FSS Requests Investigation into Illegal Investment Advisory Services like Leading Rooms... Inspection Until Year-End

The CEO of investment advisory firm A engaged in trading and brokering unlisted stocks with acquaintances and clients, guaranteeing high returns. However, he only collected the purchase funds and failed to deposit hundreds of billions of won in interest and principal. The Financial Supervisory Service (FSS) has requested an investigation by the National Police Agency on charges of unauthorized business operations and investment fraud. Sanction procedures are underway regarding violations of major shareholder credit provision rules. Company B forged documents in a leading chat room claiming that an unlisted company would soon be listed, luring investors, then sold unlisted stocks held by the company at prices more than 10 times higher than the over-the-counter trading price before disappearing. The leading chat room operator’s concentrated recommendation to buy specific stocks caused those stocks to surge rapidly in a short period, raising suspicions of market order disruption.

On the 25th, the FSS announced the detection results of a crackdown team established in June within the Asset Management Inspection Bureau to combat illegal activities by quasi-investment advisory firms and others. The detected cases have been referred to the National Police Agency for investigation on charges including unauthorized investment trading and brokerage under the Capital Markets Act and fraud. Additionally, unregistered investment advisory activities using broadcasting platforms, investment fraud via stock message boards, and investment fraud using forged exchange documents were uncovered. Cases suspected of disturbing market order, such as the leading chat room operator’s concentrated recommendation of specific stocks and members spreading these recommendations to other chat rooms, causing rapid price surges, were also detected.

One company forged exchange documents in a leading chat room to lure investors by claiming that an unlisted company would soon be listed, then reassured investors by mobilizing people who promised to buy stocks at high prices, before selling the unlisted stocks it held at high prices and disappearing.

The crackdown team plans to strengthen inspections and enforcement jointly with related agencies such as the National Police Agency’s National Investigation Headquarters through the end of the year.

In addition to firms reported to the FSS, undercover inspections will be conducted jointly with the Korea Exchange targeting about 100 firms, including unregistered ones, through the end of the year. From November, a comprehensive inspection of about 500 firms, including newly registered firms reported to the Korea Financial Investment Association and supervisory authorities, as well as firms not inspected for a long time, will be carried out. Furthermore, during market surveillance and on-site inspections of quasi-investment advisory firms, sudden on-site crackdowns will be conducted jointly with the National Police Agency on confirmed violations. Comprehensive advertising on recent investment cases and prevention methods will also be implemented.

An FSS official stated, "For safe stock investment, it is important to verify the information providers and the investment information provided, and to be cautious of impersonation of public institutions or celebrities." He added, "Using leading chat rooms may expose investors to unfair securities trading practices. We will thoroughly track and strictly deal with illegal activities in leading chat rooms."

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