Background of Naver's Summons at the National Assembly's Political Affairs Committee Audit... Securities Firms and Naver WTS Halt

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Industry Shows Interest in Collaboration with 'Major Portals'... Observing Situation

Lee Bok-hyun, Governor of the Financial Supervisory Service, is responding to a lawmaker's question during the National Assembly's Political Affairs Committee's audit of the Financial Supervisory Service held on the 17th. Photo by Kim Hyun-min

As the launch of Naver and securities firms' 'Easy Stock Trading Connection Service (tentative name)' is delayed, the financial supervisory authorities are expected to face increasing concerns. During the National Assembly's Political Affairs Committee audit, Naver was criticized for acting like a 'quasi-securities firm' without a securities business license, urging the authorities to conduct a thorough review.

According to the financial investment industry on the 21st, Kang Min-guk, a member of the National Assembly's Political Affairs Committee from the People Power Party, pointed out during the Financial Supervisory Service (FSS) audit on the 17th, "Unlike Kakao or Toss, there is a strong suspicion that Naver is attempting to provide financial services indirectly without a securities business license, thereby circumventing financial regulations and operating a financial business without oversight."

Currently, three firms?Mirae Asset Securities, Korea Investment & Securities, and Shinhan Investment Corp.?are preparing partnership services with Naver Financial, Naver's financial specialized subsidiary. The service is expected to take the form of an outlink method connecting to securities firms' proprietary accounts such as Home Trading System (HTS) and Web Trading System (WTS) from the Naver Pay interface. Since previously separate authentication procedures like securities firm login were required, this method is likely aimed at enhancing connection convenience.

The originally planned new account opening feature was excluded due to regulatory sanctions. It was publicly confirmed during this audit through Kang Min-guk's inquiry that the FSS judged the account opening task as 'brokerage,' which falls under the securities firms' domain according to the Capital Markets Act, and thus imposed restrictions. In response to a question in June about whether the FSS imposed sanctions on Naver regarding the provision of new securities account opening services during the partnership with Mirae Asset Securities, FSS Governor Lee Bok-hyun replied, "We did raise some concerns."

Kang Min-guk, a member of the People Power Party and the National Assembly's Political Affairs Committee, is speaking.

Besides the new account opening issue, the supervisory authorities plan to continue pre-consultations until final approval, emphasizing clarity of responsibility. For example, they have demanded that the contractual relationship between Naver Financial and securities firms clearly define responsibilities in case of failures or errors. This is because issues may arise regarding accountability when investors encounter problems.

The authorities have also made it clear that if Naver provides stock trading connection services in partnership with securities firms, the affiliated securities firms must fulfill the outsourcing reporting obligations under the Capital Markets Act. An FSS official stated, "If it falls within the scope of outsourcing, inspection authority is guaranteed even if the entity is not a financial company," adding, "There seems to be no particular disagreement that this case qualifies as outsourcing."

Another concern is the prevalence of unidentified source posts aimed at 'stock price manipulation' on Naver's stock discussion boards and its own social networking service (SNS) called 'Band.' An FSS official noted, "We remain cautious because Naver holds a dominant position in the portal industry market," and added, "Since it is easy to use for spreading false information or attempting unfair trading, we are constantly considering how to control this."

Naver Financial is also aware of these regulatory concerns and is preparing countermeasures. In early July, the company signed a business contract with the Korea Exchange Market Surveillance Committee and began preparing a monitoring system to prevent unfair trading within stock communities.

Meanwhile, after news of the Naver linkage service spread, some securities firms are reportedly discussing additional partnerships. However, they have taken a cautious stance, stating they will participate only after the service is actually implemented.