Korea is said to accuse BNP Paribas of illegal short selling – BNN Bloomberg

(Bloomberg) — South Korean prosecutors have charged BNP Paribas SA with allegedly violating short-selling rules, according to people with direct knowledge of the matter, marking the latest development in the country’s crackdown on such trading.

The French bank was last week accused of violating local capital markets law, according to people who asked not to be identified in connection with the private matter. Earlier this month, the Seoul Southern District Prosecutor’s Office charged a global investment bank and a global hedge fund with illegal short selling, without naming them, according to an office spokesman.

Regal Funds Management Pty Ltd., one of Australia’s largest hedge funds, said last week that it and a former employee were facing charges for allegedly violating securities laws in 2019. Regal denied the allegations and said it was “considering its rights under South Korean law.”

BNP Paribas, the prosecutor’s office and the Korea Securities and Futures Commission declined to comment.

The indictment was issued after Bloomberg News reported in December that Korean financial regulators had imposed a total fine of 26.5 billion won ($19 million) on BNP Paribas, its domestic brokerage unit and HSBC Holdings Plc for unlawful short selling. HSBC’s Hong Kong branch and three of its traders were indicted by Korean prosecutors in March on allegations of illegal short selling, with the bank promising to “strongly” defend its position at the time.

The financial industry is under increased scrutiny in Korea, which banned short selling on its stock exchange a year ago. As part of these attacks, banks including Credit Suisse Singapore Ltd., as well as hedge funds such as Segantii Capital Management Ltd. and Jane Street Group LLC, also faced investigations and financial penalties.

Korea’s top financial regulator said last month that it plans to lift the short-selling ban at the end of March and will ensure that necessary regulatory changes are made by then. The goal is to allow the strategy to be applied to all stocks, not just a limited number of stocks, Financial Services Commission Chairman Kim Byoung-hwan said at the time.

— With help from Denise Wee and Michael Patterson.