Interim Results of Securities Firms' Survey
Annual Revenue More Than Tripled Compared to 2023
As overseas investments by individual investors have increased recently, securities firms have recorded their highest-ever revenue from overseas stock brokerage commissions. In response to aggressive overseas stock sales activities by securities companies, the financial authorities have begun on-site inspections following a preliminary survey. If illegal or unfair practices are discovered during the inspections-such as exaggerated advertising that misleads investors or insufficient explanations of investment risks-the authorities plan to take strong measures, including suspending overseas stock sales operations.
According to interim results of an overseas investment survey released by the Financial Supervisory Service on December 19, the top 12 securities companies by overseas stock trading volume earned approximately 1.95 trillion won in overseas stock brokerage commissions from January to November this year, marking an all-time high. This is more than three times the amount recorded in 2023 (581 billion won). During the same period, revenue from foreign exchange commissions linked to overseas investment brokerage for individuals also increased significantly, from 147.7 billion won to 452.6 billion won.
Although overseas investments by individual investors have expanded and securities firms' revenues have grown, nearly half of the investors have not seen positive returns. As of the end of August, 49.3% of individual investors' overseas stock accounts were in loss, up about 20 percentage points from the previous year's 29.7%. The profit per account also dropped sharply to 500,000 won, compared to 4.2 million won the previous year.
Losses were also significant in individuals' overseas derivatives investments. From the beginning of this year through October, individual investors' profits and losses from overseas derivatives (futures and options) recorded minus 373.5 billion won. This amount is equivalent to 51% of the total overseas derivatives trading volume by individuals (723.2 trillion won) during this period. The cumulative losses over the past five years alone have reached 2.0527 trillion won. The financial authorities expressed concern, stating, "In overseas derivatives investments, individual investors have continued to incur large-scale losses for years, regardless of market conditions."
There is an interpretation that the recent on-site inspections by the financial authorities of major securities and asset management companies, aimed at checking the adequacy of investor protection and risk management related to overseas investments, are closely related to this situation. As individual investors' overseas investments have increased, there is a growing need to examine the status of overseas stock and high-risk leveraged product investments.
What the financial authorities have focused on is the excessive competition among securities firms to attract investors. The authorities pointed out, "Across the securities industry, companies are competitively running aggressive promotional events to attract overseas investment customers, such as those interested in U.S. stocks, and to expand market share." They added, "In particular, they are encouraging overseas investments through cash rewards proportional to trading volume, incentives for new or dormant customers, and commission discounts."
The insufficient disclosure of risks associated with overseas investments was also identified as an area needing improvement. The financial authorities stated, "Industry-wide, there is a lack of customer guidance on risks that may arise from overseas investments, such as foreign exchange fluctuations, delays in rights payments due to time differences between countries, and differences in tax systems." They added, "In most cases, risks are only disclosed at the time of initial account setup through terms and conditions, and only a few securities firms provide ongoing guidance."
Based on these survey results, the financial authorities plan to begin on-site inspections of securities firms starting today. They also announced that if illegal or unfair practices are found during the inspections-such as exaggerated advertising that misleads investors, investment recommendations unsuitable for the investor's risk tolerance, or insufficient explanations of investment risks-they will respond strongly, including imposing the highest level of sanctions such as suspending overseas stock sales operations.
To correct sales practices focused on overseas investments, the financial authorities plan to suspend new cash-based promotional events and advertisements related to overseas investments at securities firms until March next year. In addition, by the first quarter of next year, they will push for institutional reforms to completely ban trading volume-based events that could induce excessive trading. Securities firms will be guided to refrain from overseas investment-related events and advertisements when establishing their 2026 business plans within this year, and to strengthen investor guidance on overseas investment risks through HTS and MTS pop-ups.
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