Lee Chan-jin (이찬진), governor of the Financial Supervisory Service, urged securities firm chief executives to expand shareholder returns and social contributions in line with performance growth and to strengthen investor protection.

Lee held a meeting with CEOs of 23 securities firms on Sept. 29 at the Korea Financial Investment Association in Seoul’s Yeouido district. "A securities industry that fails to earn trust in investment will not be able to guarantee its future," he said.

He said stock market volatility has expanded sharply this year, extending a difficult period for retail investors. He assessed that the securities industry delivered results in the first half with net profit alone approaching last year’s full-year performance.

Lee said securities firms are taking steps on shareholder returns, including cancelling treasury shares, but these fall short of market expectations. He said the financial investment industry, which presents standards for dividends and shareholder returns to general companies, should also set an example in enhancing corporate value.

According to the FSS, the consolidated cash dividend payout ratios last year for comprehensive financial investment business operators listed on the KOSPI differed widely by company. They included 11.1 percent at Mirae Asset Securities, 27.1 percent at Kiwoom Securities, 35.5 percent at Samsung Securities, 47.3 percent at NH Investment & Securities and 51.0 percent at Daishin Securities.

He also called for an expansion of social contributions. He said domestic banks’ spending on social contribution programmes last year was about 2.2 trillion won, while domestic securities firms came to 50 billion won on a provisional basis.

"Social contribution performance in the securities industry lags far behind that of banks and others," Lee said. "Please check for yourselves whether you are contributing in line with your expanded scale and role."

On investor protection, he stressed that firms should go beyond formal disclosure obligations and ensure customers can actually understand the possibility of losses in products.

Lee cited product design that does not match investors’ level, false and exaggerated advertising and passing on hidden costs as practices that undermine trust. He urged CEOs to directly oversee investor protection systems. The FSS also plans to concentrate its supervisory and inspection capabilities to check related practices.

Lee gave a positive assessment of the securities industry’s recent voluntary push to strengthen the management of margin lending. The association and the securities industry have prepared a self-regulatory plan to limit the concentration of margin lending in specific stocks and to lower credit provision limits relative to equity capital.

Lee asked securities firms to continuously manage the measures so that the decision can be properly implemented in actual business operations.

He also stressed liquidity management amid rising interest rates. He said securities firms, which have a high dependence on short-term funds, need to be mindful of maturity mismatches between funding and investment, while supplying funds in a timely manner to needed areas such as risk capital and real estate.

"As we have entered a period of rising interest rates, securities firms with a high dependence on short-term funds should be mindful of liquidity management, including funding mismatches," Lee said. "Please look at this in a balanced way so sufficient funds can be supplied in a timely manner to needed areas such as risk capital and real estate."

Securities firm CEOs who attended the meeting said they would expand shareholder returns and social contributions and would directly oversee investor protection.