Two super investors traded 5 trillion won and pocketed 500 million won in prizes... Securities firms barred from trading promotions

[Financial News] Securities firms will no longer be allowed to run promotions offering cash, gift cards or other rewards based on the number or value of trades. Promotions involving high-risk products, such as leveraged and inverse exchange-traded products (ETPs), overseas investment products and margin trading, will also be banned outright.
The Financial Supervisory Service and the Korea Financial Investment Association said on the 28th that they would tighten standards for securities firms’ provision of financial benefits to establish fair competition and prevent investor harm.
As competition among securities firms has intensified, concerns have been raised that promotions offering cash or prizes based on trading performance encourage short-term and excessive trading. Some firms have offered high-value prizes, including 100 shares of overseas stocks worth 80 million won or a car worth 50 million won.
One securities firm, for example, ran a promotion offering up to 5 million won to customers who traded at least 50 billion won worth of domestically listed ETFs or exchange-traded notes (ETNs) in a single day. During the promotion, two individual investors traded 3.4 trillion won and 1.7 trillion won, respectively, and received prizes of 340 million won and 170 million won.
The securities firm was estimated to have earned about 51.4 billion won in brokerage commissions from trading in the ETF. During the promotion, trading in the ETF totaled 97.5 trillion won, of which 42.8 trillion won, or 43.9%, was traded through the firm.
The FSS determined that as trading volume increases, so does securities firms’ commission revenue, potentially creating a conflict of interest between investors and firms. It therefore decided to ban financial benefits linked to the number or value of trades, regardless of the type of product.
Promotions offering cash, gift cards or other rewards will not be allowed for high-risk products—including leveraged and inverse ETPs, exchange-traded and over-the-counter derivatives, credit extended to investors, and overseas investment products—even when the rewards are not tied to trading performance. However, discounts or waivers on a firm’s own fees and interest will remain allowed as price reductions. Promotions that offer benefits based on investment balances rather than the number or value of trades will also be permitted.
The Korea Financial Investment Association plans to issue an advance notice of proposed amendments to the rules in November and complete the revisions by December after gathering feedback. The strengthened standards will take effect on January 1 next year, allowing time for securities firms to incorporate them into their internal rules and revise their business procedures. Before then, firms will also refrain from launching new promotions that run counter to the measures, except for events that have already been announced.
[email protected] Lee Jeong-hwa Reporter