{"id":2204213,"date":"2024-03-12T08:00:19","date_gmt":"2024-03-11T23:00:19","guid":{"rendered":"https:\/\/koreapro.org\/?p=2204213"},"modified":"2024-03-15T10:41:03","modified_gmt":"2024-03-15T01:41:03","slug":"south-koreas-financial-regulator-urges-compensation-for-stock-derivative-losses","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/03\/south-koreas-financial-regulator-urges-compensation-for-stock-derivative-losses\/","title":{"rendered":"South Korea\u2019s financial regulator urges compensation for stock derivative losses"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The Financial Supervisory Service (FSS) \u2014 South Korea\u2019s financial regulator \u2014\u00a0 has <\/span><a href=\"https:\/\/www.fss.or.kr\/fss\/bbs\/B0000188\/view.do?nttId=134558&amp;menuNo=200218\"><span style=\"font-weight: 400;\">unveiled guidelines<\/span><\/a><span style=\"font-weight: 400;\"> advising banks and brokerages to compensate for losses incurred from investments in derivative products linked to Chinese stocks listed on the Hong Kong exchange. The move comes after a two-month inspection starting Jan. 8 revealed widespread incomplete sales practices in the selling of Equity-Linked Securities (ELS) products tracking Hong Kong\u2019s H Index, with potential combined losses reaching up to $14.2 billion (5.8 trillion won) if redeemed at end-February values.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Under the proposed guidelines, financial institutions are required to compensate investors a <\/span><a href=\"https:\/\/www.yna.co.kr\/view\/AKR20240311055651002\"><span style=\"font-weight: 400;\">minimum of 20%<\/span><\/a><span style=\"font-weight: 400;\"> of their losses, with the possibility of up to 100% compensation for serious regulatory violations. The FSS emphasizes that these measures are aimed at providing reasonable compensation to affected consumers while upholding the principle of investor responsibility. This directive follows the detection of various illegal and unfair practices, including failures to fully inform consumers about product risks, highlighting the need for enhanced consumer protection in the financial sector.<\/span><\/p>\n<p><b>Why It Matters<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The FSS\u2019 advisory on compensating investors for losses from derivative products linked to Chinese stocks listed in Hong Kong at varying degrees raises concerns over the enforceability of such measures. Given its advisory status, investors will likely be skeptical about whether the actions will be sufficient to deter similar future sales. Further, banks might opt for the minimum compensation without legal compulsion, leaving investors inadequately compensated for their losses.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The issuance of these guidelines comes just a month before South Korea\u2019s parliamentary elections. Voters will closely scrutinize the government\u2019s handling of this issue, which could significantly influence voter sentiment, potentially impacting the ruling People Power Party\u2019s standing in the upcoming elections.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The FSS\u2019 announcement is a litmus test of South Korea\u2019s regulatory environment\u2019s robustness and reliability. While the move to address investor losses could be seen as a positive step toward greater market stability, the advisory nature of the guidelines and the effectiveness of their implementation are key factors that could influence foreign investment decisions.<\/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\/domestic-politics\/\"><span class=\"tag\">Domestic Politics<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>The Financial Supervisory Service (FSS) \u2014 South Korea\u2019s financial regulator \u2014\u00a0 has unveiled guidelines advising banks and brokerages to compensate for losses incurred from investments in derivative products linked to Chinese stocks listed on the Hong Kong exchange. The move comes after a two-month inspection starting Jan. 8 revealed widespread incomplete sales practices in the [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2204214,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24,27],"class_list":["post-2204213","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy","tag-domestic-politics"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>South Korea\u2019s financial regulator urges compensation for stock derivative losses - 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\/03\/south-koreas-financial-regulator-urges-compensation-for-stock-derivative-losses\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korea\u2019s financial regulator urges compensation for stock derivative losses - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"The Financial Supervisory Service (FSS) \u2014 South Korea\u2019s financial regulator \u2014\u00a0 has unveiled guidelines advising banks and brokerages to compensate for losses incurred from investments in derivative products linked to Chinese stocks listed on the Hong Kong exchange. 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