Civil organizations have filed a public interest audit request against the Financial Services Commission and the Financial Supervisory Service, holding them responsible for inadequate monitoring and supervision of the sale of Hong Kong H Index equity-linked securities (ELS).
The Financial Justice Solidarity, People's Solidarity for Participatory Democracy, and the Lawyers for a Democratic Society (Minbyun) Committee on Livelihood Economy held a press conference on the 15th in front of the Board of Audit and Inspection in Jongno-gu, Seoul, raising questions about the effectiveness of the government's 'strengthened investor protection measures' for high-risk, complex financial products and the need to review the responsibility of financial authorities regarding the incident.
The Financial Justice Solidarity, People's Solidarity for Participatory Democracy, and the Lawyers for a Democratic Society (Minbyun) Civil Economy Committee held a press conference on the 15th in front of the Board of Audit and Inspection in Jongno-gu, Seoul, to request a public audit of the Financial Services Commission and the Financial Supervisory Service. Photo by Seongah Sim heart@
Gil Seong-ju, chairman of the Hong Kong Index ELS Victims' Association, stated, “The victims are depositors using banks, and since these products were sold by safe and trustworthy banks, they purchased the ELS products without recognizing their risks. However, even after one or two years, the products were not redeemed, and upon review, we cannot dismiss suspicions of the banks' illegal acts, ignorance, and impure intentions.”
He continued, “As a last resort, we appeal to the Board of Audit and Inspection, which can guide and supervise to correct the mistakes of public institutions,” and added, “We hope all possible methods will be used to conduct an audit of the Financial Services Commission and the Financial Supervisory Service.”
Kim Hee-sung, a lawyer from Minbyun's Committee on Livelihood Economy, also pointed out the loopholes in the 'Guidelines for Simplifying Customer Suitability Assessment and Explanation Obligations for Financial Product Transactions' announced by the Financial Services Commission in March 2021.
Lawyer Kim said, “Banks could only verify whether there was any change in the information necessary for customer suitability assessment and could conduct suitability assessments remotely. We are requesting an audit to determine whether this violates the regulation (Article 17, Paragraph 2 of the Financial Consumer Protection Act) that requires obtaining necessary information through interviews and questions.”
He also raised the need for an audit regarding the Financial Services Commission’s inadequate supervision and inspection and issues in the product sales approval process.
Kim Eun-jung, co-executive director of People's Solidarity for Participatory Democracy, said, “The financial authorities initially said they would restrict banks from selling high-risk private equity funds but withdrew their stance within a month due to opposition from the banking sector,” and urged the Board of Audit and Inspection to conduct a thorough audit, stating, “The financial authorities' supervisory negligence has led to the reckless proliferation of high-risk products, causing large-scale consumer damage again.”
Victims who participated in the press conference also commonly appealed that they were not given sufficient explanations about the high-risk products at the time of subscription.
Product subscriber Park Ki-hyun (61) said, “The bank explained it as ‘the safest deposit in the world’ and just circled the places to sign on the documents, finishing the process in an instant. When I complained to the bank three months later, they said, ‘Since you’ve waited this long, wait three more years and we will add interest,’ so I waited, but when I went in April this year, the person in charge had disappeared.”
Meanwhile, according to Financial Justice Solidarity, the total outstanding sales balance of Hong Kong ELS products is 19.3 trillion won, of which 15.4 trillion won matures this year alone, and the estimated damage amount as of the 12th is 522.1 billion won based on five banks (KB Kookmin, Shinhan, Hana, NH Nonghyup, and Woori Bank).
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