November 30, 2024

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(123rf)

The Financial Supervisory Service will look into financial institutions that handled an unusually large volume of short selling when the local markets were jumpy, the watchdog’s chief said Tuesday, as retail investors step up calls for greater oversight over the practice they say leaves them outgunned by institutional investors.

“A routine checkup is needed to see if we could come up with a better way to regulate the practice,” FSS Gov. Lee Bok-hyun told reporters, saying the agency intends to improve policy rather than seek to punish local brokerages.

The inspection would take place in October at the earliest, Lee noted, adding he had been backing efforts to root out “all unfair practices” affecting the local markets, including short selling.

Last month, the agency asked prosecutors to investigate Edison Motors, a local electric-car maker whose executives had sold their shares at their peak when news broke out it was eyeing buying SsangYong Motor, a debt-ridden carmaker. Edison pulled out at the last minute.

Lee fast-tracked the investigation, which was the first of its kind since he took office in June. Lee’s handling of the case was considered a sign that the former prosecutor versed in white-collar crimes would double down on regulatory crackdown.

Lee also said he would run in-house investigations into suspicious wire transfers involving local banks and a local cryptocurrency exchange, which had taken part in handling at least 8 trillion won ($6.1 billion) in overseas remittances. Some say digital assets were used.

“Trillions of won just slipped out of the country and I think we should definitely do something so it won’t happen again,” Lee said.

Whether banks are doing enough to step up internal oversight has been a contentious debate in Korea since Woori Bank, one of the five major lenders, reported earlier this year a theft involving its employee who had allegedly stolen at least 700 billion won.

The employee, standing trial, had turned himself in. Critics say authorities would not have found out the wrongdoing if he had not come forward, arguing the FSS needs to toughen up checks on financial institutions more than ever.

The watchdog had and will work with prosecutors and the Financial Services Commission, the top financial policymaker, to steady the markets and prevent unfair practices, Lee said.

By Choi Si-young (siyoungchoi@heraldcorp.com)