GIC fined US$82,100 by South Korea regulator over short-selling violation; third-party agent responsible pays penalty
The violation was the result of operational lapses, errors and contractual breaches by the third-party agent, said Singapore's sovereign wealth fund.
The logo of Singapore's sovereign wealth fund GIC at their office in Singapore on Jul 13, 2023. (File photo: Reuters/Edgar Su)
This audio is generated by an AI tool.
SINGAPORE: Singapore's sovereign wealth fund GIC has been fined 120.6 million won (US$82,100) by a South Korean regulator over a short-selling violation, and GIC said the fine has been paid by the third-party agent responsible.
The breach involved naked short-selling, which is the illegal practice of short-selling shares without first borrowing them or confirming they can be borrowed, possibly resulting in a failure to deliver the shares to the buyer by the settlement date. This is in contrast to normal short-selling, which involves traders borrowing shares to sell on the market before buying them back, ideally at a lower price, to return to the lender.
GIC had placed a sell order for 8,415 shares of luxury hotel chain Hotel Shilla, valued at 666.1 million won, in March 2022 despite not owning the shares in the account it was managing at the time, according to documents filed by South Korea's Securities and Futures Commission (SFC).
In response to queries from CNA, GIC said on Thursday (Jan 22) that the violation was the result of operational lapses and errors by the third-party agent, as well as breaches of its contractual arrangement with GIC.
"The agent has acknowledged its responsibility, liabilities and accepted full accountability to GIC for its lapses to the Korean regulator," a GIC spokesperson said.
"The agent has fully borne and paid up the financial penalty for and on GIC's behalf, which was accepted by the Korean regulator."
SFC documents also showed that the fine imposed on GIC was cut by 50 per cent to 120.6 million won, as the commission deemed that GIC's standing as a foreign public institution meant the likelihood of involvement in unfair trading or settlement failure was extremely low and that no profit whatsoever had been gained from the violation and only losses incurred.
The GIC spokesperson said that the sovereign wealth fund is a long-term investor that does not engage in uncovered short sales and that it will continue to review and monitor its ongoing operational processes with all its third-party agents to ensure that such operational lapses do not happen again.
"We have been investing in Korea for over two decades and it remains an important market for us," the spokesperson added.
South Korean media reported on Monday that six domestic and foreign asset managers and securities firms, including GIC, had been fined a combined 3.97 billion won by the SFC for engaging in naked short-selling.
The Chosun Daily and Korea JoongAng Daily reported that the fines had been decided upon in October and disclosed publicly in December.
The most heavily penalised firm was Norway-based Pareto Securities, which was fined 2.2 billion won for placing a sell order for over 170,000 Samsung shares worth around 10.9 billion won without holding them.
Another sanctioned firm was South Korea's Shinhan Asset Management, which was fined 370 million won after regulators discovered that the firm had placed sell orders for 5,000 stocks it did not own.
The other penalised firms were Alberta Investment Management Corporation from Canada, US-based Invesco Capital Management and Northern Trust of Hong Kong.
