South Korean financial regulators plan to tighten oversight of equity-linked securities and other structured products starting next month, according to Bloomberg. The new measures would require brokerages to warn investors when products approach the knock-in level that can trigger principal losses. Firms would also need to reassess product design and sales practices when market conditions shift in ways that materially raise risk. The move comes after sharp swings in the South Korean stock market, even as retail appetite for higher-risk products has not meaningfully cooled. Following tighter rules on single-stock leveraged ETFs, part of that demand has shifted toward stock-linked securities offering high coupon payments. Data released by the Korea Financial Investment Association showed ELS sales in July reached 3.5 trillion won, the highest level since April 2023 in what Bloomberg described as a more than three-year high. Products linked to shares of Samsung Electronics and SK Hynix were the main drivers of that growth.
South Korea’s financial regulators plan to tighten oversight of equity-linked securities, or ELS, and other structured products from next month, according to Bloomberg.
Under the planned measures, brokerages would be required to warn investors when a product nears the knock-in threshold that can trigger principal losses. They would also have to reassess product design and sales when changes in market conditions cause risks to rise materially.
The report comes as South Korea’s stock market has seen sharp volatility, while retail demand for higher-risk investments has not shown a clear slowdown. After regulators tightened rules on single-stock leveraged ETFs, part of that investment flow shifted to stock-linked securities that offer high coupon payments.
Data published by the Korea Financial Investment Association showed that ELS sales in South Korea reached 3.5 trillion won in July, marking the highest level since April 2023 and a more than three-year high. ELS products tied to shares of Samsung Electronics and SK Hynix were the main contributors to that increase.
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