As the People Power Party escalated its criticism of the single-stock leverage ETF (Exchange-Traded Fund) incident, labeling it “Bada Iyagi Season 2 that turned the stock market into a gambling den” and a “retail investor plunder gate,” the Financial Services Commission stated that it had launched the product in accordance with legal procedures while establishing investor protection mechanisms.
During the Political Affairs Committee’s national audit session targeting the Financial Services Commission, held on the 8th at the Seoul Yeouido National Assembly, FSC Chairman Lee Eui-won responded to opposition lawmakers’ criticism of the “hasty introduction” of single-stock leverage ETFs by stating, “We introduced them in accordance with legal procedures, step by step, for each institutional investor.”
Lee (Chairman) explained, “We established the basis for introduction through an amendment to the enforcement decree, gathered opinions through a legislative notice, revised the detailed implementation rules, and then the asset manager prepared the product, which went through exchange review and other processes.”
Additionally, Lee (Chairman) added, “What the Financial Services Commission changed was the enforcement decree. We created the basis for introduction there (in the enforcement decree). The Korea Exchange conducts listing reviews, but since each product is different, we do not conduct an average review,” noting that “In the case of index ETFs, the structure is simple, so the review period varies by ETF type.”
Lee (Chairman) also emphasized that investor protection mechanisms were introduced simultaneously with the product launch. Lee (Chairman) stated, “Currently, leverage products for Samsung Electronics and SK Hynix listed in Hong Kong were subscribed to by ordinary citizens without any specific measures on their part. However, when we introduced this product, we required pre-education and a basic deposit,” adding, “We prohibited margin trading and incorporated various investor protection mechanisms in our own way.”
Lawmakers from the ruling party continued to scrutinize the background and procedures of the single-stock leverage ETF launch one by one into the afternoon.
Through a procedural speech, People Power Party lawmaker Song Eon-seok said, “When reported to the Financial Services Commission on January 28, it was stated that the product would be launched in the second half of the year, but at the joint meeting of relevant institutional investors on March 18, it was changed to a launch in the second quarter,” adding, “We need materials to verify how the product’s early launch came about and who made the decision at what stage.” Song (Rep.) stated, “It appears that the Financial Services Commission Chairman lied during the national audit session,” requesting, “I believe there is reason enough to commit perjury, so please provide materials showing when and where the decision was made.”
Fellow party member Kim Jae-seop (Rep.) also claimed it was a “hasty launch” and released emails related to meetings on January 6 and 13. Kim (Rep.) argued, “Looking at it now, it appears to be very clear evidence that the Financial Services Commission actually presided over the meeting after communicating with BH (Cheong Wa Dae),” pressing, “If there are any illegalities in the ETF introduction process, will the Financial Services Commission take responsibility?”
Kim (Rep.) stated, “While the estimated amounts differ, the most conservative loss amount is 2.3 trillion won,” adding, “Citizens have actually suffered significant losses.”
Senior lawmaker Park Dae-chul (Rep.) from the same party commented on the single-stock leverage ETF incident, saying, “This is already a matter of riding a tiger’s back; a special prosecutor and national investigation are reserved,” pointing out, “I don’t know what they are afraid of. Witness selection was bulletproofing, and the Financial Services Commission did not even attend, using business trips as an excuse down to the responsible section chief.”
Park (Rep.) criticized, “There was a companion to the President, the schedule was moved up, and irregular reviews were conducted, yet they consistently lie and make excuses claiming it was a normal procedure,” adding, “It is once again Bada Iyagi Season 2 that turned the stock market into a gambling den.”
People Power Party lawmaker Park Seong-hoon described the incident as “the ‘Lee Jae-myung government’s retail investor plunder gate’ where the government plundered retail investors,” stating, “The market continues to discuss whether the main culprit is former Cheong Wa Dae Jeong Chaek (Head) Kim Yong-beom or President Lee Jae-myung.”
When asked if Park (Rep.) received a call from the Cheong Wa Dae regarding single-stock leverage ETFs, Lee (Chairman) explained, “It was not about receiving a call; it was about reporting on the necessity of introduction and other policy matters,” adding, “We were reporting on what could be changed in the capital market due to exchange rate stability and such.”
In response to the allegation that Lee (Chairman) had “diverted all LINE messages from those who handled the work practically at the time,” Park (Rep.) replied, “I do not agree with that at all.”
Park Seong-hun (Rep.) criticized, “The average ETF product takes an average of 62 days for review, but single-stock leverage ETFs took only 29 days,” adding, “Mirae Asset, where the son of former Director Kim Yong-beom works, earned over 1.9 trillion won in profits in the second quarter at the time. The Financial Services Commission failed to stop the product that Jeong Chaek (Head) introduced hastily by breaking principles, acting as a lackey.”
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