South Korea’s small investors are expressing their anger at some securities firms for reportedly cooperating with corporate investors over their short-selling practices.

A recent move to transfer their stocks to the accounts of other securities firms is gaining support from more and more individuals. The brokerage houses, which have faced retaliatory moves by individuals, included Kiwoom Securities, Mirae Asset Securities and NH Investment & Securities.

Data showed that the three firms accounted for 69 percent of the short-selling conducted on the Korean bourse. The three have faced boycotts for taking huge service charges after lending small investors’ stocks to corporate investors -- which were frequently exploited as a tool for short selling.

Short selling is a legitimate trading skill. Institutions can reap gains by dumping borrowed stocks and repurchasing them at lower prices later -- which is called short covering. After making these gains, the institutions hand back the shares to the original holders, such as individuals and public pensions.

During the process, securities firms play the role of brokers, linking stock lenders (the original holders) and borrowers (institutions). Sometimes, securities firms directly carry out short sales as an institutional investor.

Local individuals’ anger started from a systematic problem that institutions enjoy “exclusive” rights to conduct short selling. The core point surrounding public discontent lies in the fact that individuals are banned from doing it in Korea.

The Financial Services Commission has to answer their concerns in a reasonable manner through official statements, including an explanation of why it does not think the rule is unduly unfair.

The FSC should also publicize its logic to allow the public to compare the local rule with global standards. As a comparison, it should explain the difference between the local system and that of the U.S., in which the Securities and Exchange Commission allows individuals to exercise short-selling authority.

Individuals investing in the Nikkei equities are also given similar rights under the guidance of the Japanese Financial Services Agency.

The unfair regulation on the Korea Exchange does not coincide with policymakers’ continuous pledge to upgrade and globalize the local capital market. It could also deter individual foreign investors from the first-tier KOSPI and secondary KOSDAQ.

Apart from the FSC, the National Assembly cannot free itself from the criticism that they are sitting idly by while the unfair rule remains.

Last year, some lawmakers strove to bar the National Pension Service -- Korea’s largest state pension fund -- from being used for local institutional investors’ routine massive short-selling of stocks.

Rep. Hong Moon-pyo from the Saenuri Party said in its proposed bill that the lending service charges totaling 26 billion won ($21.7 million) earned by the NPS verifies the state pension fund has been used to stir the market.

But the National Assembly’s Health & Welfare Committee blocked the bill’s passage in November 2015.

Some corporate investors argue that short selling has a positive function in terms of providing sufficient cash flows to bourses. If their claim is right, there is no reason to ban individuals.

The FSC has to choose between the two -- lifting the unfair ban on individual short selling, or full-fledged abolishment of short selling by anyone.