SEOUL, May 19 (AJP) -South Korea's Financial Supervisory Service (FSS) has unveiled a sweeping set of preemptive consumer protection measures targeting leverage exchange-traded funds, social media investment influencers, and corporate insurance agencies, as domestic stock market volatility continues to climb.
FSS Governor Lee Chan-jin chaired the second Consumer Risk Response Committee meeting at the agency's Seoul headquarters on Tuesday, where attendees reviewed emerging risk factors across financial markets amid what regulators described as overheated competition among financial firms.
The financial regulator flagged growing concern over debt financed investing, noting that turnover ratios for major leverage and inverse ETF products remain significantly higher than those for general equities.
The country's first single-stock leverage ETF will debut on May 27.
The FSS plans to conduct intensive inspections of management status, disparity ratios, and trading trends across leverage and inverse ETFs, while issuing investor caution notices and reviewing asset managers' marketing practices.
To prevent consumers from mistaking high-risk instruments for conventional ETFs, the watchdog called for clearer disclosure of core risk descriptors — such as "single-stock" and "leverage/inverse" — in product names and advertisements. Current rules require a minimum deposit of 10 million won (approximately $6,665) and mandatory prior training before investing in such products.
The FSS took direct aim at so-called finfluencers — a portmanteau of "financial" and "influencer" — who have exploited recent market swings to generate personal gains. The FSS cited cases of influencers recommending stocks they had already purchased without disclosing conflicts of interest, as well as others operating paid stock-tip subscription services without registering as discretionary investment advisory businesses.
The agency said it will deploy an AI-based monitoring system for round-the-clock surveillance of finfluencer activity, while stepping up enforcement on illegal financial advertisements in coordination with the Korea Communications Standards Commission.
In insurance, the FSS singled out deceptive solicitation practices by general agencies (GAs) — corporate insurance intermediaries whose affiliated planners numbered 316,000 at end-2024, representing roughly 59.2 percent of all insurance planners nationwide.
The watchdog said some agencies have been steering clients toward unnecessary policies under the guise of tax or labor consulting, and engaging in illegal private financing. Proposed regulatory reforms include restricting GAs from concurrently operating consulting businesses and imposing stricter penalties for sanction evasion.
The committee also reviewed risks related to AI-powered cyberattacks, low early-termination interest rates at mutual financial cooperatives, and consumer access issues involving basic living expense accounts.
"We must respond with a high level of vigilance against actions that fuel excessive debt investments and leverage trading by financial companies, as well as capital market disruptions by some finfluencers amid persistent stock market volatility," Lee said.
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