The Financial Supervisory Service is launching a full-scale review of securities firms' overseas investment operations. The first targets are Korea Investment & Securities and NH Investment & Securities.
The review is a measure to strengthen investor protection and the internal control framework as transactions in high-risk overseas products expand. The scope will later be widened to include about 10 major securities firms and asset managers with large volumes of high-risk overseas product transactions.
According to the financial investment industry on the 3rd, the Financial Supervisory Service (FSS) will conduct on-site inspections of Korea Investment & Securities and NH Investment & Securities for two days starting today.
In this review, the FSS will broadly examine marketing, margin lending, the foreign exchange risk management framework, and standards for exchange fees and disclosures. It also plans to focus on whether securities firms are charging excessive fees on overseas stock transactions compared with domestic stocks and whether they are clearly informing customers of those fees.
Recently, the securities industry has been widely providing investment information, including offering overseas investment bank (IB) reports using artificial intelligence (AI) translation technology. The accuracy of that information and the verification procedures will also be reviewed in parallel. The FSS plans to check the adequacy of internal review processes in the course of providing investment information.
Excessive marketing activities will also be included in the scope of the review. Previously, a securities firm was flagged by authorities for engaging in excessive promotions ahead of the mandatory rollout on the 15th of this month of pre-education and paper trading for overseas derivatives.
When the review is complete, the FSS will hold a meeting with C-level executives at securities firms to hear difficulties related to investor protection in overseas investment across the industry and share best practices.