FSS Calls for Enhanced Consumer Protection and Market Transparency Amid Surging ETF and ELD Sales
The Financial Supervisory Service (FSS) is stepping up its oversight in response to the rapid increase in ETF (Exchange-Traded Fund) and ELD (Equity-Linked Deposit) sales, particularly among local banks. Since late last year, ETF and ELD sales have expanded significantly, with ETF sales reaching KRW 15.1 trillion in the first two months of this year—highlighting swift market growth. The FSS has criticized insufficient product explanations during bank sales processes and is urging enhanced customer communication and strengthened internal controls to prevent inappropriate sales. Special emphasis is placed on clearly distinguishing ETFs from traditional deposits, transparently explaining inherent risks, hidden costs, potentially lower net yields, and structural differences such as the lack of real-time trading.
Regarding ELD products, the FSS highlights the need for clear communication around their complex return structures, the risks of misleading 'top rate' promotions, and the potential for principal loss if terminated early. Banks have been instructed to thoroughly evaluate product suitability and principal risk for each customer, and to curb the sale of high-risk products during periods of heightened volatility. The FSS also recommends that customers be made fully aware of drawbacks in bank channel ETF purchases—such as higher fees and trading limitations—compared to direct brokerage transactions. Additionally, the FSS is investigating influencer-driven ETF recommendations, where undisclosed advertising relationships may compromise neutrality and undermine market trust, emphasizing the need for greater transparency in financial marketing.
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