Lee Chan-jin, governor of the Financial Supervisory Service, urged the securities industry to do more to protect investors and rebuild trust, saying it is "a fact that critics point out brokerages keep enjoying profits while many of the investors who are the very basis of their existence suffer only losses."
Lee made the remarks on the 29th at a meeting with chief executives of 23 brokerages, adding that "a securities industry that fails to win the trust of investors cannot guarantee its future." In Lee's view, this year's gains in the domestic stock market have been concentrated in a small number of large-cap shares, widening market volatility and leaving most retail investors with a difficult stretch.
Lee repeatedly stressed that "practices that infringe on investors' rights must be corrected." He said some conduct that betrays trust persists, including product designs that do not match investors' expectations, false or exaggerated advertising and the passing on of hidden costs. "Watching from a supervisor's perspective, I have come to see firsthand that the level of investor protection differs sharply depending on how much attention and resources the CEO devotes to it," he said.
Lee also asked brokerages to raise shareholder returns further. "There have been some efforts in the securities industry, such as retiring treasury shares, but they still appear to fall short of what the market expects," he said. "I hope brokerages will set a benchmark for ordinary companies on dividends and other shareholder returns, and become a model for raising corporate value."
According to the FSS, Mirae Asset Securities had the lowest cash dividend payout ratio last year, at 11.1%, among comprehensive financial investment business operators listed on the KOSPI market. The payout ratio, which refers to the share of net profit paid out as dividends, stood at 27.1% for Kiwoom Securities, 35.5% for Samsung Securities, 47.3% for NH Investment & Securities and 51% for Daishin Securities.
Lee said the securities industry's record on social contributions "lags far behind that of banks and others," and asked brokerages to pay attention to social responsibility in line with their expanded size and role. Domestic banks spent 2.2 trillion won on social contribution activities last year, compared with just 50 billion won at brokerages. Lee also called for easing market volatility through the management of margin loans and for risk management in preparation for a period of rising interest rates.
The brokerage CEOs who attended the meeting responded that they "take the social expectations and responsibilities placed on the securities industry more seriously than ever," pledging to "actively carry out shareholder returns and social contributions, while CEOs personally take charge of investor protection."
