[DigitalToday reporter Sangyeop Oh] South Korea's Financial Supervisory Service will impose an outright ban on events that pay cash or prizes based on stock trading amounts. It will also restrict reward-type marketing for high-risk investment products, including overseas stocks and leveraged products. The move is expected to reshape the competition among brokerages that has relied on cash-equivalent perks to attract new clients and boost trading volumes.

The FSS and the Korea Financial Investment Association on Tuesday said they will tighten standards on providing financial benefits in the brokerage industry to establish fair competition and prevent investor harm.

The core measure is a blanket ban on events that pay cash, gift certificates and similar benefits in proportion to trading frequency or trading value. Brokerages have attracted clients by returning cash once customers traded above a certain amount or by increasing prizes based on trading performance.

The FSS said it judged such sales practices could encourage unnecessary repeated trading and increase transaction costs and the risk of losses. It said brokerages' commission income rises as client trading increases, which could create conflicts of interest.

In one case disclosed by the FSS, a brokerage ran an event for domestically listed exchange-traded funds (ETFs) and exchange-traded notes (ETNs) that paid up to 5 million won if daily trading exceeded 50 billion won.

In the process, two retail investors traded 340 trillion won and 170 trillion won worth of ETFs, respectively, and received event prizes of 340 million won and 170 million won.

Total turnover in the ETF during the event period was tallied at 975 trillion won, and trading through the brokerage accounted for 428 trillion won, or 43.9 percent. The FSS estimated the brokerage earned about 51.4 billion won in commissions from ETF trading.

Regulation will also be strengthened for high-risk financial investment products. The targets include leveraged and inverse exchange-traded products (ETPs), listed and over-the-counter derivatives, investor credit such as margin lending, and overseas investment products.

Events offering financial benefits such as cash or gift certificates will be banned for these products regardless of trading performance. Restrictions will also cover practices such as paying investment support funds to first-time overseas stock traders or providing cash to new margin-trading customers.

Not all customer benefits will disappear. Discounts or waivers on trading fees and interest that brokerages apply on their own will remain allowed.

For general products such as domestic stocks, events that are unrelated to trading frequency or trading value will still be permitted. Providing benefits based on investment balances rather than trading performance will also be allowed.

As a result, brokerages can continue to offer benefits unrelated to trading performance to new domestic stock customers or customers who transfer assets from other firms, but events offering financial benefits for overseas investment products will be restricted.

The measures are expected to force changes in brokerages' customer acquisition strategies. In the overseas stock market in particular, marketing tools will be reduced because brokerages have used cash rewards to boost trading values and attract new customers.

Brokerages have competed to raise their overseas stock trading share by paying investment support funds to new or dormant customers or by offering cash to customers who transfer stocks held at other firms.

The FSS has previously pointed to problems that occurred in overseas stock sales practices.

On Aug. 31, when it notified Shinhan Investment Corp of management guidance matters, it said investor protection procedures for cash reward events proportional to overseas stock trading amounts were insufficient.

Shinhan Investment ran the related events from September 2023 to December 2025 without sufficiently reviewing compensation limits for the same individual and the possibility of conflicts of interest.

It took issue in particular with a sharp rise during the event period in trading in a U.S. short-term Treasury ETF and in customers' turnover ratios. It asked the firm to check in advance whether relevant rules are complied with when pursuing overseas stock trading events and to strengthen monitoring for suspicious trades.

Supervision of overseas investment advertising and customer disclosures is also continuing. The FSS has previously instructed brokerages to provide sufficient guidance on risks such as exchange-rate fluctuations and differences in taxation systems that can arise during overseas investment, and to strengthen internal controls over events and investment advertising.

The latest improvements go a step further in that existing supervisory direction by setting clear criteria limiting cash-equivalent benefits themselves.

The FSS and the association plan to pre-announce a revision to the association's rules in November, gather opinions and complete the revision by December. Taking into account brokerages' internal rule updates and procedural changes, they set the implementation date as Jan. 1, 2027.

Even before the rules take effect, the industry plans not to run new events that run counter to the improvements, excluding events that have already been announced.

A brokerage industry official said, "The importance of service competition, such as lowering trading fees, providing investment information and improving trading convenience, is likely to grow rather than paying cash or prizes." The official added, "The overseas stock segment is likely to affect competition among brokerages to attract customers as cash reward events are restricted."