The FSS's recent findings are part of an ongoing probe into 14 foreign banks, revealing unauthorized transactions now implicating nine banks with combined irregularities worth 211.2 billion won ($154.76 million). The investigation is still ongoing for five other banks, details of which remain undisclosed by the FSS.

In related news, South Korea's Chosun Ilbo daily reported that Credit Suisse AG had been informed of a potential 50 billion won fine for non-compliance with short-selling regulations. This notice involves the bank's South Korean and Singaporean branches, although both FSS and UBS, which acquired Credit Suisse in 2023, have not commented on the matter.

Amidst these developments, the FSS is collaborating with Hong Kong authorities and will be discussing South Korea's short-selling laws there later this month. In response to these breaches, South Korea has extended its ban on "naked" short selling – selling shares without securing them beforehand – and is developing new monitoring systems to better identify and prevent such violations in the future.

The new system will electronically track all short sale transactions by big investors and check them through a central system at the stock exchange. The head of the Financial Supervisory Service (FSS), Lee Bok-hyun, explained that illegal short selling has been a key reason for the “Korea discount,” which makes Korean companies appear less valuable compared to global firms due to issues like low dividends and unclear management.

Lee hopes that this thorough checking system will eliminate illegal short selling. He shared these details ahead of a briefing about the new system to experts and individual investors. The regulator noted that the final checks on the new system are almost done but did not specify when the short selling ban would end. The ban has been in place since last November when illegal trading by some foreign banks was discovered.

Authorities have decided to keep the ban until they are sure the new system works well. Lee mentioned that it’s unclear when the ban will be lifted as they need to see how well the new system functions. Most big and foreign investors agree that using the electronic system to regain trust from local individual investors is important, even if it costs them.

To make trading fair, South Korea also plans to ease short-selling rules for individual investors and set new borrowing limits for big and foreign investors once the ban is removed