(LEAD) S. Korea to lift stock short-selling ban on March 31 next year

South Korea's financial regulator said Thursday it will lift a ban on stock short selling on March 31 next year after completing building a computerized monitoring system on illegal short selling. The Financial Services Commission (FSC) also endorsed an extension of the short-selling ban until March 30 next year, after a three-partite policy coordination meeting involving the government, ruling party and the private sector. "Large-scale illegal stock short selling may be repeated should we resume the system before a monitoring system is established," FSC vice chairman Kim So-young said of reasons to extend the stock short-selling ban. "I think that short-selling could be resumed from March 31 next year." The government is working to develop a "naked short-sale detection system" that it said will enable real-time monitoring of stock short sales by the Korea Exchange, the country's bourse operator. The FSC earlier said it will work to develop the new monitoring system by March. The ban on stock short selli ng was put in place in November, and was originally set to expire at the end of this month. The financial regulator earlier said the ruling People Power Party had asked the government to extend the ban at Thursday's meeting, where the participants also finalized a plan to improve the country's stock short-selling system. "The plan to improve the stock short-selling system is an effort to protect investors and maintain market order by fundamentally improving the system," the financial regulator said in a press release. To this end, institutional investors, which account for 92 percent of stock short selling, will be required to develop and maintain a system that will prevent naked or illegal stock short selling in the first place. The move to improve the stock short-selling system came after the financial regulator detected illegal short selling at two global investment banks (IBs) in the country. The government has since launched an inspection of all 14 major global IBs in the country, and has so far det ected illegal short selling orders, worth some 211.2 billion won (US$153.7 million) at nine of them while the other five IBs are still undergoing inspection, according to the FSC. The financial regulator said it will push to strengthen punishment for naked stock short selling. Currently, those found guilty of naked short selling may be fined up to five times their profit from illegal trade. The maximum fine will be raised to six times the profit, while the maximum prison term for those making more than 5 billion won from illegal short selling will increase from 30 years to life imprisonment. "The government plans to swiftly take follow-up measures so the plan to improve stock short-selling system can be implemented at the earliest date possible," the FSC said. "It will work closely with the National Assembly to support the legislation process with an aim to revise the related laws before the end of the year," it added. Source: Yonhap News Agency