KOREAN REPUBLIC: FSC announce plans for significant changes to short selling rules

Friday October 7 2016

The Financial Services Commission of South Korea (FSC) has announced plans for a major revision of short-selling and disclosure rules as soon as possible, following significant losses experienced by retail investors of Hanmi Pharmaceutical Co. after short-selling was undertaken by institutional and foreign players prior to a public disclosure being made, and upon a suspected insider tip.

The chairman of the Financial Services Commission, in a parliamentary audit on 06 October 2016, indicated they will come up with revised short-selling rules as soon as possible after studying the overall situation.

The FSC are investigating Hanmi Pharmaceutical for breach of disclosure rules and suspicions that the drug maker intentionally delayed an announcement on the cancellation of a contract with Boehringer Ingelheim before making the disclosure (29 minutes after the opening of the market).

Current short-selling rules require disclosure of short-selling trades three days after the transactions are made.

The FSC Chairman indicated that since most of the short-sellers were foreign institutional investors, belated disclosures were unavoidable due to the time gap.

Opposition leaders called for listed firms to be required to make announcements about any change in technology or license-related contracts immediately, and disclose volumes of short sales made. Currently, firms are given autonomy to decide whether to make such a disclosure.

Please follow the link to our article of 04 July 2016 for a summary of short selling rules and penalties introduced on 30 June 2016.

Please click the link at the top of the page for information on the latest parliamentary audit on the Financial Services Commission (Korean).