South Korea Moves to Tighten Rules on “Fin‑Influencers” with Mandatory Disclosure Requirements
Seoul – A draft amendment to the country’s capital‑market legislation would oblige social‑media personalities who promote cryptocurrencies, stocks or other financial products to disclose both their personal holdings and any compensation they receive for the promotion.
What the proposal entails
- Scope of the rule: The amendment, being prepared by Democratic Party lawmaker Kim Seung‑won of the National Assembly’s Political Affairs Committee, targets individuals who repeatedly give investment advice or receive payment for urging the public to buy or sell securities, virtual assets, or related products.
- Disclosure obligations: Affected “fin‑influencers” would have to publish, in a clear and accessible manner, the type and amount of assets they own and any remuneration received for the endorsement. The disclosures must cover advice delivered through written articles, online posts, livestreams, videos or any other broadcast channel.
- Regulatory grounding: The changes would amend the Capital Market and Financial Investment Business Act and the Act on the Protection of Virtual Asset Users. Detailed reporting standards would be set by a presidential decree.
- Enforcement: Violations could attract penalties on par with those applied for market manipulation or insider trading, signaling a hard‑line stance by authorities.
Why the change is being pursued
Kim warned that the rise of “fin‑influencers” – individuals who wield sizable followings but are not regulated financial advisers – creates a conflict of interest that can lead to “unpredictable losses for investors.”
Recent data from the Financial Supervisory Service (FSS) underline the speed at which this phenomenon is expanding. The number of registered quasi‑investment advisors (QIAB), entities that provide general investment guidance via media channels, has surged from 132 in 2018 to 1,724 in 2024. The rapid growth reflects a broader shift toward social‑media‑driven investment advice, especially in the crypto sector, where retail participants often rely on informal recommendations.
International context
South Korea’s move aligns with a wave of regulatory action worldwide:
| Region | regulator | Recent measure |
|---|---|---|
| United Kingdom | Financial Conduct Authority (FCA) | Requires prior approval for any financial promotion, including crypto‑related content. |
| United States | SEC & FINRA | Issued fines and reprimands for undisclosed endorsements, particularly around meme‑coin promotions. |
| European Union (Italy) | CONSOB (following ESMA guidance) | Extended EU advertising rules to social‑media influencers promoting high‑risk investments, including crypto. |
These global precedents suggest a growing consensus that transparency and disclosure are essential to protect retail investors from misleading or biased recommendations.
Potential impact on the market and influencers
- Increased transparency: Mandatory disclosures could help followers better assess whether an influencer’s advice is driven by personal profit motives, potentially curbing speculative buying sprees that have previously inflated asset prices.
- Compliance costs: Influencers and agencies will need to implement robust reporting processes, possibly increasing operational expenses or prompting some to cease financial‑related content altogether.
- Enforcement risk: Given the severity of the proposed penalties, even inadvertent breaches could expose influencers to heavy fines or criminal charges, intensifying the need for legal counsel.
- Investor behavior: As the market adapts, investors may shift toward traditionally regulated advisory channels, favoring licensed financial advisers over unverified social‑media personalities.
Key takeaways
- New legislation in draft: South Korea is preparing to amend existing capital‑market laws to force crypto and stock influencers to disclose holdings and compensation.
- Broad applicability: The rule covers all forms of online communication—articles, videos, livestreams, and other broadcasts.
- Heavy penalties: Breaches could be punished as severely as market‑manipulation offenses.
- Rapid growth of fin‑influencers: FSS data shows a more than ten‑fold increase in quasi‑investment advisors over six years, underscoring the urgency of the regulatory response.
- Global trend: The initiative mirrors tightening standards in the UK, US, and EU, signaling a worldwide shift toward greater accountability for online financial promotion.
As the draft moves through the legislative process, market participants will be watching closely to gauge how the final rules may reshape the influencer‑driven investment landscape in South Korea—and whether they will set a benchmark for other jurisdictions grappling with similar challenges.
Source: https://cointelegraph.com/news/south-korea-finfluencer-crypto-stock-disclosure-bill?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
