South Korea to reform high securities fees for branch-opened accounts

South Korea’s Financial Supervisory Service (FSS) is moving to reform the practice where securities firms charge significantly higher trading fees based on how an account was opened. An investigation of 37 domestic securities firms revealed that 10 companies applied higher fees to accounts opened at physical branches compared to those opened online, even when the same mobile trading system (MTS) was used for transactions.

In some cases, the fee discrepancy was extreme; one example showed a branch-opened managed account fee of 0.136% versus an online non-managed account fee of 0.010%, a difference of over 13 times. This occurred because branch accounts were often automatically designated as ‘managed accounts’ providing advisory services, which justified higher costs. However, many investors were not clearly informed of these differences or were unable to choose lower-cost non-managed accounts.

Under the new regulations, securities firms must clearly explain the differences in fees and services between managed and non-managed accounts during the opening process. New customers opening accounts at branches will be allowed to directly choose their account type. Existing customers will also be notified of their account status and provided with options to open non-managed accounts. The FSS aims to complete these improvements by the first quarter of 2025.