President Lee Jae-myung has raised concerns about the effectiveness of additional measures for single-stock leveraged exchange-traded funds (ETFs), deepening the worries of financial authorities. Just five days after the Financial Services Commission (FSC) announced investor protection-focused measures on July 16, the need for further revisions has become unavoidable. The challenge lies in the lack of effective additional measures.
According to financial authorities on July 21, the FSC has begun reviewing additional measures for single-stock leverage ETFs following President Lee's directive during a Cabinet meeting. The President remarked, "There are questions about whether the measures announced on the 16th will suffice," and urged for prompt and decisive action. He also pointed out that the implementation of these measures is not immediate but will take time.
An FSC official stated, "The President's directive means to prepare effective measures, and we will review the overall effectiveness of the currently announced supplementary plans," but added, "No additional regulations have been specifically decided yet."
Industry observers are closely watching for any new measures following the President's public directive. Previously, the FSC announced on July 16 a series of supplementary measures, including a temporary halt on new product launches, raising the basic deposit from 10 million won to 30 million won, extending pre-education from 2 to 3 hours, and banning advertisements. Among these, all measures except for the halt on new product launches and the advertising ban are set to be implemented sequentially after August. The key regulation, raising the basic deposit from the current 10 million won to 30 million won, is scheduled to take effect on August 5, while the measure that does not recognize substitute securities as deposits will be implemented starting August 19.
Some speculate that the President's call for 'swift' and 'decisive' action could lead to an acceleration of the existing measures' implementation timeline. However, adjusting the schedule is not an easy task. Changes to the basic deposit amount and other measures have been planned considering the regulations of the Korea Exchange and the Financial Investment Association, as well as the development schedules of securities firms.
In the securities industry, there are concerns that due to the need for sufficient testing and development by each securities firm, it will be practically difficult to shorten the timeline. The FSC has also stated that there are no set plans to expedite the implementation schedule. Furthermore, introducing additional regulations before assessing the effectiveness of measures announced just five days ago could lead to controversies regarding policy consistency, which is a burden for the FSC.
* This article has been translated by AI.
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