Financial Supervisory Service Expands CFD Inspections: "Kiwoom Extended... Kyobo and Hana Initiate"

Intensive Inspection of Securities Firms' CFD Accounts
Extension of Kiwoom Securities Investigation Period
Start of Investigation for Kyobo and Hana Securities

Financial authorities are expanding inspections of securities firms' Contracts for Difference (CFD) transactions in connection with the stock price crash triggered by Soci?t? G?n?rale (SG) Securities. In the case of Kiwoom Securities, which was the first to be investigated, the investigation period has been extended, and inspections of Hana Securities and Kyobo Securities have also begun.

According to the financial investment industry on the 22nd, the Financial Supervisory Service (FSS) started a CFD inspection of Hana Securities on the 8th. This inspection aims to examine the practice of prearranged trading, where buyers and sellers set prices in advance and trade bonds, through the operation status of trust and wrap accounts, while also looking into CFD issues. Kyobo Securities has also been under investigation for CFD trading since the 10th. Earlier, the FSS extended the investigation period for Kiwoom Securities, which was the first to be inspected, from the original March 3?19 to a longer period. It appears that more time is needed to clarify suspicions involving employees.

The FSS plans to verify whether securities firms have faithfully complied with the conditions and regulations for individual professional investors during this CFD inspection. The use of customer order information and possible involvement of internal employees are also known to be part of the inspection.

In particular, regarding Kiwoom Securities, the FSS intends to investigate the connection between large-scale trades by CEO Ra Deok-yeon and former Daum Kiwoom Group Chairman Kim Ik-rae. Since Kim previously served as a registered director of Kiwoom Securities, the FSS believes it is necessary to confirm whether employees were involved in CFD transactions.

Separately, the Financial Services Commission is conducting a full-scale investigation into approximately 3,400 CFD accounts held by 18 domestic and foreign securities firms. According to data submitted by the FSS to independent lawmaker Yang Jeong-sook’s office on the 10th, as of the end of March this year, the total CFD trading balance of 13 securities firms was 2.7697 trillion KRW. The securities firm with the largest CFD trading balance is Kyobo Securities with 618 billion KRW, followed by Kiwoom Securities (557.6 billion KRW), Samsung Securities (350.3 billion KRW), Meritz Securities (344.6 billion KRW), and Hana Securities (340 billion KRW). Meanwhile, Kyobo Securities and Meritz Securities have overdue receivables of 5 billion KRW and 0.5 billion KRW, respectively.

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