KOREAN REPUBLIC: FSC publishes details of South Korea short position reporting rules to apply from 30 August

Wednesday July 4 2012

The Financial Services Commission (FSC), Financial Supervisory Service (FSS) and Korea Exchange (KRXwill introduce a rule that will make it mandatory to file a report on South Korea short positions with regulators from August 30, 2012.

The way to adopt the new reporting requirement has been paved as proposed amendments to Enforcement Decree of Financial Investment Services and Capital Markets Act was approved by the cabinet council on June 26, 2012 and is due to be promulgated on June 26, 2012. Regulators will develop detailed provisions by collecting industry feedback and studying the South Korea short position reporting regime in other markets and reflect them in Regulation on Financial Investment Services.

An investor, as opposed to a brokerage house, who has an open short position resulting from short sales that amounts to or exceeds the threshold of 0.01 % of the issued share capital of a listed company at the end of each trading day has an obligation to report the short position to the regulators.

An investor that runs a number of units in pursuit of investment strategies independent from each other would be required to aggregate the short positions in a particular stock of all units (“Aggregation Units”).

An individual investor who has the reporting obligation should report his reportable short position within three business days from the day when short position reaches the threshold. If the daily short positions continue to amount to or exceeds 0.01 % of the issued share capital of a listed company, the investor who has the reporting obligation should report to the regulators each day.

The reporting requirement applies only to short positions resulted from trading shares listed on the exchange. Short positions created via trading of other securities or derivatives will be excluded for reporting purpose. Short sale positions incurred from market makers’ activities to provide liquidity in the markets will not be counted for the threshold positions.

Details that should be reported are the name of the short-sold stock, the name and other personal information of reporting individual, total quantity of open short positions of the short-sold stock and the proportion of short positions to the issued share capital.

The short positions report would be submitted electronically through the FSS website.

A notice on amendments to the Regulation on Financial Investment Services will be published for 40 days from June 27 to August 5, 2012 and the proposed reporting rule will be submitted for FSC approval in August so that it can come into effect from August 30, 2012.

Click on the above link for more details.