GIC Faces US$82,100 Fine for Short-Selling Violation in South Korea

Singapore’s sovereign wealth fund, GIC, has been fined 120.6 million won (approximately US$82,100) by South Korea’s financial regulator due to a breach related to short-selling. The penalty arises from the fund’s involvement in naked short-selling, a practice where shares are sold without ensuring they can be borrowed, risking a failure to deliver by the settlement date.

The violation occurred in March 2022 when GIC placed a sell order for 8,415 shares of the luxury hotel chain Hotel Shilla. This order was valued at 666.1 million won, despite GIC not owning the shares at that time, as outlined in documents from the South Korea Securities and Futures Commission (SFC).

Operational Lapses and Accountability

In a statement responding to inquiries, GIC explained that the breach resulted from operational lapses and errors committed by a third-party agent responsible for the transaction. The spokesperson noted that the agent has accepted full responsibility for the violations and has paid the fine on GIC’s behalf.

“The agent has acknowledged its responsibility, liabilities, and accepted full accountability to GIC for its lapses to the Korean regulator,” the GIC spokesperson stated. They confirmed that the financial penalty was accepted by the SFC.

The SFC documents indicate that the fine on GIC was reduced by 50 percent. The commission concluded that GIC’s status as a foreign public institution significantly lowered the likelihood of unfair trading or settlement failure. Additionally, the commission determined that GIC had not profited from the violation, incurring only losses.

Commitment to Compliance

GIC emphasized its position as a long-term investor that does not engage in uncovered short sales. The fund plans to continue reviewing and monitoring its operational processes with all third-party agents to prevent similar issues in the future.

“We have been investing in Korea for over two decades, and it remains an important market for us,” the spokesperson added.

The SFC’s actions are part of a broader crackdown on naked short-selling. GIC was one of six domestic and foreign asset managers and securities firms fined a total of 3.97 billion won for similar violations. Reports from Chosun Daily and Korea JoongAng Daily indicate that these fines were determined in October 2023 and publicly disclosed in December.