The Financial Supervisory Service has urged caution to prevent investors from taking on excessive risk when investing in high-risk overseas financial products amid increasing volatility in global financial markets. This is because overseas derivatives can result in losses exceeding the principal, and there is also the possibility of losses due to unexpected exchange rate fluctuations.
On December 14, the Financial Supervisory Service announced that, starting from December 15, a mandatory pre-investment education and simulated trading system will be implemented to protect individual investors in high-risk overseas products.
After the implementation of this system, investors must complete at least one hour of pre-investment education before investing in overseas derivatives. In addition, they are required to conduct at least three hours of simulated trading. For overseas leveraged Exchange Traded Products (ETPs), investors must complete one hour of pre-investment education.
The Financial Supervisory Service is strengthening pre-investment education because large-scale investor losses occur every year. According to the Financial Supervisory Service, individual investors have suffered an average annual loss of 449 billion won in overseas derivatives investments, regardless of market conditions. Losses amounted to 457.4 billion won in 2022, 445.8 billion won in 2023, 360.9 billion won in 2024, and 373.7 billion won from January to October of this year.
The Financial Supervisory Service emphasizes that investors must keep in mind that overseas derivatives are high-risk products that can result in losses exceeding the principal. It also warns that overseas leveraged ETPs are high-risk products that can incur significant losses in a short period, and investors should pay attention to the effects of compounding.
In addition, the agency explains that investors should be aware of the possibility of losses due to unexpected exchange rate fluctuations. If margin calls (requests for additional collateral) are not met, or if there are rapid price changes during trading hours, forced liquidation may occur without the investor's consent.
The Financial Supervisory Service also stressed that investors should not be swayed by excessive promotional events and advertisements by financial companies, and should only invest after fully understanding the product structure and associated risks.
The Financial Supervisory Service stated, "We will continue to thoroughly inspect the overall investor protection management systems of securities firms and others related to high-risk overseas products. We will closely monitor individual investment trends in high-risk overseas products and, if necessary, promptly issue consumer alerts and take swift response measures."
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