Regal Funds Management Pty Ltd said it was indicted, along with a former employee, for an alleged violation of securities trading regulation in 2019. The charges follow a market-wide review of short selling by the Korean Financial Services Commission, it said in a statement on Friday. A spokesman for Seoul southern district prosecutors office declined to comment.

Regal, which had A$17 billion (US$11.4 billion, or RM49.09 billion) under management at the end of September, denied the allegations and said it is “considering its rights under South Korean law”. It will assess the materiality of any “potential one-off financial impact to the group,” after it reviews a copy of the indictment, which it hasn’t yet received.

Regal said in an April 16 filing that it would appeal what it said was then a 313 million won (US$228,408) penalty for alleged breaches of the securities law in connection with trades, made by a former employee. 

The regulatory crackdown marks a step up in South Korea’s efforts to weed out illegal short-sellers and other unfair practices, which has previously snarled global institutions. While the fines are meager, they tend to send a strong message about the government’s intentions.

The financial industry has been under increased scrutiny in South Korea, which outlawed short selling in its US$1.9 trillion stock market a year ago. Banks, including Credit Suisse Singapore Ltd and HSBC Holdings Plc, as well as hedge funds, such as Segantii Capital Management Ltd and Jane Street Group LLC, have faced probes and fines as part of the crackdown.  

Authorities said in May that they had uncovered 211.2 billion won (US$155 million) worth of illegal short trades by nine global investment banks.

Bloomberg News reported in August that South Korea’s prosecutors were asked to conduct an investigation into the hedge fund for alleged capital markets rules violations. However, the charges seem to reverse what looked to be a thaw in the jurisdiction’s aggressive stance for active managers of funds, with just months before the jurisdiction is set to lift its ban on short selling in 2025.

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