[Hong Kong ELS Compensation] "Most Compensation Ratios Distributed Between 20% and 60%"

"Compensation Ratio Not Expected to Be Higher Than During DLF"

On the 11th, the regulatory authorities stated regarding the compensation ratio for losses related to Hong Kong H-Index (Hang Seng China Enterprises Index·HSCEI) based equity-linked securities (ELS), "Based on current data, it is estimated that many cases will fall within the range of 20-60%."

Sehoon Lee, Senior Deputy Governor of the Financial Supervisory Service, said at a briefing on the inspection results and dispute resolution standards (standards) related to Hong Kong H-Index based ELS held at the Yeouido headquarters in Seoul on the same morning, "We expect the overall compensation ratio will not be higher than during the 2019 overseas interest rate-linked derivative-linked securities (DLF) incident," adding this.

Financial Supervisory Service Governor Lee Bok-hyun is announcing the dispute mediation guidelines related to the large-scale losses of Hong Kong H Index-linked ELS at the Financial Supervisory Service in Yeouido, Seoul on the 11th. Photo by Kang Jin-hyung aymsdream@

Senior Deputy Governor Lee stated, "It is difficult to specify the exact compensation ratio according to this standard at this point," and added, "The standards serve as a starting point for the dispute process and present factors to consider and important points to note. Since the facts have not been applied yet, it is difficult to predict a specific compensation ratio at this time."

However, he explained, "Considering the characteristics of the product (public offering fund) and changes in the consumer environment compared to the past DLF incident, it is difficult to recognize the sales company's responsibility more than during the DLF case," and added, "During the DLF incident, the compensation ratio was presented as an average of 20-80%, and for six representative cases, it was presented as 40-80%. This time, it is expected not to be higher than during the DLF incident."

Meanwhile, the authorities announced standards that include a basic compensation ratio (20-40%) for losses related to Hong Kong H-Index based ELS products, reflecting adjustment factors such as sales company weighting (3-10%), investor factors ±45 percentage points (p), and adjustment factors ±10 percentage points.

Financial Supervisory Service Governor Bokhyun Lee said, "These standards were carefully prepared so that investors who suffered losses unfairly receive appropriate compensation while ensuring that the principle of investor self-responsibility is not compromised," and added, "We ask for active cooperation from sales companies and investors so that compensation proceeds smoothly according to these standards, minimizing socio-economic costs caused by prolonged legal disputes."