South Korea’s financial watchdog announced on Wednesday a series of regulatory measures to prevent the improper sale of high-risk financial products, particularly equity-linked securities (ELS). The new rules will limit the sale of these products to designated bank branches staffed with licensed investment advisers and impose stricter suitability assessments for retail investors. The changes come after massive investor losses tied to autocallable Hang Seng China Enterprises Index (HSCEI) ELS, with retail customers at five major banks suffering combined losses of $3.2 billion (4.6 trillion won) in 2024.

Under the new framework, banks will be required to physically separate ELS sales from general banking services, introduce mandatory video briefings for customers and implement a two-day cooling-off period before transactions can be finalized. These measures will be phased in following revisions to financial regulations later this year, with full implementation expected by September. The Financial Supervisory Service (FSS) is also increasing compliance monitoring, including on-site inspections and stricter penalties for violations.