By Yoon Ja-young
Staff Reporter
Investors expect to get full details, including potential risks, when they are deciding whether or not to put their money into funds. Few banks and securities companies, however, turned out to satisfy these expectations, according to the Financial Supervisory Service (FSS).
The top financial regulator dispatched its employees to 210 branches of 14 banks and 240 branches of 16 securities companies to conduct clandestine case studies.
The FSS employees, disguised as customers seeking to invest in funds, evaluated the banks' fund sales processes.
It turned out that thirteen companies, including Samsung Securities, NH Investment & Securities, SC First Bank, Korea Exchange Bank, HSBC, Daegu Bank and IBK, were especially poor in this regard.
They scored below 60, while the industry average was 67.4 out of 100. The industry average also fell from the first half of the year, when the average score was 70.1.
Kookmin Bank, Woori Bank and Citibank Korea, meanwhile, were considered to be good in the fund sales process, scoring 80 or above. Prudential Securities and Korea Investment & Securities also scored well.
The regulator said that a good fund salesperson should tell customers in advance how much time is expected for the process before consultation, and notify them that there is a process required by the Capital Market Consolidation Act.
He or she should give relevant information, such as the stock market situation, using diverse data, and check whether the customer is following the explanation.
The fund sales should include detailed explanations on possible risks, such as losses and differing commissions on each class of funds.
The regulator said that the businesses were especially poor in explaining to customers how to withdraw money from funds later, or choosing the right funds that suit each investor, taking into consideration how much risk they are willing to take.
The financial regulator began the study in December 2008 to observe whether financial companies were abiding by fund sales regulations.
The regulator plans to take stronger actions against those who continue performing poorly in the fund sales process.