FSS chief calls on brokerages to raise shareholder returns, social contributions

Financial Supervisory Service chief Lee Chan-jin called on the brokerage industry Tuesday to more actively share the fruits of the stock market's growth with investors.

Lee made the remarks as securities firms post near-record earnings on the back of a buoyant market, even as many retail investors continue to struggle amid heightened volatility. He urged the industry to step up shareholder returns and social contributions.

Speaking at a meeting with the CEOs of 23 securities firms at the Korea Financial Investment Association in Yeouido, Seoul, Lee said, "Without the firm trust of investors, we cannot guarantee the future of the securities industry." The FSS used the occasion to discuss key industry issues, map out future directions and hear requests from the sector.

Lee said the investment environment felt by retail investors this year had differed from what headline market figures suggested. "The Kospi has posted a gain of more than 60 percent from the start of the year, but most of that rise was driven by a concentration in a handful of large-cap stocks, and market volatility has actually expanded significantly," he said. "As a result, for most retail investors, this has been a period of hardship to endure."

Securities firms, by contrast, have seen their earnings surge. "The brokerage industry has already achieved remarkable results in the first half alone, with net profit for the period approaching last year's full-year figure," Lee said. "It is now time to seriously consider how the industry and investors can grow together."

He particularly urged brokerages to raise their own benchmark for shareholder returns. "There have been some shareholder-return efforts in the securities industry recently, such as share cancellations, but they still appear to fall short of what the market expects," Lee said. "Please set a benchmark for shareholder returns — including dividends — for ordinary companies, and serve as a model for enhancing corporate value."

The FSS cited last year's cash dividend payout ratios for Kospi-listed comprehensive financial investment business operators: Mirae Asset Securities at 11.1 percent, Kiwoom Securities at 27.1 percent, Samsung Securities at 35.5 percent, NH Investment & Securities at 47.3 percent and Daishin Securities at 51.0 percent.

Lee also took direct aim at the industry's level of social contribution. "The securities industry's performance was made possible by investors," he said. "Now that those very investors are facing difficulties, the industry needs to reflect on what it can do." He added, "Please check for yourselves whether your contributions match your expanded scale and role."

According to the FSS, domestic brokerages spent a combined 50 billion won ($37 million) on social contribution activities last year on a preliminary basis, far below the 2.2 trillion won spent by domestic banks. Meanwhile, the combined net profit of 37 domestic securities firms on a separate financial statement basis reached 8.6 trillion won in the first half of this year, a figure that has grown substantially compared with the 13.8 trillion won posted by 20 domestic banks.

Lee also called for tighter management of margin financing, which he said could amplify market volatility. The outstanding balance of domestic margin loans grew from 15.8 trillion won at end-2024 to 27.3 trillion won at end-2025, then to 37.3 trillion won at end-June this year, before easing to 33.3 trillion won at end-August.

"Excessive concentration in specific stocks has been identified as one cause of market herding and rising volatility," he said, urging brokerages to comply in practice with the voluntary resolution they recently adopted to limit margin financing by individual stock and cap it relative to their own equity.

Lee also stressed the need for liquidity management in preparation for a rising interest rate environment. "As we have entered a period of rising interest rates, securities firms with high dependence on short-term funding should pay close attention to liquidity management, including funding mismatches," he said, calling on firms to prepare without delay for the new adjusted liquidity ratio regime set to take effect next year.

He added, however, that the industry should take a balanced approach to ensure that funding to necessary sectors — such as venture capital and real estate — does not dry up.

On investor protection, Lee delivered a pointed message placing direct responsibility on CEOs. After citing product designs that fail to meet investor expectations, false and exaggerated advertising, and the passing on of hidden costs, he said, "Having watched from a supervisor's perspective, I have come to realize that there are stark differences in the level of investor protection depending on how much attention and resources a CEO devotes to it."

He added that the FSS would concentrate its supervisory and examination capabilities going forward to "thoroughly investigate and fundamentally reform" conduct that undermines investor trust.