Reasons for Proposal
Reason for proposal
Nowadays, as the sales type of offshore investment advisory business entities is changed to online concentration and inducement of a wide range of personal investors is possible, illegal/unhealthy sales behaviors of offshore investment advisory business entities are on the rise. Investors are induced through false/exaggerated advertisement of absurd profit rate, and consulting/delegation is done by unqualified persons, resulting in financial damages such as loss of investment principal in addition to fees. Therefore, cases of civil appeals and damages are rapidly increased in relation to offshore investment advisory business entities, so the draft is intended to strengthen control and supervision of offshore investment advisory business entities by basically supplementing the system.
The draft is intended to prevent possible unregistered investment consulting by offshore investment advisory business entities by limiting the persons who do business in paid membership system using online bidirectional channels to “investment advisory business entities” classified into financial investment business entities under the Capital Market and Financial Investment Business Act and by allowing offshore investment advisory business entities to do business through unidirectional channels only suitable for investment consulting without individuality. Likewise, it seeks to strengthen control of entry of offshore investment advisory business entities with history of punishment for false report and establishment of liability for report of executive change, to strengthen the rule on sales by stating the unavailable services of offshore investment advisory business entities and possibility of principal loss, and to improve the withdrawal system with expanded reasons for ex officio cancellation.
Main content
A. Expanded range of investment advisory business (Article 7.3)
The case of business in paid membership system through online bidirectional channels is included in the investment advisory business.
B. Improvement of range of offshore investment advisory business (Article 101.1 of the draft)
The case of business in paid membership system through online bidirectional channels is excluded from the range of offshore investment advisory business, and offshore investment advisory business is clearly defined as the business of giving advice without individuality on the determination or value of investments in financial investment products.
C. Expanded liability of offshore investment advisory business entities for report (Article 101.2 of the draft)
Executive change shall be reported.
D. Expanded reasons for disqualification for report of offshore investment advisory business entities for report (Article 101.5 of the draft)
Case wherein punishment by fine was imposed due to violation of acts and subordinate statutes related to customer protection including “Door-to-Door Sales, etc. Act,” etc. within five (5) years in the past
E. Expanded reasons for ex officio cancellation of offshore investment advisory business entities (Article 101.9 of the draft)
Case wherein fine for negligence or penalty is imposed two or more times due to violation of the provisions of Article 101, Articles 101-2 and 101-3, Article 173-2.1, Article 178-2, or Articles 180-2 through 180-4 is included in the reasons for ex officio cancellation of offshore investment advisory business entities.
F. Strengthened regulation of unhealthy business of offshore investment advisory business entities (Establishment of Article 101-2 of the draft)
Prohibition of financial advisory business entities from damage compensation and profit guarantee is applied to offshore investment advisory business entities, and marking or advertisement for misunderstanding as a financial company, marking or advertisement for damage compensation or profit guarantee, false marking or advertisement of profit rate, and marking or advertisement of unrealized profit, etc. are prohibited.
G. Matters to be observed by offshore investment advisory business entities (Article 101-3 of the draft)
Unavailable services of offshore investment advisory business entities and precautions for investors shall be included in marking or advertisement.
H. Basis of punishment for false report of offshore investment advisory business is provided (Establishment of Article 446 xvii-3 of the draft)
Cases of report of offshore investment advisory business by false or other improper method are also punishable just like the case of no report.
