A South Korea won note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration Acquire Licensing RightsSEOUL, Oct 15 (Reuters) - South Korea's stock market watchdog said on Sunday it found two Hong Kong-based investment banks had engaged in naked short-selling, which would likely result in record fines. The two unnamed investment banks made naked short-selling transactions of a total 40 billion won ($29.58 million) and 16 billion won, respectively, the Financial Supervisory Service (FSS) said in a statement. Naked short selling of stocks - in which an investor short sells shares without first borrowing them or determining they can be borrowed - is banned by the Capital Markets Act in South Korea. ($1 = 1,352.2100 won)Reporting by Jihoon Lee; Editing by Muralikumar AnantharamanOur Standards: The Thomson Reuters Trust Principles.

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Persons: Thomas White, 1,352.2100, Jihoon Lee, Muralikumar Organizations: South, REUTERS, Rights, Financial Supervisory Service, Capital, Thomson Locations: South Korea, Rights SEOUL, Hong Kong