marks a historic high in fines for stock short-selling violations in South Korea, underscoring the FSC’s zero-tolerance policy.

UBS, the new custodian of Credit Suisse’s legacy, has maintained a conspicuous silence, offering no comment on the matter. This silence speaks volumes, leaving the financial community buzzing with speculation and concern.

This crackdown comes on the heels of South Korea’s recent decision to extend a market-wide ban on short-selling through the first quarter of 2025. The extended ban aims to develop a robust system to curb illicit trading practices, further highlighting the nation’s commitment to market integrity.

The FSC’s unprecedented fines are more than just punitive measures; they are a clear message to the financial world. In South Korea, the rules of the game are non-negotiable, and those who dare to flout them will face severe consequences. As the financial sector grapples with this wake-up call, one thing is certain: the era of leniency is over.

(Source: MarketWatch | Korea Times)

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