The risk categories are currently regulated autonomously by financial institutions themselves, and have often been subject to complaints from customers claiming that the institutions failed to notify them of the actual risks of their investment. (image: KobizMedia/ Korea BIzwire)
SEOUL, July 4 (Korea Bizwire) – The Korean Financial Supervisory Service (FSS) revealed Monday that it will implement a ‘deliberation policy’ in which an investor will be required to take time before making a final decision to invest in high-risk financial products. The policy will take effect as early as this coming August.
Currently, citizens 80 years of age and older are obliged to take a one-day deliberation period prior to signing up for high-risk over-the-counter products such as derivative-linked securities. The new policy will be an extension of this existing policy.
The ‘deliberation policy’ concept is not unique to Korea, as Hong Kong currently has a similar policy that mandates a reflection period not only for the elderly, but also to experienced investors. The FSS is reviewing various overseas cases of similar systems to finalize and implement the policy for high-risk financial products in Q3.
Along with the new policy, the FSS is also devising a plan to measure an investor’s understanding of a financial product prior to making an investment, via a self-assessment check sheet. The check sheet will consist of content that evaluates the investor’s comprehension of the product, its profit-loss structure, risk factors, and commissions, and will be developed with help from the financial industry and the Korea Financial Investment Association.
Further details of the self-assessment check sheet, such as what to do with investors that show a lack of understanding, will be specified in the coming months.
Meanwhile, the FSS will also examine the current risk categorization of various financial products in order to determine if the current investment risk levels for these products are appropriately set.
The risk categories are currently regulated autonomously by financial institutions themselves, and have often been subject to complaints from customers claiming that the institutions failed to notify them of the actual risks of their investment.
The FSS also plans to provide consumers with various precedents of stock manipulation and unfair trading acts to alert them to the potential risks and dangers.
“With falling interest rates, more investors are turning to high-risk financial products, and with the trend there are rising concerns that financial institutions are selling products without fully informing consumers of the potential risks,” said an FSS official. “We’re urging financial institutions to establish a safer investment environment for consumers, while encouraging consumers to invest responsibly.”
By Kevin Lee (kevinlee@koreabizwire.com)
