Complaints about Stock Leading Rooms Double in One Year... Illegal Detection Rate Also on the Rise

Unauthorized Credit Card Payment Cases
Photo by Financial Supervisory Service

[Asia Economy Reporter Lee Jung-yoon] Complaints about damages caused by quasi-investment advisory services, commonly known as 'stock leading rooms,' have nearly doubled in one year.

According to the Financial Supervisory Service (FSS) on the 10th, the number of damage complaints related to quasi-investment advisory businesses received by the FSS last year totaled 3,442, a 97.4% increase compared to 1,744 cases in 2020.

Additionally, considering the frequent complaints last year, the FSS selected 660 companies for inspections. The inspection results revealed 120 violations at 108 companies, with the detection rate rising by 2.4 percentage points compared to the previous year. Notably, for the first time last year, special inspections were conducted on 20 broadcasting platform companies, among which 12 companies were found to have committed violations. Quasi-investment advisory businesses are only allowed to provide investment judgment and advice on the value of financial investment products to an unspecified majority; one-on-one advisory services and the sale or rental of automated trading programs are illegal.

The main violations were failure to report obligations at 39.2%, unregistered investment advisory at 31.7%, unregistered discretionary investment management at 23.5%, and unauthorized investment brokerage at 3.3%. In particular, unregistered discretionary investment management cases totaled 28, accounting for 23.5% of all violations, which is a sevenfold increase compared to 2020.

Major damage cases include unauthorized credit card payments, where credit card information is obtained through postpaid payments or refunds upon failure to meet specific returns after using the service, and charges are made without consent. Unregistered financial investment businesses providing one-on-one investment advice or selling/renting automated trading programs, false or exaggerated advertisements such as misleading investors into believing that quasi-investment advisory services are registered financial institutions, or promises like 'full refund if returns are not met' were also confirmed.

The FSS plans to notify investigative agencies about 65 companies found violating regulations and continue investor damage prevention activities such as issuing consumer alerts. Furthermore, it will maintain a joint inspection system with related organizations including the Korea Exchange and the Korea Financial Investment Association and pursue improvements in supervisory systems.

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