The state financial regulator has slapped a record penalty on global investment banks BNP Paribas and HSBC for illegal short selling.

The Securities and Futures Commission of the Financial Services Commission said on Monday that it decided to fine the two banks a combined 26-and-a-half billion won, or 20-point-four million U.S. dollars, for illegal short selling while also filing a complaint against the two firms with the prosecution.

The fine is the largest imposed since short selling became subject to penalties in April 2021.

BNP Paribas in Hong Kong issued orders for unborrowed short positions worth 40 billion won on 101 stock items, including Kakao, between September 2021 and May 2022.

HSBC was found to have submitted orders to short 16 billion won in stock on nine stock items, including The Shilla, between August and December of 2021.

The move comes shortly after the government unveiled plans last month to temporarily ban short selling until the end of June next year.

Short selling is an investment or trading strategy that speculates on a decline in the price of a stock or security, with investors trading with borrowed shares that they intend to buy back and return later for less money, netting the difference between the price they sold and re-bought it for.