Market analysis materials with investment-solicitation content to face pre-screening; chief consumer officers required to join ad review

Post-publication checks mandatory at least once a year; rules to take effect in January 2027

[Yonhap]
[Yonhap]

Financial authorities will tighten scrutiny of advertisements on YouTube and other proprietary channels run by financial investment firms. Video ads for newly listed exchange-traded funds and high-risk financial investment products will be added to the Korea Financial Investment Association's review list, and firms will be required to have their chief consumer officers participate in the ad vetting process.

The Financial Supervisory Service and the Korea Financial Investment Association on Tuesday unveiled a comprehensive plan to overhaul advertising practices at financial investment firms and held a briefing session. The two bodies developed the plan through a task force they ran with the industry from April through August. Discussions from the fourth Financial Consumer Protection Advisory Committee meeting, held Thursday, were also incorporated.

The plan centers on strengthening every stage of the advertising process — from production and internal review at individual firms to the association's self-regulatory screening and post-publication monitoring. Firms will be required to pre-screen market and industry analysis materials distributed externally to check whether they contain investment-solicitation content designed to prompt trading in specific securities. Chief consumer officers will also join the ad review process to assess potential consumer harm.

Management of online advertising will be tightened as well. When financial firms use operators of online channels such as YouTube, they must prepare stage-by-stage checklists covering contracts, review and post-publication management, and conduct pre-screening. So-called "hidden advertising" — content that does not disclose economic relationships — will also fall under the new oversight framework.

The scope of the association's screening will be expanded. Video ads for newly listed ETFs and high-risk financial investment products run on a firm's own channels, as well as ads for products designated by an advertising committee, will be added to the association's review list. The association will establish a new advertising committee with participation from the industry, consumer groups and the media, and will spell out clearer criteria and factors for imposing fines on advertising violations.

Post-publication oversight will also be made mandatory. Financial investment firms must promptly verify that published ads accurately reflect the final approved content and conduct regular post-publication checks at least once a year. The accessibility of the association's false and exaggerated advertising reporting center, along with its complaint intake and processing procedures, will also be improved.

The association plans to pre-announce a proposed rule amendment early this month and complete the revision by mid-October. The new rules are set to take effect in January 2027, following adoption into the internal regulations of financial investment firms and the association.

The tightened advertising regulations come in response to a string of ETF ads that have recently overstated returns or could mislead investors about product risks. Authorities had previously flagged a series of problematic cases, including ads that cited unrealized target returns such as "expected annual distribution rate of 15 percent," used superlatives requiring objective substantiation such as "first in Korea," or employed phrases like "steady income just like monthly rent" that could be mistaken for a guarantee of returns.

Seo Jae-wan, deputy governor of the Financial Supervisory Service, said firms must first correct the mindset of treating advertising as a simple tool for recruiting investors. "We will hold the companies and their executives and employees strictly accountable for false or exaggerated advertising that undermines investors' ability to make rational decisions," he said.


kacew@heraldcorp.com