SEOUL -(Dow Jones)- The South Korean units of Barclays PLC (BCS: 17.14, -0.18, -1.04%) and JPMorgan Chase & Co. (JPM: 40.80, -0.71, -1.71%) have been warned by the Financial Supervisory Service for selling currency derivatives that broke local regulations.

The financial regulator said in a report on its website Tuesday it has warned both banks about the violations and asked them to punish the responsible executives.

A spokeswoman at JPMorgan's Seoul office said the company has noted "receipt of a minor caution from the FSS." A Barclays official in Asia said the company won't comment on the matter.

According to the regulator, JPMorgan sold high-risk currency options in 2007 that crimped the ability of six companies to effectively hedge against currency volatility, while Barclays sold currency derivatives to three exporting companies between June 2006 and November 2007 which resulted in them incurring losses.

An FSS spokesman said the warnings won't necessarily lead to the investments banks being punished unless they continue to break local rules.

Derivatives trading

in South Korea is currently in the spotlight as financial regulators are considering new measures to protect investors from swings in the derivatives market. The regulators--the Financial Services Commission and the Financial Supervisory Service--said last week they will step up monitoring and supervision of the derivatives market and may limit investors' holding of stock-options.

The Korean government is also pushing ahead with a plan to reimpose taxes on foreigners' purchases of local government bonds, and plans to unveil a series of steps to counter sudden capital flows in and out of the country to protect itself from sudden swings in capital that it fears could undermine stable economic growth.