South Korea starts inspections for stock short-selling with Morgan Stanley

South Korea’s financial regulator Financial Supervisory Service (FSS) said on Tuesday it has launched an inspection into short selling of shares by major brokerages and branches of foreign firms, starting by the Seoul branch of Morgan Stanley.

The move is part of South Korea’s efforts to tighten supervision on such trading.

FSS’s official said the inspection was not based on any irregularities as it didn’t target any specific company.

The official stressed on this is part of FSS efforts to strengthen monitoring of short selling, which is the sale of borrowed shares, benefiting the seller if prices fall.

The inspection is likely to focus on the major players and it is not important too look in all companies, according to the official.

Korea Exchange’s data shows local branches of such foreign companies as Merrill Lynch, Credit Suisse, Goldman Sachs and UBS were also among the main players in terms of stock short-selling.

President Yoon Suk-yeol has ordered for a comprehensive supervision of stock short-selling, which many South Korean retail investors have complained has deepened the local stock market’s falls.