Still Rapidly Increasing Similar Investment Advisory Firms... Growing Support for Abolition Theory

315 New Reports from January to August This Year... Similar Increasing Trend as Last Year
Relief Requests Also Reach 3,702, Already Surpassing Last Year's Figures

[Asia Economy Reporter Gong Byung-sun] Despite strengthened regulations, pseudo-investment advisory businesses are still springing up like mushrooms. As the scale of damage increases, calls for their abolition are gaining momentum.

According to the Financial Consumer Information Portal on the 29th, the number of new pseudo-investment advisory business registrations in August alone was a total of 86. The number of new registrations for pseudo-investment advisory businesses was only 12 in May, 29 in June, and 15 in July, but it increased significantly in August. The total number of new registrations from January to August this year was 315, similar to last year's 506.

The sharp increase in August is due to strengthened regulations and still many applicants. In May, financial authorities tightened regulations by classifying all stock reading rooms operated as paid membership services through online interactive channels as investment advisory businesses. A Financial Supervisory Service official explained, "Due to the strengthened regulations and thorough review, the number of pseudo-investment advisory business registrations was somewhat delayed until August," adding, "There are still more than 300 new registrations waiting, indicating many applicants for pseudo-investment advisory businesses."

Although regulations have become stricter, the scale of damage has actually increased. According to Kim Byung-wook, a member of the Democratic Party of Korea, 3,702 damage relief applications related to pseudo-investment advisory businesses were received by the Korea Consumer Agency from January to August this year. This already exceeds last year's 3,148 applications. The number of applications in August alone was 495, more than the 475 applications received in the entire year of 2017.

The increase in damage stems from the inherent limitations of the pseudo-investment advisory business system itself. According to Article 101 of the Capital Markets Act, pseudo-investment advisory businesses must provide financial investment-related advice for a fee to an unspecified number of people. However, it is common for them to go beyond advice and provide investment consultation or even entrust investment itself. Moreover, unlike investment advisory businesses, they are not required to have experts, making it easier for investor damage to occur.

Recently, cases of attracting investors to pseudo-investment advisory businesses using YouTube have also increased. They induce paid membership subscriptions through YouTube videos recommending stocks. Although financial authorities have decided to classify stock reading rooms using online interactive channels including YouTube as investment advisory businesses, many still operate in blind spots. As the number of investors studying stocks through YouTube increases, damage from pseudo-investment advisory businesses is also believed to be rising.

Accordingly, voices calling for the abolition of the pseudo-investment advisory business system itself are growing louder. Since posts pointing out that pseudo-investment advisory businesses are close to scams have repeatedly appeared in stock-related communities, investors do not feel the effectiveness of pseudo-investment advisory businesses. The Korea Capital Market Institute also supported the abolition of the pseudo-investment advisory business system. In a report titled "Current Status and Improvement Directions of Pseudo-Investment Advisory Businesses" published on the 14th, the institute proposed abolishing pseudo-investment advisory businesses but suggested either maintaining the system temporarily and absorbing pseudo-investment advisory businesses into investment advisory businesses or boldly abolishing the system. Each option has pros and cons, but the conclusion is that abolition is desirable.

Kang Hyung-gu, head of the Financial Consumer Federation, explained, "The pseudo-investment advisory business system, created to invigorate the stock market, currently causes more harm than benefit," adding, "It is difficult for the Financial Supervisory Service to monitor pseudo-investment advisory businesses due to manpower and budget issues, and the industry itself cannot self-regulate."

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