Only 27,000 Individual Investors in CFD... Lee Yong-woo "Impact of Reckless Deregulation"

Individual Professional Investors 3,331 in 2019 → 27,584 Last March
Lee Yong-woo "Financial Authorities Cannot Be Free from Responsibility"

In 2019, the financial authorities significantly relaxed the requirements for individual professional investors, which has been identified as a major cause of the recent crash triggered by Societe Generale (SG) Securities. As of the end of last year, the number of individual professional investors engaged in Contracts for Difference (CFD) reached 27,584.

On the 11th, Rep. Lee Yong-woo, a member of the National Assembly's Political Affairs Committee, announced this in a press release.

The Financial Services Commission (FSC) had been easing the requirements for individual professional investors through a series of measures: announcing capital market innovation tasks in November 2018 → releasing detailed plans to improve entry requirements for individual professional investors in January 2019 → revising the Enforcement Decree of the Capital Market Act in August 2019 → and amending and implementing financial investment business regulations in November 2019.

Rep. Lee emphasized that CFDs, which are high-risk products and can only be traded by professional investors, became widely accessible to individual professional investors due to the FSC's relaxation of requirements, leading to indiscriminate expansion of this investor group. He also noted that securities firms aggressively conducted business activities such as lowering fees and holding new customer events in line with the financial authorities' policy at the time.

Meanwhile, according to the Capital Market Risk Analysis Report published by the Financial Supervisory Service last year, although registrations of individual professional investors increased, there is a general lack of understanding regarding the impact of switching to professional investor status, raising concerns about investor damage caused by incomplete sales.

Rep. Lee Yong-woo criticized, “The FSC’s reckless deregulation has exacerbated the situation,” adding, “Since this was a foreseeable incident, the financial authorities cannot evade responsibility.”