Lee Chan-jin, Governor of South Korea's Financial Supervisory Service (FSS), chaired a meeting with asset management company CEOs on May 13 at the Korea Financial Investment Association in Yeouido, Seoul, but made no public remarks about single-stock leveraged exchange-traded funds (ETFs) during his prepared statement. Lee had previously expressed regret over the launch of Samsung Electronics and SK Hynix single-stock leveraged and inverse products, yet read from a prepared script at the May 13 meeting, focusing instead on false advertising and ETF tracking error management. The silence comes amid nationwide attention on single-stock leverage products, with industry representatives and officials indicating that regulatory measures may be formalized through an upcoming F4 meeting involving South Korea's top financial policymakers.
FSS Governor Lee Chan-jin Focuses on Advertising and Tracking Errors at May 13 CEO Meeting
Lee Chan-jin delivered prepared remarks at the May 13 meeting, departing from his usual practice of raising unannounced topics. He stated, "Special self-regulatory efforts are needed for market order violations such as exaggerated advertising," and added, "I urge [asset managers] to work together with liquidity provider securities firms to thoroughly manage tracking errors in the ETF operation process." Lee made no mention of single-stock leveraged products during his public statement. When reporters asked questions about the issue after the meeting, Lee entered an elevator without responding.
Korea Financial Investment Association Chairman Yellow Sung-yeop Mentions Soft Landing Need
Yellow Sung-yeop, Chairman of the Korea Financial Investment Association, addressed the topic in his remarks immediately following Lee's opening statement. Yellow said, "Phenomena such as recent concentration of funds in specific large-cap stocks and rapid growth of individual investors' leveraged product investments are areas our industry must examine more carefully." After the meeting, Yellow told reporters, "[Discussion of single-stock leverage] did not entirely not come up," and added, "We talked about the need to make efforts to ensure a soft landing in the market." Asset management CEOs attending the meeting declined to comment, with one CEO stating that "the FSS will organize and announce" any relevant information.
F4 Meeting Expected to Address Single-Stock Leverage Measures
The FSS had announced that the May 13 meeting's theme was "Review of Voting Rights and Shareholder Rights Exercise Systems and Other Capital Market Issues." While the stated focus was on improving asset managers' voting rights practices in connection with stewardship code implementation, the phrase "other capital market issues" allowed for some discussion of single-stock leverage products. Kim Yong-beom, Chief of Staff for Policy at the Blue House, stated on May 10 that "if there are necessary improvements [regarding single-stock leverage], I think they will be reviewed, discussed, and decided at the F4 meeting." The F4 meeting is a consultative body where Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul, Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eok-won, and FSS Governor Lee Chan-jin discuss financial market issues. Industry observers note that measures may focus on Korea Exchange rule-making and securities firms' transaction oversight rather than asset managers' product offerings.
FAQ
What did FSS Governor Lee Chan-jin say about single-stock leveraged ETFs at the May 13 CEO meeting?
Lee Chan-jin made no public remarks about single-stock leveraged ETFs during his prepared statement at the May 13 meeting with asset management CEOs, focusing instead on false advertising and ETF tracking error management.
Why did Korea Financial Investment Association Chairman Yellow Sung-yeop mention a soft landing?
Yellow Sung-yeop stated that the industry discussed the need to make efforts to ensure a soft landing in the market regarding the concentration of funds in specific large-cap stocks and rapid growth of individual investors' leveraged product investments.
How will South Korea's financial authorities address single-stock leverage product measures?
Kim Yong-beom, Chief of Staff for Policy at the Blue House, stated on May 10 that measures will be reviewed, discussed, and decided at the F4 meeting, which includes the Deputy Prime Minister, Bank of Korea Governor, Financial Services Commission Chairman, and FSS Governor.
