Citigroup and Barclays Face Penalty for Naked Short Selling

Citigroup Inc. C and Barclays PLC BCS have been fined for financial misconduct under the recommendation of South Korea’s financial watchdog. The nation’s Financial Supervisory Service (“FSS”) imposed a fine on both companies for engaging in naked short selling activities. This was reported by Bloomberg citing people familiar with the matter.Short selling is an investment strategy where an investor sells stocks they do not own. This involves borrowing the stocks, selling them with an expectation of a decline in stock price, and later repurchasing them at a lower price to return to the lender. Notably, South Korea has banned naked short selling since November 2023. The ban is expected to be lifted by the end of March 2025, allowing short selling activities to resume under stricter oversight.C and BCS’ Penalty for Engaging in Naked Short SellingAccording to the source, Citigroup was fined 4.7 billion won ($3.2 million) for its involvement in naked short selling activities, while BCS received a penalty of 13.7 billion won ($9.5 million) for the same violation. Initially, the FSS proposed penalty surcharges of 20 billion won for Citigroup and 70 billion won for Barclays for the naked short selling violations, which were later submitted to the Securities and Futures Commission (SFC) for review. Citigroup and Barclays were found to have used a “post-borrowing” method, executing short sales before securing the borrowed shares. While this practice led to regulatory scrutiny, the SFC ultimately concluded that there was no intention to violate the rules. Hence, these penalties were significantly reduced, approximately by 80% of the amounts proposed initially.A spokesperson from FSS said, "Both investment banks also made efforts to prevent illegal short selling, which was reflected in the final calculation of the penalty surcharges."Some other big banks like HSBC Holdings plc HSBC and BNP Paribas SA BNPQY were also slapped with penalties for engaging in naked short selling activities in South Korea. A combined penalty of 26.5 billion won was imposed on HSBC and BNPQY in November 2023.Citigroup & Barclays’ Price Performance & Zacks RankShares of Citigroup and BCS have gained 12.4% and 21.1%, respectively, in the past six months.Image Source: Zacks Investment ResearchCurrently, C and BCS carry a Zacks Rank #3 (Hold) each. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Citigroup Inc. (C): Free Stock Analysis Report Barclays PLC (BCS): Free Stock Analysis Report BNP Paribas SA (BNPQY): Free Stock Analysis Report HSBC Holdings plc (HSBC): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks