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Hedge fund Regal charged in South Korea short-selling crackdown

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Regal Funds Management Pty Ltd, one of Australia’s largest hedge funds, has been indicted by South Korean regulators as part of an expansion of Seoul’s crackdown on short-selling trading practices, according to report by Bloomberg.

The reports cites a statement released by Regal on Friday as confirming that the firm and a former employee have been charged with allegedly violating securities trading regulations in 2019. The charges follow a comprehensive review of short selling by the Korean Financial Services Commission. A spokesperson for the Seoul Southern District Prosecutors Office declined to comment.

Regal, which managed AUD17bn ($11.4bn) as of September, denied the allegations, stating it is “considering its rights under South Korean law” and will assess any potential financial impact on the group after reviewing the indictment, which it has yet to receive.

In an April filing, Regal disclosed plans to appeal a KRW313m ($228,408) penalty for alleged securities law breaches related to trades made by a former employee.

The crackdown represents a significant escalation in South Korea’s efforts to root out illegal short-selling and other ‘unfair’ practices, which have previously entangled major global institutions. While the fines imposed are relatively small, they convey a clear message about the government’s intent to maintain strict oversight.

South Korea’s financial industry has faced increased scrutiny since the country banned short selling in its $1.9tn stock market in 2020. Several global financial institutions, including Credit Suisse Singapore Ltd, HSBC Holdings Plc, Segantii Capital Management Ltd, and Jane Street Group LLC, have faced investigations and penalties as part of the crackdown.

In May, South Korean authorities revealed they had uncovered KRW211.2bn ($155m) worth of illegal short trades involving nine global investment banks.

The reports cites a statement released by Regal on Friday as confirming that the firm and a former employee have been charged with allegedly violating securities trading regulations in 2019. The charges follow a comprehensive review of short selling by the Korean Financial Services Commission. A spokesperson for the Seoul Southern District Prosecutors Office declined to comment.

Regal, which managed AUD17bn ($11.4bn) as of September, denied the allegations, stating it is “considering its rights under South Korean law” and will assess any potential financial impact on the group after reviewing the indictment, which it has yet to receive.

In an April filing, Regal disclosed plans to appeal a KRW313m ($228,408) penalty for alleged securities law breaches related to trades made by a former employee.

The crackdown represents a significant escalation in South Korea’s efforts to root out illegal short-selling and other ‘unfair’ practices, which have previously entangled major global institutions. While the fines imposed are relatively small, they convey a clear message about the government’s intent to maintain strict oversight.

South Korea’s financial industry has faced increased scrutiny since the country banned short selling in its $1.9tn stock market in 2020. Several global financial institutions, including Credit Suisse Singapore Ltd, HSBC Holdings Plc, Segantii Capital Management Ltd, and Jane Street Group LLC, have faced investigations and penalties as part of the crackdown.

In May, South Korean authorities revealed they had uncovered KRW211.2bn ($155m) worth of illegal short trades involving nine global investment banks.

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