Hanwha·Samsung Securities Fund Sales 'A+'.. Banks 'C'

Fund Sales Company Evaluation Results
Fund Investor Protection Level Declines for 3 Consecutive Years

[Asia Economy Reporter Junho Hwang] Despite the fund mis-selling scandal, the level of protection for fund investors has lagged for three consecutive years. There are calls for fundamental solutions to the chronic problem of mis-selling.

According to the '2020 Fund Sales Company Evaluation Results' released by the Korea Financial Investment Investor Protection Foundation on the 2nd, last year, banks (10 institutions), securities firms (17 institutions), and insurance companies (1 institution) were comprehensively evaluated on fund sales procedures (97.5%) and post-management services (2.5%). Hanwha Investment & Securities and Samsung Securities maintained an A+ rating for more than three years.

Hanwha Investment & Securities received favorable evaluations by strengthening responsibility in the sales process through the disclosure of the real names of complaint handling department personnel. Shin Young Securities, Meritz Securities, and Hana Financial Investment also ranked in the top 5 and received A+ ratings.

On the other hand, four companies?IBK Industrial Bank, Woori Bank, Hana Bank, and SC First Bank?maintained a C rating for more than three years. IBK Industrial Bank, Woori Bank, and Hana Bank held a C rating for six years, while SC First Bank maintained a C rating for four years.

The number of sales companies whose rankings dropped by more than 10 places compared to the previous year also increased. It surged from one company in 2019 to four companies in 2020.

The foundation explained, "IBK Industrial Bank, Woori Bank, and Hana Bank were designated for inspection by the Financial Supervisory Service in the second half of 2020 due to private fund mis-selling issues," adding, "When inadequate fund sales practices of sales companies become chronic, it implies adverse effects not only on investor protection but also on the nation's asset formation."

Additionally, the foundation evaluated that the overall level of investor protection declined for three consecutive years based on checks of fund sales procedures through Mystery Shopping.

In particular, the 'sales proficiency,' which greatly affects the qualitative level of investor protection, deteriorated. The correct answer rate of sales staff's expertise on financial investment income tax and fund investment structure was only 26.0% (78 cases). In industry comparisons, banks showed a weaker tendency than securities companies for three consecutive years, and the score gap between banks and securities firms also widened. Compliance with regulations related to the 'suitability and appropriateness principle' in the fund sales process was also deemed insufficient.

Post-management services generally complied with regulations, with 75.7% (227 cases) of sales staff providing contact information such as their names or guidance letters at the end of fund sales.

Meanwhile, the Korea Financial Investment Investor Protection Foundation conducts annual evaluations of fund sales companies to detect risks of mis-selling at fund sales sites and provide useful comparative information to financial consumers. The fund sales procedures are checked by dispatching monitors posing as investors to the sales branches of each fund sales company to inspect the actual fund consultation status.