Lee Chan-jin, Governor of South Korea's Financial Supervisory Service, announced supplementary measures on the 16th for leveraged ETFs and ETNs. The measures were introduced just 50 days after single-stock leveraged exchange-traded funds (ETFs) and exchange-traded notes (ETNs) targeting Samsung Electronics and SK Hynix were launched on May 27. The new rules include raising the basic deposit requirement from 10 million won to 30 million won effective August 5, restricting deposits to cash only starting August 19, and expanding the minimum trading unit from 1 share to 20 shares beginning in November. Market participants have criticized the measures as insufficient to address the root causes of volatility, while Lee's June 22 statement proposing regulations on corporate employee housing loans has drawn scrutiny after disclosure of his 2019 personal loan of 500 million won to President Lee Jae-myung, secured by a mortgage on the president's Bundang apartment and repaid the following year. The Financial Services Commission stated on the 9th that employee loans are welfare benefits distinct from household credit and should not be subject to direct lending regulations. The FSS plays a central role in supervising South Korea's financial markets and approving securities filings for new investment products.
FSS Announces Supplementary Measures for Single-Stock Leveraged Products
The Financial Supervisory Service announced supplementary measures on the 16th for single-stock leveraged ETFs and ETNs targeting Samsung Electronics and SK Hynix. The measures were introduced 50 days after the products were launched on May 27. The FSS suspended new product listings and prohibited advertising and promotional events for existing products. The basic deposit requirement for individual retail investors will increase from 10 million won to 30 million won on August 5. Starting August 19, only cash deposits will be accepted, excluding substitute securities. From November, the minimum trading unit for domestic listed products will expand from 1 share to 20 shares on a provisional basis.
Market Participants Criticize Measures as Insufficient
Market participants have questioned whether the supplementary measures address the fundamental causes of volatility in Samsung Electronics and SK Hynix stocks. Critics have described the measures as stopgap solutions that adjust trading thresholds for individual investors without addressing product structure or asset managers' rebalancing transactions. The products were launched after undergoing institutional design by the Financial Services Commission, listing review by the Korea Exchange, and securities registration review by the Financial Supervisory Service.
Lee Chan-jin Expresses Regret Over Product Introduction at June 22 Press Conference
Lee Chan-jin stated at a June 22 press conference that he regretted not preventing the introduction of single-stock leveraged products. He said, "I should have somehow laid down and blocked it at that time." Lee explained that the products were prepared hastily and securities registration documents were submitted earlier than expected. Lee also raised concerns at the same press conference about corporate employee housing loans, stating, "I have a sense of the problem that some regulation may be necessary for the public interest." He mentioned the possibility of linking corporate welfare programs to the Debt Service Ratio (DSR) system.
FSC States Employee Loans Differ from Household Credit on the 9th
The Financial Services Commission stated on the 9th that employee loans are provided as employee welfare benefits and differ in nature from household loans in the financial sector. The FSC said it is difficult to directly apply household loan regulations to employee loans. Instead, the FSC requested that companies voluntarily manage employee loans by setting first-priority mortgages, requiring principal and interest installment payments, and restricting loans for multi-homeowners and high-priced housing.
Lee Chan-jin's 2019 Personal Loan to President Lee Jae-myung Disclosed
Lee Chan-jin personally lent 500 million won to President Lee Jae-myung. The two are peers from the bar exam and Judicial Research and Training Institute. President Lee declared a debt of 500 million won to a private individual in his 2020 public official asset disclosure. A mortgage with a maximum bond amount of 700 million won was registered in October 2019 on an apartment owned by President Lee and his spouse in Bundang-gu, Seongnam-si, Gyeonggi Province. President Lee was the debtor and Lee Chan-jin was the mortgagee. The debt was repaid the following year. President Lee recently sold the apartment for 2.9 billion won, earning a profit of 2.5 billion won.
FAQ
What measures did the FSS announce for single-stock leveraged products on the 16th?
The FSS announced on the 16th that it would suspend new product listings, prohibit advertising and promotional events, raise the basic deposit requirement from 10 million won to 30 million won effective August 5, restrict deposits to cash only starting August 19, and expand the minimum trading unit from 1 share to 20 shares beginning in November for single-stock leveraged ETFs and ETNs targeting Samsung Electronics and SK Hynix.
What did the Financial Services Commission state about employee loans on the 9th?
The Financial Services Commission stated on the 9th that employee loans are provided as employee welfare benefits and differ in nature from household loans in the financial sector, making it difficult to directly apply household loan regulations. The FSC instead requested that companies voluntarily manage employee loans by setting first-priority mortgages, requiring principal and interest installment payments, and restricting loans for multi-homeowners and high-priced housing.
