The Financial Supervisory Service is stepping in to curb the practice of securities firms charging up to 10 times higher trading fees for online transactions even when accounts are opened at branch offices. Going forward, investors will be informed about fee differences and can choose whether to designate a managed account when opening an account at a branch office.
The Financial Supervisory Service announced on the 14th that it will improve the practice of some securities firms charging higher trading fees for accounts opened at branch offices compared to online channels.
Securities firms receive trading fees as compensation for intermediating investors' trades in stocks, ETFs (exchange-traded funds), and other instruments. According to a survey by the Financial Supervisory Service, 10 domestic securities firms have been applying differential trading fees based on how accounts are opened. When investors visit a branch office to open an account, they are charged higher trading fees than if they had opened the account online.
This is because accounts opened at branch offices are automatically designated as "managed accounts," meaning service costs for consultations and asset management are included in the fees. The problem is that even when investors trade online through a mobile trading system (MTS) or other channels without consulting with branch staff, the trading fees remain unchanged.
In fact, one securities firm charged a 0.136% trading fee for accounts opened at a branch office and traded via MTS or other online platforms. This is 13.6 times the 0.01% trading fee applied when both the account opening and trading are done online. Even though transactions are conducted online in both cases, the trading fee varies depending on where the account was created.
However, it has been pointed out that guidance from securities firms has been insufficient. Proper information regarding the fact of differential trading fees and the services available based on managed account designation was not provided. Additionally, investors' right to know and right to choose were restricted, as accounts opened at branch offices were automatically designated as managed accounts, leaving no option to select a non-managed account.
In response, the Financial Supervisory Service has required securities firms to establish procedures for comparing and informing investors about trading fee differences and available services during the account opening process. Differences in trading fees must be clearly stated in terms of service or transaction explanations provided at the time of account opening so that investors can verify them.
Improvements will also be made to allow investors to choose whether to designate a managed account when opening an account at a branch office. For existing investors, securities firms will enable verification of managed account status via text messages, MTS, etc., and guide them on how to open a new non-managed account if necessary.
The Financial Supervisory Service plans to complete the institutional improvements by the first quarter of next year. A Financial Supervisory Service official stated, "We will proceed with follow-up measures, such as revising related terms and monitoring securities firms' compliance status, without any issues," adding, "We expect that through these improvement measures, investors' choice of account type will be expanded and unnecessary trading fee burdens will be reduced."
The official further stated, "We will continue to make efforts to establish fair and reasonable business practices among securities firms going forward."
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