Financial regulators in South Korea expressed regret on Tuesday for the over 6 trillion won ($5 billion) losses incurred by individual investors due to the launch of single-stock leveraged products linked to Samsung Electronics and SK Hynix. Both the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) acknowledged their responsibility during a parliamentary audit.
During the National Assembly's audit session, FSC Chairman Lee Ok-keun stated that while there were policy considerations behind the introduction of single-stock leveraged exchange-traded funds (ETFs), he felt a heavy heart over the resulting losses. He pledged to implement more careful and refined policies to ensure investor protection and market stability.
FSS Chairman Lee Chan-jin also expressed his deep regret, stating, "I always carry a heavy heart and apologize to the public." He emphasized the need for the financial supervisory authority to reflect on its role and responsibilities regarding investor protection.
The officials' apologies came in response to criticism from lawmaker Kim Jae-seop of the ruling People Power Party, who pointed out that losses for individual investors had exceeded 6.3 trillion won since the launch of the single-stock leveraged ETFs, particularly affecting investors in their 40s and 50s, who are considered pillars of the national economy. Kim stressed that policymakers should feel a profound sense of responsibility.
Kim further remarked, "It is not sufficient to evade accountability by claiming that neither of you are the final decision-makers. When a policy is created, there are decision-makers, and those responsible must be identified."
According to statistics distributed by the FSS to lawmakers the previous day, losses for individual investors totaled 6.313 trillion won from May 27, when the single-stock leveraged exchange-traded products (ETPs) were launched, until August 14.
Opposition lawmakers criticized the launch of these products, stating that the President had directly signaled a shift of funds from real estate to stocks. They expressed frustration that there was no clear accountability or transparency in the decision-making process.
During the audit, financial authorities agreed that the NASDAQ listing of Solidigm, a U.S. subsidiary of SK Hynix, falls under the regulations for dual listings in South Korea. In response to a question from lawmaker Park Sung-hoon of the People Power Party regarding the applicability of dual listing regulations to Solidigm's U.S. listing, Chairman Lee stated that it is subject to the dual listing guidelines and that SK Square and SK Hynix must fulfill their obligations to shareholders.
Solidigm was established when SK Hynix acquired Intel's NAND flash and solid-state drive (SSD) business and produces enterprise SSDs used in AI data centers. Concerns have been raised that a separate listing for Solidigm could negatively impact shareholder value for SK Hynix and SK Square.
Since August, financial authorities have been restricting dual listings to protect shareholder value. According to the guidelines established by the FSC, the board of directors of a parent company must assess the impact on existing shareholders when a subsidiary goes public and develop measures to protect them. They must also communicate with shareholders to gather feedback before deciding on the listing and disclose the results and actions taken. An independent special committee's review and approval process is also required.
When asked by Democratic Party lawmaker Lee Kang-il whether the same regulations apply to overseas listings, Chairman Lee confirmed that the dual listing guidelines should apply to both domestic and international listings. However, he noted that Solidigm's listing plans have not been officially confirmed. As a result, the actual listing process and specific transaction structure for Solidigm will likely become key issues once shareholder protection procedures and regulatory applicability are finalized.
* This article has been translated by AI.
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