Home Hedge Funds Segantii, Point72 Hedge Funds Fined for Korean Trades

Segantii, Point72 Hedge Funds Fined for Korean Trades

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(Bloomberg) — Hedge fund firm Segantii Capital Management Ltd. and proprietary trader Jane Street Group LLC were among companies fined by South Korea last year during a regulatory crackdown.

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Segantii, Jane Street and Regal Funds Management Pty Ltd. were fined in December, according to regulatory filings. Point72 Asset Management LP drew a penalty in September for an uncovered short position caused by human error, a separate filing showed.

Read More: Hong Kong Watchdog Prosecutes Segantii Pair for Insider Dealing

South Korea has been retroactively probing short-selling transactions by global banks since late last year to root out illegal use of the practice. It even banned all short selling from last November through next month. It’s a contentious political issue in the country, where retail investors often blame the practice for driving stocks lower.

Credit Suisse faces 50 billion won ($36 million) in fines over alleged illegal short selling in South Korea, local newspaper Chosun Ilbo reported Thursday. The Financial Supervisory Service launched an investigation into global banks’ past short-selling transactions, which resulted in fines on BNP Paribas SA and HSBC Holdings Plc. The latter was also indicted by prosecutors. The financial watchdog is scheduled to hold a briefing on Friday to share interim investigation results.

South Korea’s financial authorities imposed penalties including 2 billion won in fines on three global hedge funds in December without naming them. They allegedly violated rules during block trades of SK Hynix Inc. shares in October 2019.

One of the three funds conducted an alleged illegal trade including naked short selling, the FSS said in December. The move is banned in South Korea and a violation of the capital markets act, subject to criminal punishment. Two others were penalized by financial authorities but do not face prosecutors’ investigation.

The Seoul Southern District Prosecutors’ Office declined to comment on an ongoing investigation.

Segantii paid a Korean Financial Services Commission fine of $1.15 million “in connection with certain hedging trades,” the Hong Kong-based firm disclosed in an April 26 filing to the US Securities and Exchange Commission.

Separately, Hong Kong’s securities watchdog started criminal proceedings against Segantii, along with its founder Simon Sadler and former trader Daniel La Rocca over alleged insider dealing, according to a statement Thursday.

Korea’s FSC imposed a $215,000 penalty on Jane Street related to a block trade during the same month for “violating market disruption provisions,” the firm disclosed. Regal’s appeal of a $234,000 FSC fine is under review, it said on April 16.

Point72 in September paid a $165,000 penalty for a short position left uncovered temporarily as a result of a one-off error of a trader at its Hong Kong unit two years earlier, it said a March 28 filing. The firm quickly remedied the situation and the trade was reported to the Korean exchange via the broker that executed it.

(Updates with details on HK probe of Segantii. Earlier version corrected date of fine on Point72)

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