HSBC Holdings Plc was acquitted by a South Korean court of charges that the bank engaged in illegal short-selling, a blow to the government’s efforts to rein in abuses in the stock trading practice.

In its ruling Tuesday, the Seoul Southern District Court said there was no evidence that HSBC employees knew of the rule violation before carrying out the trades in question, according to Yonhap.

The ruling comes after South Korean prosecutors investigated and indicted the bank and three traders at HSBC’s Hong Kong unit in March on allegations of conducting naked short selling — a practice of selling shares without securing them first — amounting to about 15.8 billion won ($10.9 million).

ALSO READ: Banking giant HSBC sued by Australian regulator over failure to protect scam victims

The case, closely watched by overseas investors, resulted in what the local media reported to be the first indictment against a foreign bank on charges related to naked short selling. HSBC has previously argued that the Korean prosecutors’ approach was “arbitrary” and the verdict likely reassures foreign investors who are calling for loosening of stock trading rules in the country.

“We are pleased with today’s decision in favor of HSBC,” an HSBC spokesperson said in an email statement. “There was no intention to breach any Korean short selling regulations and we are looking forward to putting this matter behind us.”

READ MORE: HSBC merges commercial and investment banking units, names first female CFO

Korean regulators plan to lift in March a temporary ban on short-selling. But they plan to keep the ban on naked short-selling, responding to retail investors and others who say the tactic renders unfair advantages to foreign institutional investors. The practice is “rampant,” they said.

In pursuing its case against HSBC, the prosecutors’ office sought to fine the bank 300 million won.

READ MORE: HSBC shares rise on $3b buyback; flat first-half profit beats estimates

In March, the bank had acknowledged “unintentional breaches” of the Korean short selling regulations, and said it took fast remedial action to address them and paid $5.6 million in fine. But the bank also said in the statement then that indicting HSBC and individuals was unwarranted and disproportionate to the local regulatory findings.

In October, South Korean prosecutors also indicted BNP Paribas SA for allegedly violating short-selling rules. The Securities and Futures Commission also fined in December Barclays Plc and Citigroup Inc. 13.7 billion won and 4.7 billion won, respectively, for alleged naked short selling.

Lifting the short selling ban, which has been in place since November 2023, would help remove one of the barriers in Korea’s bid for a market upgrade from index operator MSCI, Financial Services Commission Chairman Kim Byoung-hwan said in September.