[Asia Economy Reporter Song Hwajeong] Unsolicited solicitation using visits or phone calls for investment products is exceptionally permitted if the consumer's consent is obtained. However, even in this case, high-risk products cannot be solicited to general financial consumers.
On the 7th, the Financial Services Commission announced a legislative notice for amendments to the Enforcement Decree and Supervisory Regulations of the Financial Consumer Protection Act (FCPA).
The FCPA generally prohibits solicitation of investment products using visits or phone calls without the consumer's request. However, since the Enforcement Decree recognizes broad exceptions, unsolicited solicitation for most investment products except over-the-counter derivatives is currently possible. In particular, with the revised Door-to-Door Sales Act (DDA) to be enforced from December, financial products will be excluded from the scope of the DDA, raising concerns about an increase in excessive unsolicited door-to-door sales of investment products. To prevent this, the amendment allows unsolicited solicitation only if the consumer's specific and active consent is obtained before the visit. Even in this case, solicitation of high-risk products to general financial consumers is restricted. The amendment expands the prohibition targets from previously only over-the-counter derivatives to include high-difficulty products, private equity funds, and both on-exchange and over-the-counter derivatives. However, for professional financial consumers, only over-the-counter derivatives remain prohibited as before.
Previously, prepaid and debit payment methods (including electronic payment methods) were not considered financial products under the FCPA, unlike credit cards, so regulations such as explanation obligations and six-month prior notice for reduction or change did not apply. This created a consumer protection gap where linked services could be unilaterally changed or reduced to the consumer's disadvantage without any regulation, and regulatory arbitrage existed compared to credit cards and similar products from the perspective of identical functions and regulations.
Accordingly, the amendment applies linked service regulations to prepaid and debit cards as well. To this end, the Financial Services Commission plans to simultaneously amend the Supervisory Regulations on Financial Consumer Protection as a follow-up measure to apply FCPA linked service regulations to payment methods such as check cards.
Additionally, the amendment applies the suitability and appropriateness principles to foreign currency insurance. Previously, these principles did not apply to foreign currency insurance despite the possibility of losses due to exchange rate fluctuations. The suitability principle prohibits recommending financial products unsuitable for the consumer's preferences, and the appropriateness principle requires notification and confirmation if the product the consumer intends to purchase is inappropriate for them.
The amendment aligns the confirmation requirements for professional financial consumers handling over-the-counter derivatives with the Capital Markets Act to enhance regulatory consistency and reduce regulatory burdens. A special provision for foreign financial companies is introduced regarding the establishment and revision of internal control standards. While the FCPA requires board approval for establishing or revising internal control standards, some domestic branches of foreign financial companies do not have a board. The amendment allows branches of foreign financial companies without a board to obtain approval from an internal decision-making body involving the representative.
The electronic methods available for obtaining consumer confirmation will also be expanded. Although the FCPA requires consumer confirmation to fulfill suitability, appropriateness principles, and explanation obligations, electronic methods other than electronic signatures under the Electronic Signature Act?such as mobile phone authentication, PIN authentication, and credit card authentication?are currently not permitted. The amendment plans to improve this by allowing various means that ensure safety and reliability in addition to electronic signatures.
Furthermore, the amendment prohibits third-party joint guarantees for loan products and clarifies binding sales types among unfair business practices. Also, for financial product sales agents and brokers who are not legally required to register, direct financial product sellers will be allowed to issue certificates.
The Financial Services Commission will accept public comments on the amendments to the Enforcement Decree and Supervisory Regulations of the FCPA until August 16, and after review by the Ministry of Government Legislation, plans to implement them in the second half of this year.
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