Customer Asset Protection, Segregation, and Complaint Handling
This domain tests how a foreign securities branch protects customer assets and handles complaints, including when custody sits outside Korea.
Segregation
Customer assets must be segregated from the branch’s own assets and from proprietary trading. Securities are typically held with the Korea Securities Depository or a qualified custodian, with sub-ledgers identifying each customer. The branch must reconcile positions and cash regularly and must not use customer assets for its own margin, financing, or hedging. Offshore custody arrangements must preserve Korean segregation and recordkeeping standards.
Complaint handling
Maintain a documented complaint-handling process: receipt, recording, investigation, response, escalation, and reporting. Complaints should be handled promptly under supervisory rules, with reasons given if the branch rejects a claim. Cooperate with FSS dispute mediation and retain records.
Worked example
A branch places customer bonds in its own omnibus account at a foreign custodian, mixed with proprietary bonds. This is commingling. The branch must segregate the customer bonds, reconcile the sub-ledgers, and correct the custody arrangement. The breach may support sanctions even if no loss occurred.
Traps
Using an omnibus account without customer sub-ledgers; using customer assets for margin; ignoring complaints; failing to document responses; assuming offshore custody is outside Korean rules.