Lee Chan-jin: Securities Firms Reap Profits While Investors Suffer Losses... Lack of Shareholder Return and Social Contribution

Financial Supervisory Service Governor Lee Chan-jin met with the chief executive officers (CEOs) of securities firms on the 29th and pointed out that while securities firms are enjoying profits, a significant number of investors are experiencing losses, emphasizing that "it is time to seriously ponder ways for the industry and investors to grow together."

In particular, he pointed out that the securities industry's shareholder returns and social contribution performance are insufficient and stressed the need for improvement.

Governor Lee made the remarks during a meeting with the CEOs of 23 securities firms at the Korea Financial Investment Association in Yeouido, Seoul, noting that stock market volatility expanded significantly this year, making it a difficult period for most retail investors, and adding, "The securities industry has already achieved remarkable performance in the first half alone, nearly rivaling last year's annual earnings."

He stated, "It is also true that criticisms are emerging that securities firms continue to reap profits while a majority of investors, who form the foundation of their existence, only suffer losses," and mentioned that "a securities industry that fails to gain the trust of investors cannot guarantee its future."

Governor Lee urged the industry to play its part in enhancing shareholder value and fulfilling social responsibilities.

He said, "While there have been some efforts in the securities industry recently toward shareholder returns, such as treasury stock cancellations, they still seem to fall short of market expectations," and requested, "I hope you will set a benchmark for general corporations regarding shareholder returns such as dividends and become a model for corporate value enhancement."

According to the FSS, last year's cash dividend payout ratios (on a consolidated basis) for KOSPI-listed comprehensive financial investment business entities varied widely among companies, with Mirae Asset Securities at 11.1%, Kiwoom Securities at 27.1%, Samsung Securities at 35.5%, NH Investment & Securities at 47.3%, and Daishin Securities at 51.0%.

Governor Lee also emphasized social responsibility, stating, "The performance of the securities industry was made possible because of investors. Now, when those investors are experiencing difficulties, the industry needs to look back on what it can do."

He noted, "The securities industry's social contribution performance lags far behind that of banks and others," and asked them to "self-assess whether you are contributing in line with your increased scale and role."

Last year, domestic banks spent approximately 2.2 trillion won on social contribution activities, while domestic securities firms stopped at a tentative 50.0 billion won.

He re-emphasized the principle of investor protection.

He added, "Beyond the legal obligation of explanation, I hope you will provide practical investor education so that investors can clearly recognize the possibility of losses," through which a mature investor protection culture can take root.

In particular, he pointed out, "Some practices that betray trust, such as designing products that do not match investors' expectations, false or exaggerated advertisements, and passing on hidden costs, still persist."

He continued, "I have come to realize that there are stark differences in the level of investor protection depending on the CEO's interest and resource allocation," repeatedly urging special attention from CEOs, and emphasized, "The FSS will concentrate its supervisory and inspection capabilities going forward to thoroughly hold accountable behaviors that undermine investor trust and fundamentally improve them."

Governor Lee expressed appreciation for the recent association-led autonomous resolution to restrict stock-by-stock margin loans and tighten limits relative to equity capital, urging continued attention to ensure that the resolution's contents are observed in the field.

Furthermore, noting that the industry has entered a period of rising interest rates, he stated that securities firms with high dependence on short-term funds should pay attention to liquidity management such as fund mismatches, and asked them to "balancedly look into ensuring that sufficient funds are supplied in a timely manner to necessary fields such as venture capital and real estate."

The FSS reported that attendees stated they accept the social expectations and responsibilities toward the securities industry more heavily than ever, vowing to actively practice shareholder returns and social contributions while CEOs directly oversee investor protection.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.