Starting from the 30th of next month, financial companies will be required to provide guidance on the expected maximum loss rate when launching leverage products.

In addition, details of past massive losses exceeding 20 percent must also be publicly disclosed.

The Financial Supervisory Service announced today (the 25th) that it will introduce the "Fund Core Risk Standard" next month on the 30th, aiming to guide public fund investment risks in alignment with consumers' perspectives.

This measure follows the necessity raised to improve public fund registration statements in the wake of last year's total loss incident involving overseas real estate funds.

The target funds encompass a total of 10 categories.

Included are 4 categories that have previously experienced massive loss cases, such as overseas real estate funds, overseas REITs, and equity-linked funds (ELF) and derivatives-linked funds (DLF) related to past equity-linked securities (ELS) and derivatives-linked securities (DLS) loss incidents.

Two products with high risks due to their product structures, such as leverage and inverse products, are also subject to this rule.

Four products with potential for consumer misunderstanding, including covered call, target conversion, gold spot, and overseas fund-of-funds products, were also listed.

When newly launching these fund types, their core investment risks must be clearly communicated.

In addition, "principal loss risks" must be stated in common, and up to 3 "special risks" per fund must be included.

Leverage and inverse products will also provide guidance on maximum loss rates under extreme scenarios that may occur in the future.

An example would be noting that if the underlying asset, Stock A, hits the lower price limit (-30%), the daily maximum loss rate of a single-stock leverage product is expected to be -60%.

While up to 4 core risks can be entered, if further explanation of investment risks is necessary depending on market conditions, it can be included as a footnote.

Furthermore, asset management companies' past massive loss details exceeding 20 percent must also be publicly disclosed.

This is to enhance asset managers' accountability regarding high-risk funds that have caused significant consumer harm and to improve investors' understanding of risks.

Cases where past loss rates exceeded -20 percent among the company's similar products are deemed massive losses, and the corresponding fund name, investment region and asset name, loss occurrence date, and scale must be specified.

The Financial Supervisory Service stated that this standard serves as a minimum baseline to be included in securities registration statements, and emphasized that individual asset management companies need to strengthen their internal controls so that investors can understand fund investment risks before investing.

(File Photo: Yonhap News)