SEOUL, Nov. 28 (Xinhua) -- South Korea's financial regulator said Wednesday that it fined the Seoul branch of U.S.-based Goldman Sachs Group 7.5 billion won (6.7 million U.S. dollars) for the naked short selling that is illegal in the country.
The Financial Services Commission (FSC) said the fine was imposed as the U.S.-based investment bank violated the local rules that ban financial institutions from making a sell order without borrowed stocks.
Short selling, which is legal here, refers to the sale of borrowed stocks on expectations for a price fall. The borrowers are required to return back the borrowed stocks by buying back the stocks when the price falls, making a profit of the price gap.
The naked short selling is illegal as financial institutions give a sell order without borrowed stocks. It raises volatility in the stock market and is sometimes used to manipulate stock prices.
The Goldman Sachs Seoul branch gave the naked short-selling order of local listed stocks worth 40 billion won (3.6 million U.S. dollars) in late May. It failed to report the holdings of its short-selling orders for two years through June this year.
The fine levied on Goldman Sachs was the biggest ever imposed by the country's financial regulator for the violation of the short-selling regulation.
