SEOUL, Oct 15 Reuters South Korea39;s stock market watchdog said on Sunday it found two Hong Kongbased investment banks had engaged in naked shortselling, which would likely result in record fines.

The two unnamed investment banks made naked shortselling transactions of a total 40 billion won 29.58 million and 16 billion won, respectively, the Financial Supervisory Service FSS said in a statement.

Naked short selling of stocks in which an investor short sells shares without first borrowing them or determining they can be borrowed is banned by the Capital Markets Act in South Korea.

The violations by the global banks were over long periods, for nine months through May 2022 and five months through December 2021, respectively, and expected to result in record amounts of fines, the FSS said.

The FSS said such violations, which came against authorities39; efforts to provide a more favourable environment for foreign investors, should be prevented from recurring and that it would also look into practices at other similar investment banks.

1 1,352.2100 won

Reporting by Jihoon Lee; Editing by Muralikumar Anantharaman

Source Reuters