Shinhan Investment & Securities was criticized by the Financial Supervisory Service for charging additional fees to customers who subscribed to the stock recommendation service for transactions unrelated to the recommended stocks and not clearly informing them of the details.
In the past, it was confirmed that compensation limits and potential conflicts of interest were not sufficiently reviewed when conducting events where cash was paid in proportion to the amount of overseas stock transactions.
According to data submitted by Park Seong-hoon of the People Power Party, a member of the National Assembly's Political Affairs Committee, from the Financial Supervisory Service on the 18th, the Financial Supervisory Service notified Shinhan Investment & Securities of four management precautions and one improvement on August 31.
First, the Financial Supervisory Service requested action, claiming that the fee structure for the stock recommendation service operated by Shinhan Investment & Securities was unreasonable.
Shinhan Investment & Securities receives stock recommendations and other information from an affiliated company, which is a quasi-investment advisory business, and provides it to customers. It pays a monthly fee to the affiliated company and collects service fees from customers who subscribe to the service by adding a certain rate to the basic trading commission.
In the case of overseas stock accounts, a maximum of 0.25% point was added to the existing trading commission rate, and an additional commission was charged to all transactions regardless of whether recommended stocks were traded or not.
It was also pointed out that customers were notified of sales details that did not distinguish between basic fees and additional fees, making it difficult to know the exact fee payment details.
Accordingly, the Financial Supervisory Service notified that "there is a need to improve the usage fee structure, provide guidance on basic and additional fees separately, and develop a screen where fee details can be viewed in real time."
It was also confirmed that Shinhan Investment & Securities recommended stocks that were different from the portfolio descriptions provided by some affiliates, so a monitoring system was established to periodically verify the content.
In addition, the Financial Supervisory Service requested that investor protection procedures related to monetary compensation events proportional to the amount of overseas stock transactions be strengthened.
The explanation is that Shinhan Investment & Securities did not sufficiently review in advance the setting of compensation limits for the same person and the possibility of conflicts of interest while conducting the event from September 4, 2023, to December 19, last year.
In particular, the Financial Supervisory Service was concerned about the risk of concentrated trading as the trading amount and trading turnover rate of participants in U.S. short-term bond exchange-traded funds (ETFs) increased rapidly during the event period.
At the same time, when promoting events related to overseas stock trading, compliance with relevant laws and regulations will be thoroughly reviewed in advance and monitoring of abnormal transactions will be strengthened.
The fact that Shinhan Investment & Securities' overseas stock transaction consultation fees and exchange rate preferential application standards were not specifically established was also cited as an area for improvement. There is a risk of discriminating against investors without justifiable grounds, such as only some investors receiving benefits due to insufficient customer guidance.
In addition, it was pointed out that there is a need to specify the calculation standards and payment cycle for foreign currency investor deposit usage fee rates in the internal regulations and to increase the convenience of the procedure for exercising voting rights on foreign stocks, which can only be done by wire.
Meanwhile, some point out that even for services that deliver information provided by affiliated companies, since securities firms receive commissions from customers, they must fulfill their responsibilities in protecting investors, including the usage fee charging system and content management.
Rep. Park Seong-hoon said, “It is an incomprehensible business practice to charge additional fees for trading non-recommended stocks and not even allow customers to know how much more they paid.” He continued, “Financial authorities must thoroughly check the scale of customer burden and the actual status of transaction inducements for cash compensation events, and if unfair fee charges are confirmed, prepare practical damage relief measures such as customer refunds.”
According to a financial investment industry official, Shinhan Investment & Securities was requested to improve the services mentioned after the Financial Supervisory Service inspection in February, and changed the service to be available for free starting last May.
Shinhan Investment & Securities said, "This service provides various investment information such as stock recommendations and supply and demand. Previously, a separate fee system was applied depending on the use of the service." It has now been converted to free, and the service is scheduled to end in December. We will continue to manage related matters in consideration of customer convenience in the future."
