A Legal Guide by a Pseudo-Investment Advisory Lawyer
The Decisive Difference Between
Pseudo-Investment Advisory Business and Investment Advisory Business
Many operators run paid “signal groups” or trading rooms on platforms such as KakaoTalk or Telegram relying solely on a pseudo-investment advisory business registration.
However, in actual legal assessments, the most critical issue is individualization.
A pseudo-investment advisory business provides non-personalized, general investment information to an unspecified audience through publications, broadcasts, or online postings.
In contrast, an investment advisory business offers customized advice tailored to a specific individual’s investment profile, which requires formal registration with the Financial Services Commission.
Following the 2024 amendment to the Capital Markets Act, structures in which operators receive compensation and directly exchange opinions with users online are increasingly likely to be classified as investment advisory services.
Accordingly, responding to member questions in paid groups by specifying particular stocks or precise buy/sell timing carries a high risk of being deemed unregistered investment advisory activity, subject to criminal penalties.
Key Prohibited Practices Operators Must Avoid
In investigations and disputes, the following conduct most frequently becomes problematic:
First, providing individualized investment advice.
The moment an operator gives a member a tailored instruction such as “Do not average down on this stock,” it may constitute a violation of the prohibition on unregistered investment advisory services.
Second, guaranteeing profits or covering losses.
Statements such as “principal guaranteed” or “fixed monthly returns of 5%” may themselves violate the Capital Markets Act and can result in up to three years’ imprisonment or fines of up to KRW 100 million.
Third, false or exaggerated advertising.
Posting fabricated profit screenshots, impersonating investors, or claiming superiority over competitors without objective evidence may escalate into fraud charges.
Mandatory Compliance Measures and Internal Controls
When operating signal groups or investment-information services, the following points must be clearly disclosed on websites, notices, and pinned messages:
No one-to-one consultations or asset management services are provided
Investment losses are possible and responsibility rests solely with the investor
The operator is a registered pseudo-investment advisory business, not a licensed financial investment company
In addition, pseudo-investment advisory registrations must be renewed every five years.
Failure to complete mandatory education or having a prior violation of financial laws may result in rejection of the registration.
For virtual asset (cryptocurrency) signal groups, the Virtual Asset User Protection Act applies.
Engaging in insider trading, market manipulation, or unfair trading practices may lead to severe criminal penalties, including imprisonment of one year or more.
In particular, pump-and-dump schemes involving coordination with specific projects are currently under intensive regulatory scrutiny.
Why Legal Support from Decent Law Firm Matters
Decent’s virtual asset and financial regulation team goes beyond simple registration assistance, providing comprehensive management of legal risks across the entire business structure.
Formation and operational advisory
We design service structures, terms of use, and advertising language to ensure compliance within the scope of pseudo-investment advisory regulations.
Criminal investigation defense
We respond to allegations of unregistered advisory services, fraud, or unfair trading by developing legal arguments focused on the absence of conspiracy and fraudulent intent.
Civil dispute representation
We handle investor damage claims by structuring defenses based on the validity of limitation-of-liability clauses and comparative negligence principles.
In an evolving regulatory environment, compliance must begin before issues arise, not after enforcement actions commence.
If you are concerned about legal risks related to operating a pseudo-investment advisory business or signal group, we recommend consulting with a specialized lawyer for a proactive legal review.
