Securities Industry Trust and Discretionary Management Improvement Plan Established: "Best Effort to Restore Customer Trust"

The Korea Financial Investment Association and the securities industry acknowledged deep responsibility on the 12th for the market confusion caused by improper operational practices related to bond-type trust and discretionary account management during the tightening of the funding market in the second half of 2022, and stated they will strive to prevent recurrence of similar cases.

At that time, some securities firms faced issues where assets with maturities longer than the contract period were included in bond-type trust and discretionary contracts. When it became difficult to sell these included assets in the market, problems such as the use of the company's proprietary funds to respond to customer redemption requests were pointed out.

Following the controversy, the securities firms have prepared and implemented internal improvement measures across sales, operations, risk management, and compliance, including strengthening customer risk disclosures related to bond-type trust and discretionary contracts, setting standards for normal trading prices (discrepancy rates), and enhancing monitoring of abnormal transactions.

For contracts that experienced redemption suspensions or delays, the firms actively responded to minimize customer damage by extending maturities through consultation with customers or proceeding with redemptions through proper internal procedures.

The Association has established and decided to implement from the 12th the "Risk Management Guidelines for Bond-type Discretionary Investment and Specific Money Trusts" as a self-regulatory measure that the entire industry must comply with when managing bond-type contracts.

The guidelines stipulate obligations such as mandatory investor consent for maturity mismatches exceeding 90 days related to bond-type discretionary investments and specific money trust operations, mandatory market valuation of included assets, investor notification and asset readjustment in case of sudden market changes, and the establishment of a continuous monitoring system for duration, transaction prices, and related factors.

The industry plans to derive additional improvement measures through discussions with financial authorities, including improving excessive sales practices and preparing contract liquidity management plans during market shocks.

Seo Yu-seok, Chairman of the Korea Financial Investment Association, said, "This has become an opportunity to re-examine and improve the unreasonable practices that have persisted in the securities industry under the name of custom," and added, "Going forward, our entire industry will make every effort with a resolute spirit so that the trust and discretionary industry can regain customer trust."