CREDIT Suisse reportedly faces 50 billion won (S$49.4 million) in penalties over illegal short selling in South Korea, where authorities are due to give an update on their broader investigation into the practice on Friday (May 3).

The Financial Supervisory Service (FSS) is imposing the fine on the Singapore and South Korean units of Credit Suisse over alleged illegal short selling, daily newspaper Chosun Ilbo reported, citing unidentified sources in the industry and financial authorities. The penalty will be finalised after it is reviewed by committees at the FSS and the Financial Services Commission.

UBS Group, which acquired Credit Suisse in 2023, declined to comment to Bloomberg News on the report. The FSS declined to confirm the name of the firm and the size of the penalty when contacted by Bloomberg.

On Friday, the financial watchdog will brief reporters on the interim results of the short-selling investigation into global banks.

Since late last year, South Korea has been probing past short-selling transactions by global banks in a bid to root out illegal use of the practice, and even banned all short-selling from last November to next month. It’s a contentious political issue in the country, where the powerful retail investor cohort often blames the practice for driving stocks lower.

In December, the financial watchdog imposed fines on BNP Paribas and HSBC Holdings for naked short selling – selling shares without borrowing them first – which is illegal in South Korea, while prosecutors have indicted HSBC’s Hong Kong unit and three of its traders.

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As the June expiry of the current ban approaches, the nation has announced details of an upcoming centralised system to monitor short selling. The platform, to be managed by Korea Exchange, the nation’s sole bourse operator, can identify naked short selling. BLOOMBERG