FSS Governor: Review for Single-Stock ETFs Expedited to Meet Schedule

Financial Supervisory Service (FSS) Governor Lee Chan-jin stated on October 19 that the review process for single-stock leverage exchange-traded funds (ETFs) was expedited to meet their listing schedule.

Governor Lee made the remarks during the morning parliamentary audit of the FSS by the National Assembly's National Policy Committee, in response to a related question from People Power Party lawmaker Park Dae-chul.

Lawmaker Park noted that ETF listings typically go through two stages—a preliminary review by the Korea Exchange and a review by the FSS. Pointing out that in the case of single-stock leverage ETFs, the FSS conducted its review even before the exchange's preliminary review was completed, Park asked if this was the first time such a case had occurred. Governor Lee replied, "As far as we have checked, it appears to be so."

Asked by Park to explain the reason, Governor Lee said, "In mid-April, the Financial Services Commission (FSC) made a policy announcement regarding the listing schedule for single-stock leverage ETFs. We expedited the review to meet that schedule."

When asked whether the FSS checked the exchange's preliminary review results during the FSS review process, he answered, "I need to check that, but I understand there were no particular issues."

The launch date for single-stock leverage ETFs announced by the FSC was May 27, when 16 single-stock leverage ETF products were listed.

However, regarding this criticism, the FSS stated, "The exchange's preliminary review for fund listings is not an essential prerequisite for the FSS to begin reviewing registration statements," adding that it thoroughly reviewed the securities registration statements submitted on April 28 over a 15-day period.

Opposition lawmakers continued their criticism regarding Governor Lee's remarks at a regular press conference in June concerning the launch of single-stock leverage products, where he asked, "Should I have laid down on the floor to stop it?"

When Social Democratic Party lawmaker Chang-min Han pointed out that the issue was not about making such remarks, but rather whether the FSS should have exercised prior checks through its system as a regulatory body, Governor Lee stated, "I will make efforts to ensure that the FSS's position is asserted in the field of regulatory enforcement so that similar situations do not recur."

People Power Party lawmaker Kim Jae-seop also criticized why he did not lie down, to which Governor Lee replied, "The policy had already been announced and finalized."

This is interpreted to mean that it was realistically difficult to block the launch as it was imminent.

Governor Lee further explained, "The reason I made that remark on June 22 was because significant losses for investors were anticipated. I delivered a strong message to sound the investor alert."

In response to a question from People Power Party lawmaker Song Eon-seok asking, "Whose feet did you think you needed to lie down in front of?", Lee answered, "I spoke in the sense that (the introduction should have been blocked) before accepting the securities registration statements."

To a similar question from lawmaker Seo Il-jun of the same party, he said, "Actually, there was a part of me that wanted to postpone the launch," hinting that Governor Lee himself had a strong urge at the time to block the introduction of single-stock leverage products.

Regarding the comment that the plunge in the Kospi might be due to single-stock leverage products, Governor Lee acknowledged, "I think (the launch of those products) was a factor to some extent."

When asked to evaluate his announcement in last February's work plan regarding securing financial market stability, he expressed a heavy heart, stating, "My heart is heavy."

Mentioning the market impact assessment results studying the volatility of single-stock leverage, and responding to lawmaker Song's question of whether the FSS had pointed out that such problems could arise, Governor Lee stated, "We did not point it out directly," and added, "I am sorry."

To People Power Party lawmaker Shin Dong-wook's question on whether he intends to resign to take responsibility for the single-stock leverage situation, Governor Lee avoided a direct answer, saying, "I don't think it is appropriate to mention that now. It is a matter for the appointing authority to decide."

Addressing lawmaker Song's persistent questioning on whether former Policy Chief Kim Yong-beom proposed the introduction of single-stock leverage during a closed-door Cheong Wa Dae meeting on January 13, FSS Vice Governor Hwang Seon-o, who attended the meeting, consistently stated, "I do not remember."

Regarding the conflict of interest controversy surrounding his son's employment at Mirae Asset Global Investments, Governor Lee dismissed it, stating, "There is no relation to his duties."

People Power Party lawmaker Park Sung-hoon asked whether Governor Lee had reported conflict-of-interest duty recusals and private interests regarding 14 institutions including Mirae Asset Global Investments immediately after taking office, which Governor Lee acknowledged.

When lawmaker Park pointed out, "Approving an amendment to enforcement rules that could generate massive profits for the company where your son is employed is a clear case of self-favoritism and a violation of the Conflict of Interest Prevention Act," Governor Lee emphasized, "Regarding the enforcement rules, he is neither a party with a private interest nor is there any relation to my duties."

He explained the reason for his recusal, saying, "There seemed to be many issues such as disciplinary actions against asset management companies, so I had preemptively recused myself to eliminate any room for misunderstanding."

To lawmaker Park's request to reveal the key figure behind the introduction of single-stock leverage products, Governor Lee responded, "I don't think it is appropriate to say. It was a matter decided through consultations between the government and authorities, and it is difficult to say that a specific individual played the core role."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.