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| A panoramic view of Seoul's Yeouido financial district / gettyimagesbank |
By Lee Min-hyung
Securities firms are reducing their workforces amid their continuous involvement in a series of scandalous financial fiascos.
According to data from the Korea Financial Investment Association, the number of employees at Korea's 612 securities firms reached 39,119 as of the end of March. This is a drop of 515 from a year earlier.
The figure is also forecast to decline further at a time when they are handling the aftermath of a recent stock manipulation scandal. Suspicious trading of contracts of differences (CFD), which comes with inherent risk due to leverage, is considered the root cause of the latest controversy, which resulted in investor losses reaching hundreds of billions of won.
Brokerage houses have no choice but to suspend or downscale their CFD business amid escalating pressure from watchdogs. Under the latest decision by the Financial Services Commission, securities firms will no longer be able to engage in marketing activities on their CFD products.
A group of 13 securities firms ― which sold CFDs ― will be hit by the toughened regulation. This encompasses major ones, such as Samsung Securities and Korea Investment & Securities, and mid-tier ones, including SK Securities and Yuanta Securities.
As the investigation is still underway over the scandal, more employees and executives who worked at the relevant units may end up leaving their jobs.
Industry officials said most brokerage houses will have to keep a low profile for the time being without pursuing aggressive business expansion this year.
"Chances are some medium- to small-tier brokerage houses may have to scale down their workforces on the CFD business, but most major players do not appear to have specific plans to do so for the time being," an industry source said. "Aside from such financial scandals, the rise of mobile trading systems also makes securities firms reluctant to hire more staff."
Starting from 2023, the benchmark KOSPI is showing signs of a rebound, but the pace of recovery still remains sluggish due to high-interest rates and weak investor sentiment triggered by the latest stock scandal.
Amid their lukewarm stock trading commission revenue, most securities firms are focusing on cutting their fixed costs. According to other data from the financial association, the number of sales offices of the nation's 60 securities firms came in at 798 at the end of March, a decline of 37 from a year earlier.
They are shutting down more offices to reduce their spending on rent amid weakening profitability due to recent rate hikes. The movement is also forecast to pick up further steam in the second half of this year amid a bleak economic outlook here and abroad.
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