Kyungsillyeon: "Brokerages Shift 2 Trillion Won in Costs to Investors Over 10 Years by Offering Free Commissions"

[Image source=Yonhap News]

[Asia Economy Reporter Song Seung-yoon] An analysis by a civic group revealed that securities firms have earned profits amounting to 2 trillion won over the past decade by advertising that trading fees for non-face-to-face accounts are free, while actually passing various costs onto investors under different names.

The Citizens' Coalition for Economic Justice (CCEJ) and the Korea Stock Investors Association held a press conference on the 2nd at the CCEJ auditorium in Dongsung-dong, Jongno-gu, Seoul, stating, "Securities firms have deceived investors by promoting free trading fee events over the past 10 years and illegally collected related institution fees to gain profits." CCEJ explained that the total damage to the entire market is estimated to be at least 2 trillion won. CCEJ estimated this amount by assuming an average related institution fee rate of 0.005% for the entire stock brokerage market transaction volume from 2009 to 2018 and the related institution fee rates of securities firms during the same period.

CCEJ said, "Considering an annual compound interest rate of 2%, the total damage amount that securities firms should compensate the entire market is 2.2011 trillion won, and the damage amount to be compensated to individual investors is estimated at 1.4198 trillion won," adding, "This means that securities firms should compensate individual investors approximately 200,000 to 300,000 won each."

Related institution fees include fees such as transaction and clearing settlement fees of the Korea Exchange, securities firm and deposit fees of the Korea Securities Depository, and membership fees of the Korea Financial Investment Association. The fixed-rate fees paid to the Exchange and the Depository include three types: transaction, clearing settlement, and securities company fees, set at 0.0036396% of the transaction amount. According to the Financial Supervisory Service, the fee rates vary between 0.0038% and 0.0066% of the transaction amount because securities firms calculate related institution fees without specific calculation or accounting standards, adding membership fees beyond the fixed-rate fees.

CCEJ stated, "There is absolutely no reason for investors to pay related institution fees," and explained, "Relevant laws clearly stipulate that securities firms should bear the fee costs."

CCEJ also collected and analyzed 69 related advertisements conducted by 14 securities firms, including Hanwha Investment, NH Investment, and Mirae Asset Daewoo Securities, from September 2013 to April 2020, and found a total of 584 violations of related laws such as the Act on Labeling and Advertising, the Act on Terms and Conditions, and the Capital Markets Act.

Although the fees collected as related institution fees mean that actual trading fees are paid, CCEJ judged that advertising "free trading fees" in non-face-to-face account opening advertisements constitutes a violation of the Act on Labeling and Advertising. Failure to disclose related institution fee rates in advance through advertisements, terms and conditions, or websites was also deemed a violation of the Act on Terms and Conditions and the Capital Markets Act.

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