As the launch of the Integrated Investment Account (IMA) approaches, financial authorities have significantly strengthened investor protection measures across the entire sales process, including product brochures, terms and conditions, management reports, and advertising standards.
On December 17, the Financial Supervisory Service announced that it had formed a task force (TF) with the financial investment industry to ensure that key features and core risks are reflected in IMA sales documents. The task force includes the Financial Supervisory Service, the Korea Financial Investment Association, and comprehensive financial investment firms such as Mirae Asset Securities and Korea Investment & Securities.
First, the product brochure must now include more specific details on the core investment risks of the IMA. It must clearly state major risks, such as the possibility of principal loss in the event of a comprehensive financial investment firm's bankruptcy and whether early termination is possible. The brochure will also include scenario analysis based on the worst-case scenario. In addition, based on discussions between the Ministry of Economy and Finance and the Financial Services Commission, it will be specified that IMA investment returns will be classified as "dividend income."
The terms and conditions will reinforce the management and oversight responsibilities of comprehensive financial investment firms. These firms are now required to confirm that the IMA's management details are consistent with the product brochure. In the event of significant issues such as the occurrence of non-performing assets or inability to repay at maturity, firms must immediately notify investors.
Transparency in IMA management details must also be enhanced. IMA asset management reports must be provided to investors once per quarter, and key information such as major investment holdings must be disclosed in a manner similar to public funds. Even for products that do not allow early termination, asset management reports will be provided quarterly. The status of major investment holdings and management operations will be disclosed in detail, on par with public funds.
Advertising guidelines are also being established. Even when a comprehensive financial investment firm is obligated to pay the principal at maturity, it must be clearly stated that these are investment products with the possibility of principal loss. Fees and commissions, including performance fees, must be specified in detail. Due to the nature of performance-based products, the display of expected rates of return is prohibited.
The Financial Supervisory Service stated, "We will actively promote the IMA as a core funding tool for expanding corporate finance and venture capital supply," adding, "If excessive sales competition after the launch leads to mis-selling, we will respond strictly in accordance with laws and principles."
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