KFTC Issues Guidelines to Curb Excessive Investment of Prepaid Funds in High-Risk Assets

The Korea Fair Trade Commission (KFTC) is preparing guidelines to prevent prepaid installment transaction businesses, such as funeral service companies, from excessively investing prepaid funds in high-risk assets like virtual currencies. On the 24th, the KFTC announced that it would issue an administrative notice regarding the revised 'Guidelines for Consumer Protection in Prepaid Installment Transactions.' The focus of this revision is to clarify the operational principles and internal control systems to ensure that the prepaid funds paid by consumers can be utilized stably. The revised guidelines require a balanced consideration of stability, liquidity, and profitability when managing prepaid funds. In particular, when there is a risk of significant principal loss due to excessive investment in high-risk assets, businesses are required to thoroughly review transaction scale, conditions, and the possibility of fund recovery. The KFTC warned that if prepaid installment businesses expect high short-term returns and invest excessive assets in leveraged stock products, the risk of loss of prepaid funds could increase. According to the revised guidelines, a set of rules for managing prepaid funds must be established, outlining the basic direction for fund management, the scope of permissible investment assets, investment review procedures, and risk management procedures. Businesses with prepaid funds exceeding 100 billion KRW at the end of the previous business year must establish and operate a Prepaid Fund Management Review Committee, which should also consider the opinions of external experts when reviewing investments in high-risk assets. The KFTC plans to implement the revised guidelines after finalizing them.

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