The Financial Supervisory Service (FSS), under the leadership of Governor Lee Chan-jin, has announced a transition from examining the overseas stock trading practices of securities firms to conducting full inspections. This move comes amid concerns that high exchange rates are partially driven by the “Seohak Ants” trend, prompting the FSS to issue a “cautionary warning” against excessive competition among securities firms. In response, major securities companies have decided to halt new overseas investment marketing activities.
During a financial market review meeting, Governor Lee expressed grave concerns over securities firms focusing on short-term commission income at the expense of investor protection. He urged companies to prioritize investor interests over performance. Governor Lee pointed out that while securities firms’ profits are increasing annually from transaction and exchange fees, individual investors are facing decreasing profits, with many incurring losses, particularly in overseas derivative investments.
According to the FSS, commissions from securities firms’ overseas stock brokerage services surged from 1.4 trillion KRW last year to 2 trillion KRW from January to October this year. In contrast, 49% of individual investors’ overseas stock accounts reported losses, with losses from individuals’ overseas derivative investments totaling approximately 370 billion KRW by the end of August.
In light of these concerns, the FSS will expand its inspection of securities firms, beginning with Korea Investment & Securities and NH Investment & Securities. Any issues identified during the examination will immediately lead to on-site inspections. Governor Lee called for maximum penalties, such as suspending overseas stock operations, when illegal or improper activities like misleading advertisements or inadequate risk disclosure are discovered.
Following the meeting, the FSS gathered major securities firm CEOs to review issues in overseas securities brokerage operations and urged a revision of business incentive structures to prioritize investor benefits. Earlier, the FSS had also asked Consumer Protection Officers of securities firms to refrain from excessive promotional events and advertisements.
In response, securities firms have decided to suspend new marketing and events related to overseas stocks, which had previously included incentives like investment support funds or fee waivers to attract investors.