The controversy over the Financial Supervisory Service’s “irregular and hasty review” of single-stock leveraged ETFs (Exchange-Traded Funds) came under scrutiny during the National Assembly Audit.
Opposition lawmakers on the Political Affairs Committee pressed for FSS accountability, noting that the launch schedule was announced before a listing application was even filed, and that the listing process, which typically takes more than two months, was completed in just 29 days. A warning also emerged that former Cheong Wa Dae Jeong Chaek (Head) Kim Yong-bom would be put on the witness stand through a national investigation or special prosecution if necessary.
At the Political Affairs Committee’s National Assembly Audit of the Financial Supervisory Service held at the Seoul Yeouido National Assembly on the 19th, lawmakers from the People Power Party poured out criticism right from the start over whether there were any issues in the review process for single-stock leveraged ETF products.
People Power Party lawmaker Park Dae-chul pointed out, “Finance is a business of buying and selling trust, yet the Financial Supervisory Service hastily opened the door to single-stock leveraged ETFs, and the responsibility for that will inevitably be heavy,” adding, “The problem with single-stock leveraged ETFs lies in irregularity and haste.”
Park (Rep.) cited as issues: △confirmation of product launch before even filing a review application, △streamlining of review stages through parallel reviews, and △the Financial Services Commission’s announcement of the listing schedule before the listing application. Park (Rep.) pointed out, “It takes an average of 62 days for an ETF to be listed, and 43 days for representative index funds, but it was 29 days for single-stock leveraged ETFs,” adding, “This is the first case where the securities registration statement review began before the preliminary review was completed.”
FSS head Lee Chan-jin explained, “Upon checking, it seems that is the case,” and noted, “There was a policy announcement by the Financial Services Commission in mid-April regarding the listing schedule.”
Park (Rep.) criticized, “Did they announce it first to meet that schedule and then (file the) application?” adding, “That is why interpretations are emerging that it was tailored to the local election timetable.”
FSS Deputy Commissioner Hwang Sun-oh explained, “The exchange’s preliminary listing review and the Financial Supervisory Service’s securities registration statement review are conducted as separate tasks.”
In response, Park (Rep.) stated, “Although they are separate review processes, Lee Chan-jin (Director) just answered that there has been no case where the securities registration statement review was conducted before the preliminary review,” reiterating criticism by saying, “Announcing the listing before even filing an application is what constitutes irregularity.”
A warning also emerged to push for a national investigation or special prosecution, citing the failure to secure former Commissioner Kim Yong-bom as a witness for the National Assembly Audit. People Power Party lawmaker Park Sung-hoon stated, “Former Commissioner Kim Yong-bom posted a congratulatory message about himself on the day when KOSPI and KOSDAQ simultaneously plunged by more than 7% on the 15th,” adding, “What is even more astonishing is that this day (the 15th) was effectively the last day to go through the National Assembly witness appearance procedure. It is openly deceiving the National Assembly and mocking the public.”
Regarding former Commissioner Kim’s whereabouts, Park Seong-hun (Rep.) claimed, “I do not know whether he is in Korea or has fled abroad,” adding, “If he were in Korea, he would not be able to so brazenly post self-congratulatory content.” He continued, “The public wants to know the truth about this policy disaster,” emphasizing, “If we cannot summon him as a witness during the National Assembly Audit, we will definitely put him on the historical witness stand through a national investigation or special prosecution, and take the lead in restoring damages as desired by the public.”
Song Eon-seok (Rep.) of the same party demanded the submission of a list of Financial Supervisory Service executives who attended four meetings held before the launch of single-stock leveraged ETFs.
People Power Party lawmaker Shin Dong-wook stated, “Regarding single-stock leveraged ETFs, we need data on net loss amounts distinguishing between realized and unrealized losses for retail investors, loss amounts by product, trends in the number of investors by age group along with holdings and purchase amounts, and average loss per investor who incurred losses,” adding, “Estimates have even emerged that losses reached 56 trillion won, yet the Financial Supervisory Service is not even providing documents. This is a grave mistake.”
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