Jeongmu Committee criticizes Financial Services Commission over stock price crash... Kim Juhyun announces "full investigation of 3,400 CFD accounts"

Lawmakers: "Financial Services Commission's Relaxation of Professional Investor Requirements Caused the Crisis"

At the full meeting of the National Assembly's Political Affairs Committee held on the 11th, voices calling for the Financial Services Commission to improve the CFD system in relation to the stock price crash caused by SG Securities continued. Kim Joo-hyun, chairman of the Financial Services Commission who attended the meeting, announced that they would actively pursue a full investigation of the 3,400 CFD accounts opened so far and strengthen the requirements for professional investors as part of the system improvement. Lee Bok-hyun, governor of the Financial Supervisory Service, did not attend the meeting due to an overseas business trip.

[Image source=Yonhap News]

Lawmakers pointed to the Financial Services Commission's relaxation of the professional investor requirements as the biggest cause of CFD stock price manipulation. Yoon Joo-kyung, a member of the People Power Party, said, “In 2019, despite opposition from the Financial Supervisory Service, the Financial Services Commission relaxed the professional investor requirements to activate venture capital investment, but looking at those requirements, it seems that anyone with money can invest without financial knowledge,” adding, “For someone like Lim Chang-jung, who has no stock investment experience but has money, it would have been a good financial investment tool.”

Lee Yong-woo, a member of the Democratic Party of Korea, said, “The Financial Services Commission should consider whether funds flowed into venture capital due to the relaxation of CFD professional investor requirements,” and criticized, “If regulations were relaxed, risk control should have been implemented, but instead, they opened the way for people without financial knowledge to invest in CFDs and even expanded securities firms’ CFD businesses.”

It was also pointed out that securities firms cannot be exempt from responsibility in this incident. There is a strong opinion that explanations about the products were likely not properly provided to investors during the non-face-to-face account opening process. Lee Yong-woo said, “CFDs are essentially the same as credit loans, and securities firms have an obligation to verify whether the money was actually loaned to the person,” emphasizing, “Considering that banks prohibit multiple accounts in a short period and conduct identity verification to prevent the occurrence of ‘dapo’ accounts, securities firms cannot be free from responsibility in this incident.”

In response, Kim Joo-hyun, chairman of the Financial Services Commission, said, “First, we will conduct a full investigation of the 3,400 CFD accounts to check whether there was stock price manipulation with the same pattern,” and added, “We will thoroughly examine whether the professional investor requirements for individuals are reasonable and whether there were any problems in the securities firms’ approval process for professional investors.”

Regarding criticism that the financial authorities’ monitoring system did not function properly, Chairman Kim explained, “This stock price manipulation incident occurred over three years with daily changes of 1-2%,” and said, “We will work with the Korea Exchange on technical discussions to ensure that the market monitoring system operates well.”

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