Consumer Precautions Based on Major Dispute Cases Released by the Financial Supervisory Service
Key Points to Check When Investing in Financial Products
Investor A filed a complaint, claiming it was unfair that the fund he invested in, which has a high proportion of Apple, Microsoft (MS), and Google, showed poor returns despite the sharp rise in the US Nasdaq Index. However, unlike index funds, the returns of active funds do not necessarily correspond to the returns of a specific index. Therefore, investors must identify and consider the factors that may affect returns before investing.
Investor B submitted STOP/LIMIT sell orders to hedge against a decline in US bond futures and gold futures prices. However, he requested compensation for damages, stating that his order was not executed even though the price reached the designated LIMIT price, resulting in a loss. Such orders may not be executed if prices fluctuate sharply or if there is insufficient trading volume, so investors need to be aware of these risks.
On July 28, the Financial Supervisory Service announced that as domestic investors' overseas investments have increased recently, complaints regarding the payment and calculation methods of investment returns and overseas financial product investments have continued to be raised. The agency released "Consumer Precautions Based on Major Dispute Cases."
A representative from the Financial Supervisory Service explained, "We aim to prevent consumer damage by identifying dispute complaints that consumers may misunderstand when investing in financial products, such as fund return calculation standards and disputes related to overseas IPO subscription services, and by providing relevant precautions."
First, as in the case of Investor A, the returns of active funds may not be proportional to the returns of a specific index, unlike index funds that track an index. Active funds generally aim for higher performance than the index and often have higher management fees (such as operating expenses). Therefore, it is important to carefully review factors that may affect returns, such as investment strategy, portfolio composition, and management fees, before investing.
The second point to note is that if the maturity of an ISA account does not match the maturity of a time deposit invested through the account, a special early termination interest rate lower than the initially agreed rate may be applied. If the ISA account matures before the time deposit, the "special early termination interest rate," which is lower than the initially agreed rate, will apply. If investors wish to extend the maturity, they can do so on a yearly basis starting three months before maturity through branches, websites, and other channels.
Additionally, the Financial Supervisory Service pointed out that fund redemption amounts are calculated based on the reference price on the redemption base date, not the redemption request date. As a result, the estimated redemption amount displayed on websites and other platforms at the time of redemption may differ from the actual redemption amount.
Furthermore, interest on overseas bonds is paid later than the interest accrual date, and payment may be further delayed if domestic or overseas holidays are included. In the case of Investor C, who requested a recalculation because the interest payment on Brazilian government bonds was delayed beyond the date specified in the asset management statement and an unfavorable exchange rate was applied, the Financial Supervisory Service responded that it was difficult to recommend accepting the request since the calculation was carried out correctly.
Moreover, as in the case of Investor B, STOP/LIMIT orders may not be executed if prices fluctuate sharply or if there is insufficient trading volume. Therefore, it is necessary to consider both price and trading volume when placing orders and to check whether the order was actually executed.
When subscribing to US IPOs through a US IPO subscription agency service, investors should also be aware that the allocation method for IPO shares may differ from the domestic method, which is proportional to the subscription deposit. In Korea, IPO shares are allocated equally to all investors regardless of the investment amount, but in the US, allocation is at the discretion of the local IPO underwriter, and securities firms generally do not disclose the detailed allocation criteria. In addition, even if IPO shares are not allocated, currency exchange fees, foreign exchange losses, and financial costs related to the subscription deposit (in US dollars) may still occur.
Finally, the Financial Supervisory Service also included in its investor precautions that when investing in overseas stocks, the actual rate of return may vary depending on exchange rate fluctuations between the time of stock purchase and sale.
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