▲ HSBC Hong Kong
The Hong Kong branch of global investment bank HSBC, which was indicted on charges of conducting naked short selling worth KRW 15.8 billion, has been definitively acquitted by the Supreme Court.
The Supreme Court's Second Division (presiding Justice Oh Kyung-mi) dismissed the prosecution's appeal during the final ruling held today (October 8) regarding the Capital Markets Act violation charges against HSBC's Hong Kong branch, thereby finalizing the lower court's acquittal.
Short selling involves borrowing shares in advance and selling them when a stock price drop is anticipated, then buying them back at a lower price to return them when the price actually falls.
South Korea prohibits "naked short selling," which is selling short without borrowing the shares in advance.
Three individuals, including an HSBC Hong Kong branch trader identified as A, were indicted in March 2024 on charges of naked short selling 318,781 shares (valued at KRW 15.78468 billion) across nine listed companies, including Hotel Shilla, between August and December 2021.
The HSBC corporate entity was also put on trial under the joint penal provision.
This marked the first time a case involving violations of naked short selling regulations was brought to a criminal trial.
However, in February of last year, the first instance court acquitted the Hong Kong branch of HSBC.
The first instance court stated, "In South Korea, the price difference must be finalized before conducting short selling, and HSBC had a system that carried out the price difference finalization process ex post," while adding, "There is insufficient evidence to acknowledge that the bank employees knowingly committed naked short selling while aware of the violation of South Korean regulations."
Although the prosecution appealed, the appellate court and subsequently the Supreme Court maintained the acquittal.
Lee & Ko, the law firm representing HSBC, stated, "This ruling puts an end to the controversy over whether HSBC bears criminal responsibility for violating naked short selling regulations," adding, "It is of great significance as it provides guidelines on under what circumstances naked short selling acts become subject to criminal punishment."
(Photo: Yonhap News)
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