"Trade 3 Trillion Won, Get 300 Million?" Starting Next Year, Securities Firms Barred from Transaction-Linked Promotions

FSS to Regulate Promotions for High-Risk Products as Well

Starting next year, securities firms will no longer be able to run promotions offering cash or other rewards based on transaction amounts or trading frequency to attract customers. Promotions involving high-risk financial investment products that investors particularly need to be protected from, such as leveraged products and credit financing, will be completely prohibited.

On October 28, the Financial Supervisory Service (FSS) announced that it would strengthen the standards governing securities firms' provision of financial benefits to prevent marketing that encourages excessive short-term and overtrading, as well as high-risk investments.

Under the Financial Investment Services and Capital Markets Act regulations, securities firms may not provide financial benefits that go beyond what "the general public would ordinarily consider acceptable." Specific limits and internal controls are to be established through self-regulation. However, as competition in the securities industry has intensified, promotional competition has overheated, with firms offering high-value prizes such as "100 shares of overseas stocks" and cars.

Financial authorities have decided to categorically prohibit the provision of financial benefits linked to factors such as trading frequency and transaction amounts, which carry a high risk of conflicts of interest between securities firms and investors. They determined that because securities firms' brokerage income rises as investors' transaction amounts increase, such promotions encourage short-term trading and unnecessary excessive trading, increasing investors' costs and the likelihood of losses. They have also contributed to market volatility.

Previously, one securities firm ran a promotion involving domestically listed exchange-traded funds (ETFs) and exchange-traded notes (ETNs), offering up to 5 million won per day to customers who met a daily trading-volume target. In one case, two retail investors traded ETFs worth 3.4 trillion won and 1.7 trillion won, respectively, and received promotional prizes of 340 million won and 170 million won, respectively. The securities firm was estimated to have earned approximately 51.4 billion won in brokerage commissions from these trades.

Promotions involving high-risk products will also be prohibited, regardless of their content or format. These include leveraged and inverse exchange-traded products (ETPs), exchange-traded and over-the-counter derivatives, investor credit financing, and overseas investment products. Despite the high need to protect investors using these products, no separate regulations on related promotions had been in place.

However, securities firms may continue to offer their own fee or interest-rate discounts and waivers, as before. Promotions that provide benefits based on investment balances rather than transaction amounts or trading frequency will also be allowed. The FSS plans to issue advance notice of proposed amendments to the Korea Financial Investment Association's rules and gather feedback during October, then complete the amendments by the end of 2026. The amended rules will take effect on January 1, 2027.

An FSS official said, "We expect to prevent investor harm and market disruption by institutionally prohibiting promotions that encourage short-term and excessive trading, as well as high-risk investments." 

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