'Paid Membership' YouTube Channel 'Yusa Investment Advisory Business'... Reporting Obligation Until July

1-on-1 Investment Consultation and Stock Leading Rooms 'Illegal'

[Asia Economy Reporter Ji Yeon-jin] YouTube personal broadcasts operated on a paid membership basis must be reported as 'quasi-investment advisory businesses' by the end of July, and one-on-one investment consultations and chat room openings will be prohibited.

The Financial Services Commission, Financial Supervisory Service, Korea Exchange, and Korea Financial Investment Association held the third meeting of the Securities Market Illegal and Unsound Practices Intensive Response Team on the 30th of last month and announced on the 2nd that they have prepared improvement measures for the management and supervision system of quasi-investment advisory businesses.

Quasi-investment advisory businesses are operators who provide investment advice on financial investment products to unspecified many people, operated under a reporting system without entry requirements but subject to minimum business regulations to prevent consumer damage.

The number of quasi-investment advisory businesses increased from 54 in 1997 to 2,122 last year. However, recently, as investment advice has been conducted mainly online through stock leading rooms and YouTube, illegal investment advice such as inflating returns or charging high fees has increased, and related consumer damage is also rapidly rising. According to the Financial Supervisory Service, the number of damage complaints was only 905 in 2018 but increased to 1,744 last year, and reached 663 in the first quarter of this year alone.

The financial authorities plan to regard stock leading rooms operating on a paid membership basis through online interactive channels as 'investment advisory businesses' and only allow registered official investment advisory businesses. Investment advisory businesses are financial investment businesses subject to regulations such as suitability principles, duty of explanation, liability for damages, advertising regulations, and contract delivery obligations.

In addition, personal broadcasts such as YouTube operated on a paid membership basis by directly receiving fees from investors will be interpreted as quasi-investment advisory businesses and required to report. However, personal broadcasts that only receive advertising revenue or occasional viewer sponsorship will be excluded from the reporting target.

The financial authorities have decided to provide a three-month grace period until the end of July for reporting, as the legal interpretation of such paid membership YouTube channels has been unclear until now.

They plan to establish punishment grounds for false reporting equivalent to non-reporting, subdivide business methods in the reporting form, and understand business status through reporting materials.

Quasi-investment advisory businesses must specify in advertisements and services the services they cannot provide and the possibility of investors' principal loss. For example, they must inform, 'This company is a quasi-investment advisory business, not a financial investment business, and individual investment consultations and fund management are not possible. Investment results may cause loss of principal, and such loss is borne by the investor.'

Also, ▲prohibition of promises for loss compensation or profit guarantees ▲prohibition of advertisements that may be mistaken for financial companies ▲prohibition of false display of returns and presentation of unrealized returns are enforced. This is to prevent investor damage caused by false or exaggerated advertisements.

The financial authorities plan to expand the grounds for ex officio cancellation of unqualified businesses by including cases of two or more violations of capital law fines or surcharges within five years and violations of the Door-to-Door Sales Act, Electronic Commerce Act, etc. (penalties or higher), and restrict re-entry of responsible executives in the case of corporations.

The Financial Supervisory Service and the Korea Exchange will integrate undercover inspections of stock leading rooms and significantly expand the scale of undercover inspections to more than 40 cases this year. Last year, 10 undercover inspections were conducted, detecting six cases of unregistered investment advisory businesses. In addition, joint inspections with the Korea Financial Investment Association will expand annual inspections from 300 to about 600 cases.

If unregistered advisory or discretionary businesses of quasi-investment advisory businesses are detected, the plan is to request the Korea Communications Standards Commission to block the operator's site.

The financial authorities expect that the use of online interactive channels by quasi-investment advisory businesses will be blocked, and inspections and crackdowns on illegal advice will become easier. Anyone can report if they find a stock leading room in the form of one-on-one consultation operated by quasi-investment advisory businesses.

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