South Korea’s financial regulator unveiled a set of tougher measures on short selling on Thursday.

Stocks with a sudden and abnormal increase of short-sale transactions will be classified as so-called “overheated stocks” and will be banned from further short-selling on the following day.

KRX, South Korea’s exchange, will designate overheated stocks at market close to prohibit short selling during the next day’s trading session.

Deadlines for reporting and disclosure of short positions will also be shortened from the current T+3 days to T+2 days, according to a statement from the Financial Services Commission (FSC).

It is expected that the changes will come into force in early 2017 along with heftier fines for those that breach the rules.

The FSC's move follows heavy losses for investors of Hanmi Pharmaceutical due to massive short-selling before the company disclosed on September 30 that its contract with Boehringer Ingelheim broke down.

The firm is suspected of intentionally delaying its official announcement of the major deal breakup to buy select investors more time to withdraw or short-sell Hanmi shares.

South Korean prosecutors raided the Hanmi Pharmaceutical headquarters in southern Seoul on Monday, the Korea Herald reported.

At the time of the global financial crisis, South Korea banned all short selling. 

That ban was lifted for most companies in June 2009 and restrictions on financial stocks were loosened in 2013.