South Korea's Financial Supervisory Service said it will overhaul account-opening practices at brokerage branches to reduce investors' trading-fee burden. Under the change, investors opening a new account at a branch will be able to choose whether the account is designated as a managed account.
The FSS announced the plan on the 14th, saying it targets the practice of charging different trading fees on brokerage and pension savings fund accounts opened at branches.
According to the FSS, some brokerages charged higher trading fees on accounts opened at branches than on those opened online. Because accounts opened at branches were automatically designated as managed accounts, some clients paid trading fees of 0.136%, more than 10 times the 0.010% charged on accounts opened online, the regulator found.
Accounts can currently be opened either in person at a branch or through non-face-to-face channels such as mobile trading systems. Only the non-face-to-face channels, however, allow investors to choose whether the account is designated as a managed account, because branches can open managed accounts only.
The FSS will therefore allow investors at branches to make the same choice, widening their options. Investors who have already opened an account will be informed that they can open a new non-managed account if they wish.
Brokerages will also face stronger disclosure obligations when investors open accounts at branches. The measure follows complaints that clients were not properly informed that trading fees differ by account type or about the services tied to managed-account status.
Where managed-account status results in different trading fees, brokerages will be required to compare and explain the fee gap and the available services at the account-opening stage. The fee differences will also be spelled out in the account terms and transaction statements provided when an account is opened.
The FSS said the measure will broaden investors' choice of account type and lower unnecessary trading fees. "We will carry out follow-up steps without delay, including revisions to the relevant account terms and monitoring of how brokerages implement them," an FSS official said. "We aim to have everything in place within the first quarter of next year."