Securities corporations have posted record-high brokerage charge revenue from abroad inventory buying and selling as retail traders more and more flip to overseas markets, however rising volatility has left about half of these traders posting losses on abroad equities, the Monetary Supervisory Service (FSS) stated Friday.
In opposition to this backdrop, the monetary watchdog stated it should promptly escalate its opinions of abroad funding gross sales practices at brokerage corporations into full-scale on-site inspections.
It vowed to take robust measures, together with the suspension of abroad inventory enterprise, if illegal or improper conduct, equivalent to misleading advertising or inadequate threat disclosure, is recognized.
The FSS launched interim outcomes from its opinions of abroad funding practices, which have been underway since Dec. 3 at main brokerages and asset managers.
The findings confirmed that brokerage commissions from abroad inventory buying and selling on the 12 largest securities corporations totaled about 1.95 trillion received ($1.3 billion) throughout the January-November interval, marking an all-time excessive and greater than tripling from 581 billion received a yr earlier.
Income from overseas alternate charges tied to abroad funding transactions by retail purchasers additionally surged over the identical interval, rising from 147.7 billion received to 452.6 billion received.
Nevertheless, the speedy enlargement of abroad funding by particular person traders has not translated into broad positive factors. Practically half of retail traders recorded losses on abroad shares, with the share of loss-making accounts rising to 49.3 % as of August, up about 20 proportion factors from a yr earlier. Common revenue per account additionally plunged to 500,000 received from 4.2 million received.
Losses additionally grew in abroad derivatives buying and selling. From January by means of October, retail traders posted internet losses of 373.5 billion received on abroad futures and choices, regardless of whole buying and selling quantity reaching 7,232 trillion received. Cumulative losses over the previous 5 years have amounted to about 2.05 trillion received.
“Retail traders have suffered persistent and sizable losses in abroad derivatives buying and selling for a number of years, largely impartial of general market circumstances,” an FSS official stated.
Monetary Supervisory Service (FSS) Gov. Lee Chan-jin holds a press convention at FSS headquarters in Seoul, Dec. 1. Yonhap
In response, the watchdog stated it should step up its oversight by shifting to full on-site inspections to intently study areas of potential concern. Kiwoom Securities and Toss Securities have been chosen as the primary inspection targets, as they rank among the many high corporations in abroad buying and selling quantity, in response to FSS insiders.
Authorities are focusing specifically on extreme competitors amongst brokerage corporations to draw traders.
“Securities firms have been aggressively rolling out promotional campaigns to lure clients into abroad investments, particularly U.S. shares, by means of money incentives linked to buying and selling quantity and charge reductions,” the official stated.
The FSS additionally pointed to insufficient threat disclosure as a key subject, noting that data on alternate fee dangers, settlement delays as a consequence of time variations and tax discrepancies is usually supplied solely at account opening, with restricted ongoing steerage.
It additionally warned that violations equivalent to deceptive promoting, unsuitable funding suggestions or inadequate explanations of funding dangers may lead to extreme measures, together with the suspension of abroad inventory enterprise.
To rein in aggressive abroad funding advertising, the FSS suspended new cash-based promotional occasions and promoting associated to abroad funding by means of March subsequent yr and plans to ban buying and selling volume-linked promotions. Brokerages have additionally been urged to strengthen investor steerage on abroad funding dangers by means of their buying and selling platforms.
