South Korea’s FSC chief defends leveraged ETF launch, apologizes for investor harm

Financial Services Commission Chairman Lee Eog-weon defended South Korea’s introduction of single-stock leveraged exchange-traded funds at a National Assembly audit in Seoul on October 8, 2026, while apologizing for investor harm. His remarks put the policy under parliamentary scrutiny after authorities tightened trading safeguards in July amid concerns about volatility and losses.

Answering an opposition lawmaker, Lee said the launch reflected a range of views and denied that it followed instructions from the presidential office, Yonhap reported. “We have listened to various opinions,” he said. His comments establish his account of the decision; the report does not independently resolve how it was made.

Lee also disputed a recent market estimate putting individual investors’ losses at about 54 trillion won, calling it “not accurate.” Yonhap did not identify the estimate’s methodology or supply a verified replacement figure. The amount should therefore not be treated as an established total.

“Regardless of the need to introduce the policy, I am sorry for the losses, concerns and harm it has caused,” Lee said, according to Yonhap’s report of the audit.

Why South Korea introduced single-stock leveraged ETFs

Lee cited calls to allow products already available overseas. In its July 16 explanation, the FSC said Hong Kong had begun listing comparable products tied to Korean-listed shares in 2025, while those products remained unavailable in the domestic market.

The regulator described its objectives as narrowing regulatory differences between domestic and overseas markets, expanding investment choices and bringing demand within Korean investor protections. These were its stated reasons for introducing the products, rather than evidence that the launch achieved those aims.

The FSC said expectations of rising share prices for global memory-chip companies accompanied rapid increases in the products’ market capitalization and trading. That growth raised concerns about further volatility in chipmakers’ shares and the possibility of greater investor losses, prompting the July package.

How July safeguards changed investor access

The FSC’s July 24 announcement said restrictions on new listings and advertising by financial investment businesses had taken effect on July 16. Its earlier package described the listing suspension as temporary and included inverse and covered-call products within its scope.

Authorities then accelerated a higher minimum deposit requirement to July 31 from planned August implementation dates. Yonhap’s October report confirms that the increase occurred in late July. The threshold rose from 10 million won to 30 million won in cash for domestic and overseas single-stock leveraged products, including additional purchases by existing investors.

The change affected what investors could count toward that threshold. Previously, 70 percent of the market value of eligible substitute securities could qualify alongside cash. The revised rules excluded those securities, and proceeds from selling them would count only after cash settlement, ordinarily two trading days later.

Brokers also lost discretion to reduce the minimum after investors gained trading experience, although they could still require a higher amount. The FSC said the accelerated timetable was intended to stabilize demand; its July 24 announcement does not establish whether that objective was achieved.

Other July proposals included extending mandatory investor education from two hours to three, adding loss examples and chapter tests requiring at least 60 percent. Authorities also proposed tighter management of ETF and exchange-traded note premiums and discounts to address purchases above underlying asset value followed by sales below it.

Product risks and unanswered questions

Separate U.S. investor-education guidance helps explain the product structure. In a July 2022 statement, Securities and Exchange Commission staff said single-stock leveraged or inverse ETFs target very short periods, sometimes one day. Returns over longer holding periods can differ significantly from the corresponding multiple of the stock’s return.

The staff also explained that exposure to one stock removes diversification benefits and that leverage amplifies price movements. That historical guidance was not a binding rule or a statement approved by the full Commission, and it does not measure Korean investors’ losses or constitute a reaction to Lee’s remarks.

Yonhap’s October 8 report contains no new remedial measure or implementation deadline. The aggregate loss figure remains unverified, while the July announcements do not establish the October status of every proposed safeguard or demonstrate whether those measures reduced volatility or losses.