FSS: Securities Firms Cannot Use 'Zero Transaction Fee' or 'Free Trading Commission' Unless Actual Trading Cost Is '0 Won'

[Asia Economy Reporter Gu Eun-mo] From now on, securities firms will not be allowed to use the expression ‘zero commission’ in advertisements for opening non-face-to-face accounts if the actual transaction cost is not ‘0 won’.

The Financial Supervisory Service (FSS) announced on the 24th the results of an inspection on the fee structures of securities firms’ non-face-to-face accounts, which have been rapidly increasing recently.

The FSS inspected 22 securities firms known to have conducted zero-fee events for non-face-to-face accounts from June to November last year, checking whether fees and interest rates were operated reasonably. This measure was taken following the rapid increase in account openings since non-face-to-face account openings were permitted for securities firms in February 2016, alongside concerns raised about fee and interest rate charging systems.

The inspection revealed that although advertisements for non-face-to-face account openings stated ‘zero transaction fees,’ a certain rate (0.0038% to 0.0066% of the transaction amount) was separately charged as related institution fees. Accordingly, the FSS decided that even if the phrase ‘excluding related institution fees’ was indicated, it could mislead investors, so the use of ‘free’ in advertisements is prohibited when the actual transaction cost is not ‘0 won.’

The basis for calculating fees will also change. Previously, when calculating related institution fees, indirect costs such as the Financial Investment Association fees were included in addition to the fixed-rate fees paid to the Korea Exchange and Korea Securities Depository proportional to the transaction amount. However, through this inspection, cost elements with low relevance to trading transactions were excluded from related institution fees, and the charging ratio was reviewed to improve the rationality of the calculation criteria.

Differentiation of interest rates on credit loans will also be restricted. It was found that some securities firms currently apply higher interest rates for credit loans through non-face-to-face accounts compared to general accounts. The FSS plans to improve this so that interest rate differences do not occur unless there is a reasonable basis for differences in collateral ability or borrower credit risk between non-face-to-face and general accounts.

In addition, specific related institution fee rates will be clearly stated in advertisements, terms and conditions, and websites to sufficiently inform investors of the actual transaction costs in advance.

An FSS official said, “This inspection is expected to reduce unreasonable cost burdens on investors and provide more thorough information when selecting financial products,” adding, “Investors should be cautious not to be misled by provocative advertising phrases from financial companies and carefully review the pros and cons of products before making decisions.”

The FSS plans to continue closely monitoring the business practices of financial companies and persistently improve unreasonable aspects.

This content was produced with the assistance of AI translation services.