During a National Assembly audit, lawmakers clashed over allegations of Blue House involvement in the introduction of single-stock leverage exchange-traded funds (ETFs). The ruling People Power Party claimed that investor losses have reached 54 trillion won since the product's launch, demanding the resignation of the Financial Services Commission chairman and the testimony of key policymakers. Chairman Lee Ok-keun denied the allegations of Blue House directives but expressed regret over the investor losses.
At the National Assembly's Political Affairs Committee audit on October 8, Lee responded to People Power Party lawmaker Song Eon-seok's call for a public apology and resignation, stating he felt deeply sorry for the losses and concerns caused to the public, regardless of the necessity of the policy's introduction.
When lawmaker Jo Jeong-hoon pressed for a direct apology to the public, Lee acknowledged the need for the product's introduction but reiterated his sincere apologies as the head of the financial authority for the distress caused to the public. However, he denied any allegations of Blue House involvement in the product's launch.
Song pointed out that a Financial Services Commission report from January 28 indicated the launch of the single-stock leverage ETF was scheduled for the second half of the year, but a joint meeting on March 18 moved it to the second quarter, questioning the reasons behind this change.
When asked about Blue House directives, Lee replied, "That is not the case." He explained that a 40-day legislative notice period was conducted until March 11, during which no significant opinions were raised, allowing the process to continue.
Lawyer Park Jun-tae also questioned whether the product's introduction was effectively decided at a closed meeting led by then-Blue House policy chief Kim Yong-beom on January 13. Lee responded, "That is not the case," asserting that various opinions were considered and decisions were made after consultations with relevant ministries. He noted that concerns had existed for some time regarding the restriction of investment products available domestically compared to those available internationally.
Lee emphasized that the legal basis for the product's introduction was a revision of the enforcement decree. He explained that the Financial Services Commission had gone through consultations with relevant ministries, legislative notices, and public opinion collection, followed by the product development by asset management companies and the review of securities registration and listing.
Regarding the increased stock price volatility following the product's launch, Lee stated that multiple factors contributed to the situation. He acknowledged that while the single-stock leverage ETF may have had an impact, other factors, such as increased volatility in the global semiconductor sector and a rise in the concentration of semiconductor stocks in the domestic market, also played a role.
Despite Lee's explanations, opposition lawmakers insisted that the decision-making authority and accountability for the product's introduction must be clearly identified, repeatedly demanding the testimony of related individuals.
People Power Party lawmaker Park Seong-hoon criticized the rushed launch of the single-stock leverage ETF just a week before local elections, claiming it resulted in 54 trillion won in losses for the public. He questioned why the former Blue House policy chief Kim Yong-beom was not called as a witness, suggesting that the ruling party was obstructing the selection of key witnesses and attempting to turn the hearing into a superficial inquiry.
Park called for the testimony of Kim Yong-beom, Mirae Asset Group Chairman Park Hyun-joo, and Korea Financial Investment Association Chairman Hwang Seong-yeop. However, due to disagreements between the ruling and opposition parties, the selection of related witnesses did not materialize.
Park Jun-tae claimed that while the Financial Services Commission had received a proposal from the Korea Financial Investment Association for the introduction of the single-stock leverage ETF in January, none of its member firms had requested it. He concluded that the single-stock leverage ETF was primarily driven by President Lee Jae-myung and the Blue House, with the Financial Investment Association and the Financial Services Commission as accomplices. He criticized Kim's resignation as merely a scapegoat, stating that if this continued, no one would be held accountable.
In contrast, the Democratic Party rebutted the opposition's claims regarding the scale of investor losses as inaccurate.
Democratic Party lawmaker Park Hong-bae confirmed the official stance of the financial authorities regarding the 54 trillion won loss claim. Lee clarified that this estimate was based on unofficial market commentary rather than official data and encompassed not only single-stock leverage ETFs but also all leverage products. He noted that the Financial Supervisory Service estimated trading losses of approximately 2.3 trillion won from ten securities firms as of August 14.
Park argued that since the stock prices of SK Hynix and Samsung Electronics, the underlying assets, had fallen and leverage was applied, it would be more accurate to view the losses as approximately half of the claimed amount.
Regarding the allegations of Blue House involvement, Park suggested that there was a tendency to frame it as a conspiracy theory, noting that single-stock leverage ETFs based on domestic stocks were already being traded abroad. He emphasized that the introduction was necessary to address regulatory disparities with overseas markets.
Concerns were also raised about the Korea Exchange's market surveillance capabilities. Democratic Party lawmaker Kim Hyun-jeong alleged that high-frequency trading firms were profiting from rebalancing trades of single-stock leverage ETFs near market close, raising suspicions of inadequate oversight by the exchange.
Kim stated that the average monthly trading volume of high-frequency trading from January to May was 2,700 trillion won, but increased to 4,200 trillion won from June to August after the product's listing, a rise of about 52%. She called for a comprehensive investigation into the trading behaviors of high-frequency trading firms and suggested that the exchange's public oversight functions should be separated into an independent body.
In response, Lee stated, "The possibility of unfair trading is continuously monitored by the exchange," adding that they would conduct stricter reviews and respond immediately if any illegal activities were discovered.
* This article has been translated by AI.
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