FSS inspects Morgan Stanley's short-selling records

August 29, 2022



By Anna J. Park

The Financial Supervisory Service (FSS) has begun an inspection into Morgan Stanley's Seoul office, which generates the highest amount of short-selling trading in the country's stock markets. The FSS also plans to inspect Merrill Lynch early next month, as the U.S.-based investment bank takes up the second-highest portion of short-selling transactions in the local stock markets.

The financial watchdog agency is also planning to look into short-selling practices and records of Korea Investment & Securities during its regular inspection period slated to begin next month. It will be the first mandatory inspection of the company in four years.

Although the inspection of the Seoul-headquartered securities company is not solely aimed at investigating the firm's short-selling records, short-selling trading is expected to become one of the inspection's focal points, given that it fined the company 1 billion won ($741,000) in February for short-selling related violations.

Normally, the FSS inspects brokerage companies every two to five years, considering each entity's capital assets and market influence.

The series of inspections targeting short-selling trading records by both domestic and foreign securities companies reflects the FSS' strong determination to curb illegal short-selling practices.

"Inspections of securities firms that are responsible for major portions of the country's short-selling trading are regarded as necessary," FSS Governor Lee Bok-hyun said during a press conference held in mid-August. "The inspections do not necessarily arrive at penalizing firms. However, the inspections are necessary to determine if there are any areas in short-selling practices that could be enhanced or improved through the inspections."

In line with the FSS chief's stance on eradicating illegal short-selling practices, the FSS has decided to launch a team dedicated to investigating short-selling practices within this week.

"The FSS is set to launch a short-selling investigation team within this week, aiming to rapidly carry out inspections into any illegal short-selling practices and to sternly punish any illegal or unfair short-selling practices," the FSS said Monday.

The financial authority continued that it will also closely monitor short-selling practices in general so that any distortions of the market could be modified and corrected.

Selected articles from The Korea Times