Public Seminar on Preventing Recurrence of the 'Hong Kong ELS Incident'... "Need to Improve Practices and Culture in Selling High-Risk Products"

Vice Chair Kim So-young Emphasizes Balance Between 'Consumer Protection Principle' and Consumer 'Self-Responsibility Principle'
Financial Services Commission, YouTube Live Broadcast... "Preparing Improvement Measures Reflecting Opinions"

On the 5th, the Financial Services Commission held a public seminar titled 'Measures for Basic ELS on the H Index' at the Financial Security Education Center to prevent the recurrence of large-scale losses in Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI) equity-linked securities (ELS). The FSC plans to develop improvement measures to create a sales environment where the 'consumer protection principle' and the consumer's 'principle of self-responsibility' can be balanced by gathering various opinions both internally and externally.

At the seminar, Dr. Lee Jung-do of the Korea Institute of Finance gave a presentation on the topic of 'Improvement Measures for Financial Consumer Protection Related to Banks' Sale of Complex Financial Investment Products,' and experts from various fields expressed diverse opinions on the presentation. The seminar was broadcast live on the Financial Services Commission's YouTube channel, and viewers expressed their opinions through online comments.

In his opening remarks, Kim So-young, Vice Chairman of the FSC, stated, "As the voluntary compensation based on the dispute resolution standards prepared by the financial authorities following the large-scale losses related to the H Index ELS is gradually concluding, it is time to diagnose the overall status of the sale of complex financial investment products and discuss improvement measures." He pointed out, "Despite strengthened sales regulations on financial investment products since the 2019 derivative-linked fund (DLF) incident, issues of mis-selling continue to recur."

He emphasized the need for a clear diagnosis of the problems in sales regulations and the necessity of measures that can balance the financial companies' 'consumer protection principle' and consumers' 'principle of self-responsibility.'

Vice Chairman Kim mentioned, "These products have a return structure that is difficult for general consumers to understand, and especially, while they offer slightly higher interest than regular deposits with a high probability, there is a low but significant chance of substantial losses." He added, "There is an opinion to restrict bank sales because the temptation to receive slightly higher interest can lead to significant losses, which may be harmful to general consumers and provide incentives for mis-selling."

Dr. Lee Jung-do, who delivered the presentation, stated that to prevent the recurrence of mis-selling of H Index-based ELS, improvement in practices and culture is needed more than institutional measures for financial consumer protection, and a sales environment where consumers suitable for high-risk financial products can properly understand and contract the products should be established. During the panel discussion following the presentation, it was pointed out that improvement in practices and culture for financial consumer protection should take priority. In particular, there was an opinion that an environment where financial companies, financial consumers, and financial authorities can faithfully fulfill their given roles together is necessary.

Vice Chairman Kim also said, "We will comprehensively review not only the opinions of experts from various fields but also the opinions received through YouTube and reflect them in the final measures to be established in the future."