Financial consumer protection law to be strengthened

Financial Services Commission (FSC) headquarters at the Government Complex in central Seoul / Yonhap

By Anna J. Park

Financial companies will be facing more limitations in soliciting investments when they attempt to sell high-risk financial products to general consumers.

This is according to Thursday's preliminary announcement by the Financial Services Commission (FSC) on the revision of the nation's Financial Consumer Protection Act, which will take effect sometime later this year.

In principle, the current law prohibits investment solicitations, unless there's a request made on the part of consumers. However, as enforcement ordinances of the law allow a wide range of exceptions to the prohibition, such investment solicitations on most products are actually possible, other than for over-the-counter derivatives products.

Aiming to prevent an excessive increase of solicitations on financial consumers, the revision of the act will allow only exceptional cases of consumer persuasion by financial firms on the condition of acquiring consumer consent in advance. Even when they succeed at getting consumers' consent in solicitations, the firms are prohibited from promoting high-risk products to general consumers.

While the current ordinances only forbid soliciting general consumers with over-the-counter derivative products, the revised act will also be proscribing investment solicitations of private equity funds, exchange-traded derivative products and high-risk financial products.

The revisions to the act also include requests from the financial industry, allowing additional ways of confirming financial consumers' consent through electronic signature.

The revisions will take effect before the end of the year, following deliberations at the Ministry of Government Legislation.