It has been revealed that individual investors have suffered an average annual loss of approximately 460 billion won over the past five years from investing in overseas derivatives. As these losses have continued for several years, financial authorities are strengthening investor protection measures, such as mandatory pre-investment education and simulated trading.
The Financial Supervisory Service and the Korea Financial Investment Association announced on November 16 that they will implement a system requiring pre-investment education and simulated trading for transactions involving high-risk overseas derivatives, such as futures and options, starting from December 15.
According to the Financial Supervisory Service, individual investors recorded an average annual loss of about 458 billion won from investing in overseas derivatives from 2020 to the first half of this year. As large-scale losses have continued for several years regardless of market conditions, the need for enhanced investor protection has been raised.
In response, the Financial Supervisory Service and the Korea Financial Investment Association have prepared measures to expand the pre-investment education and simulated trading system, previously applied only to domestic high-risk products, to overseas products as well.
Under the new system, individual investors trading overseas derivatives for the first time must complete at least one hour of pre-investment education and more than three hours of simulated trading.
The required hours for pre-investment education and simulated trading may be increased depending on investor characteristics such as investment experience and age. For example, senior investors aged 65 or older with no investment experience will be required to complete 10 hours of pre-investment education and 7 hours of simulated trading, significantly increasing the total time.
In addition, for overseas leveraged exchange-traded products (ETPs), only one hour of pre-investment education will be mandatory. This measure takes into account that leveraged ETPs are traded like regular stocks and do not carry the risk of losses exceeding the principal.
The pre-investment education will be available through the Korea Financial Investment Association's learning system starting November 17, prior to the implementation of the new system. Existing investors may also participate in the education program.
The Financial Supervisory Service and the Korea Financial Investment Association plan to continuously monitor investment trends and, if necessary, implement additional measures such as issuing consumer alerts.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
