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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] Seoul, September 23, 2025 – The Market Oversight Committee of the Korea Exchange (KRX) has launched an inspection into Korea Investment & Securities and Samsung Securities following suspected violations of short-selling regulations. The inquiry stems from trade orders flagged by the KRX’s newly introduced Naked Short Selling Detection System (NSDS), which identified suspicious transactions resembling naked short sales, according to a report by Hankyung.com.
The committee has already conducted working-level reviews and received explanations from the compliance departments of both firms. The matter was reportedly discussed once last month and is expected to be reviewed again in October before a final decision is reached.
A KRX official commented,
“While the fact-finding stage has been completed at the working level, the Market Oversight Committee’s review is still ongoing, and no final conclusion has been reached.” (Hankyung.com)
The NSDS, implemented at the end of March, is designed to monitor not only naked short selling but also compliance with the uptick rule (prohibiting short-sale orders below the last traded price) and accurate labeling of borrowed short-sale transactions. In this case, the focus is on whether the two brokerages violated the ban on naked short selling.
Stronger Penalties in Place
In the past, violations of naked short-selling rules resulted in fines of up to KRW 100 million. However, since the April 2021 amendment of the Capital Markets Act, penalties have been strengthened to allow fines of up to 100% of the transaction amount.
Disputed Issue: Error Corrections
Industry insiders note that the central issue is whether trades corrected after an error can be considered naked short selling if the required pre-reporting was not submitted before processing. Brokerages argue that such practices have been long-standing procedures for correcting trade errors and should not be equated with intentional naked short selling.
A Samsung Securities spokesperson declined to comment, stating that the matter is still under review. A Korea Investment & Securities representative added,
“This issue relates to regulations followed by all securities firms, and the case is currently under review by the exchange.”
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
