(1) Reasons for Proposal

As the Financial Investment Services and Capital Markets Act was amended (January 5, 2021) to tighten punishment for illegal short selling and improve the short selling system, this Partial Amendment aims to reflect matters delegated from the Act.

(2) Major Provisions

A. Delete the basis to limit short selling (Article 208)

Delete the basis to limit short selling as a temporary market action in the Enforcement Decree as the basis to limit short selling was moved to the Act.

B. Limit those who short sell during the paid-in capital increase period from participating in paid-in capital increase (Article 208-4)

Limit those who short sell from the day after the date of publicly disclosing a paid-in capital increase plan to the value date, in which the issue price written in documentation disclosed for paid-in capital increase is determined, from participating in paid-in capital increase, while allowing them to participate in paid-in capital increase in exceptional cases such as buying more than short sold since the last short selling.

C. Specify the method to storage loan transaction information (Article 208-5)

Require those who make a loan transaction for borrowed short selling to store loan transaction information including loan transaction item, quantity, and confirmed date with electronic systems which cannot be falsified or fabricated.

D. Prepare criteria to impose penalty surcharges (Article 379)

Comprehensively consider the short selling amount and profits earned from a violation when imposing penalty surcharges if those who illegally short sell or short sell during the paid-in capital increase participate in paid-in capital increase.

E. Delegate the authority to impose administrative fines and penalty surcharges to the Securities and Futures Commission (Article 387)

Delegate from the Financial Services Commission to the Securities and Futures Commission the authority to impose penalty surcharges on those who illegally short sell or short sell during the paid-in capital increase for violating obligations to not participate in paid-in capital increase and administrative fines for any violation of storing and submitting loan transaction information.

F. Prepare criteria to impose administrative fines (attached Table 22)

Impose obligations to store loan transaction information and define administrative fines imposed on violators failing to submit to financial authorities as 60 million won for corporations and 30 million won for those who are not corporations.