{"id":2203374,"date":"2024-01-08T08:00:14","date_gmt":"2024-01-07T23:00:14","guid":{"rendered":"https:\/\/koreapro.org\/?p=2203374"},"modified":"2024-01-08T01:45:38","modified_gmt":"2024-01-07T16:45:38","slug":"south-korea-investigates-banks-on-risky-investment-sales","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/01\/south-korea-investigates-banks-on-risky-investment-sales\/","title":{"rendered":"South Korea investigates banks on risky investment sales"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">South Korea\u2019s Financial Supervisory Service (FSS) <\/span><a href=\"https:\/\/www.fss.or.kr\/fss\/bbs\/B0000188\/view.do?nttId=132926&amp;menuNo=200218\"><span style=\"font-weight: 400;\">announced<\/span><\/a><span style=\"font-weight: 400;\"> it will launch an investigation into 12 financial institutions for suspected violations in the selling of equity-linked securities (ELS) tied to Hong Kong\u2019s Hang Seng China Enterprises Index (HSCEI). The investigation, starting on Monday, follows the FSS\u2019s preliminary inspection conducted between November and December, which uncovered significant rule violations, including internal control lapses and mismanagement of contract-related documents.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The ELS in question are derivatives that yield returns based on the performance of equities, with investors facing principal losses if stock prices fall below a predetermined level. The FSS\u2019s action comes in the wake of the HSCEI\u2019s sharp decline since Feb. 2021, exacerbating the risks associated with these products. Among the first to be examined are KB Kookmin Bank and Korea Investment &amp; Securities, the top-selling bank and securities firm of ELS products, respectively. The FSS plans to extend the investigation to other major banks and brokerages within the month.<\/span><\/p>\n<p><b>Why It Matters<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The FSS\u2019s investigation into the sale of ELS tied to the HSCEI highlights a significant concern for South Korea\u2019s financial market, particularly regarding retail investor protection. With the HSCEI <\/span><a href=\"https:\/\/www.koreaherald.com\/view.php?ud=20240107000163\"><span style=\"font-weight: 400;\">halving<\/span><\/a><span style=\"font-weight: 400;\"> since early 2021, the risk of considerable losses for ELS investors has increased. This situation is amplified by the fact that these complex financial products are often challenging for average investors to understand. The FSS revealed some banks appear to have encouraged their employees to sell more ELS products despite risks.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As reported by the FSS, the total value of South Korea\u2019s ELS products linked to the HSCEI stood at $14.7 billion (19.3 trillion won) as of November. About 52% of this, which is roughly $7.76 billion (10.2 trillion won), is expected to reach maturity in the first half of the year, with an additional $3.96 billion (5.2 trillion won) maturing in the second half. With the HSCEI having halved since 2021, substantial financial losses are expected. The FSS\u2019s investigation could influence future regulatory policies and practices in the marketing and sale of complex financial instruments.<\/span><\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><a href=\"https:\/\/koreapro.org\/tag\/culture-society\/\"><span class=\"tag\">Culture &amp; Society<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>South Korea\u2019s Financial Supervisory Service (FSS) announced it will launch an investigation into 12 financial institutions for suspected violations in the selling of equity-linked securities (ELS) tied to Hong Kong\u2019s Hang Seng China Enterprises Index (HSCEI). The investigation, starting on Monday, follows the FSS\u2019s preliminary inspection conducted between November and December, which uncovered significant rule [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2203375,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24,25],"class_list":["post-2203374","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy","tag-culture-society"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>South Korea investigates banks on risky investment sales - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2024\/01\/south-korea-investigates-banks-on-risky-investment-sales\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korea investigates banks on risky investment sales - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"South Korea\u2019s Financial Supervisory Service (FSS) announced it will launch an investigation into 12 financial institutions for suspected violations in the selling of equity-linked securities (ELS) tied to Hong Kong\u2019s Hang Seng China Enterprises Index (HSCEI). 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