By Kim Jae-won
The financial regulator will inspect brokerage houses over their equity-linked securities (ELS) products to protect investors from incomplete sales where customers are inappropriately informed of involving risks.
KDB Daewoo Securities has the largest ELS exposure with a 7.9 trillion won balance as of Monday, according to data from the Korea Securities Depository.
NH Investment & Securities came second with 7.8 trillion won, followed by Shinhan Investment with 6.7 trillion won. Mirae Asset Securities had 6.1 trillion won while Hyundai Securities reached 5.2 trillion won.
ELS are hybrid debt instruments linked to equity markets. They can be in the form of a single stock, a group of stocks or an equity-based index, such as the S&P 500.
The Financial Supervisory Service (FSS) said Wednesday that it will examine whether securities firms notified investors of the risks associated with derivatives sufficiently before selling to them. The regulator will also see if they exaggerated returns on their ELS products.
"Our priority is to check out incomplete sales of ELS and overseas bonds. We aim to crack down on financial investment firms' irregularities with audits," said Lee Eun-tae, an FSS director at a press briefing.
Market watchers expected major brokerage houses, which have higher ELS exposure, will be subject to the audits.
The announcement came a few days after the FSS issued warnings for investors when they buy ELS products. The regulator said investors need to understand the risks of ELS fully before they invest because they are high-risk products with complicated structures.
The regulator said that among 55.1 trillion won of ELS principals returned to investors last year, 3.6 trillion won, or 6.5 percent paid less than their initial principal. This is greater than 2013 when it reached 2.2 trillion won, and the ratio marked 5.3 percent.
As investors lose more money in their ELS investments, so the number of complaints related to them increased. The number of complaints on ELS products filed with the FSS reached 264 last year, up 71 or 36.8 percent from the previous year.
Some of the investors prepare to file collective lawsuits against brokerage houses. Earlier this month, the Supreme Court allowed investors to file a collective compensation lawsuit against Royal Bank of Canada over its alleged stock manipulation regarding ELS sales.
The financial regulator will inspect brokerage houses over their equity-linked securities (ELS) products to protect investors from incomplete sales where customers are inappropriately informed of involving risks.
KDB Daewoo Securities has the largest ELS exposure with a 7.9 trillion won balance as of Monday, according to data from the Korea Securities Depository.
NH Investment & Securities came second with 7.8 trillion won, followed by Shinhan Investment with 6.7 trillion won. Mirae Asset Securities had 6.1 trillion won while Hyundai Securities reached 5.2 trillion won.
ELS are hybrid debt instruments linked to equity markets. They can be in the form of a single stock, a group of stocks or an equity-based index, such as the S&P 500.
The Financial Supervisory Service (FSS) said Wednesday that it will examine whether securities firms notified investors of the risks associated with derivatives sufficiently before selling to them. The regulator will also see if they exaggerated returns on their ELS products.
"Our priority is to check out incomplete sales of ELS and overseas bonds. We aim to crack down on financial investment firms' irregularities with audits," said Lee Eun-tae, an FSS director at a press briefing.
Market watchers expected major brokerage houses, which have higher ELS exposure, will be subject to the audits.
The announcement came a few days after the FSS issued warnings for investors when they buy ELS products. The regulator said investors need to understand the risks of ELS fully before they invest because they are high-risk products with complicated structures.
The regulator said that among 55.1 trillion won of ELS principals returned to investors last year, 3.6 trillion won, or 6.5 percent paid less than their initial principal. This is greater than 2013 when it reached 2.2 trillion won, and the ratio marked 5.3 percent.
As investors lose more money in their ELS investments, so the number of complaints related to them increased. The number of complaints on ELS products filed with the FSS reached 264 last year, up 71 or 36.8 percent from the previous year.
Some of the investors prepare to file collective lawsuits against brokerage houses. Earlier this month, the Supreme Court allowed investors to file a collective compensation lawsuit against Royal Bank of Canada over its alleged stock manipulation regarding ELS sales.
