South Korea imposes fines on hedge funds that misuse block trade information

On the 20th, South Korea's Securities and Futures Commission issued a criminal complaint against three global hedge funds that misused information from block trades, which are off-market OTC transactions, to engage in fraudulent short selling transactions and obtain unfair profits.
announced that it had decided to impose a surcharge of 2.02 billion won (approximately 222 million yen) and a fine for violations of the Capital Market Act.
According to the committee, Global Hedge Fund A
, when negotiating the block transaction price for the shares of Company B, a listed Korean company, placed and concluded a sell swap order for 11.6 billion won worth of shares with the aim of lowering the company's stock price.
It is estimated that Company A's unfair profits as a result of this amount to approximately 3.2 billion won. After negotiating the block transaction, and before the transaction information is made public, Company A will be able to sell this stock without borrowing money.
I sold (placed an order to sell stock without borrowing it). The committee said, ``This was a violation of short-selling restrictions,'' and added, ``This was a violation of short-selling restrictions for the purpose of obtaining unfair profits before disclosing important information.''
"Short selling is recognized as an illegal means, so we judged it to be a fraudulent transaction." The committee concluded that Company A's violation of short selling restrictions will be carried out before the introduction of penalties and fines in 2021.
Because the act was committed, we decided to impose a separate fine of 60 million won. The three hedge funds, including Company A, also participate as buyers in block trading of Company B's stock, and the purchase price is determined.
However, before the block transaction information was made public, the company submitted and concluded a sell swap order worth 176.8 billion won for Company B's shares.
Stock prices usually fall when news of a block trade is reported, so
It appears that the purpose was to obtain a market profit. Financial authorities said, ``Currently, we are conducting an intensive investigation into short selling transactions in Global IB.
We will also closely examine the possibility of this, and if any such incident is discovered, we will promptly launch an investigation and take strict action."