Financial Authorities Launch Intensive Crackdown on Overseas Stock 'Leading Rooms' Boom

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] As the balance of overseas stocks held by domestic individual investors increases, the financial authorities have launched a focused crackdown as so-called 'leading rooms' are rampant. Leading rooms refer to group chat rooms where so-called 'stock experts' (leaders) recommend real-time trading of specific stocks. They usually charge usage fees ranging from tens of thousands to millions of Korean won.

On the 27th, a Financial Supervisory Service (FSS) official stated, "We are intensively monitoring overseas stocks," adding, "There is a tendency for inaccurate information to spread instantly through leading rooms and the like, and we plan to carefully monitor and crack down on these areas." They intend to block situations where inaccurate or self-serving information is spread to take advantage of the lack of information and increased volatility compared to domestic stocks.

The financial authorities are concerned that leaders of leading rooms do not take responsibility for individual investors' losses and that many have not been verified for financial expertise. Additionally, illegal activities such as 'eating and running,' unregistered one-on-one investment advice, and false advertising are frequent, raising concerns about investor damage.

According to the FSS, as of the end of July, the balance of overseas stocks held by individual investors was 24.6 trillion KRW, a 107% increase compared to the end of last year. Even in July alone, the net purchase amount of overseas stocks was 3.6 trillion KRW, similar in scale to the net purchase amount of domestic stocks at 3.8 trillion KRW.

This is interpreted as a result of significantly increased liquidity in the market due to ultra-low interest rates and the convenience of investing in overseas stocks online.

A financial authority official said, "We will receive and review data from securities companies regarding accounts, traded stocks and volume trends, marketing events, and overall matters," adding, "If necessary, we are also considering conducting on-site inspections."

The financial authorities are also considering expanding the service that some securities companies provide to overseas stock investors, which informs them of precautions, to all securities companies.