Review began before Korea Exchange preliminary screening was complete

Lee Chan-jin: 'First time we've seen this,' in effect acknowledging irregularity

Chief says product launch partly contributed to Kospi plunge

Cites already-finalized policy as reason he could not block it

Financial Supervisory Service chief Lee Chan-jin pauses in thought during a national audit session of the National Assembly's Political Affairs Committee on Monday. [Yonhap]
Financial Supervisory Service chief Lee Chan-jin pauses in thought during a national audit session of the National Assembly's Political Affairs Committee on Monday. [Yonhap]

Financial Supervisory Service chief Lee Chan-jin acknowledged Monday that the FSS rushed its review of single-stock leveraged exchange-traded funds to meet a launch schedule.

The FSS began its review before the Korea Exchange had completed its own preliminary screening, in order to keep pace with a listing timeline announced by the Financial Services Commission. Lee also said the launch of single-stock leveraged ETFs had partly contributed to the sharp decline in the Kospi.

Lee made the remarks at a national audit session of the National Assembly's Political Affairs Committee, responding to questions from People Power Party lawmaker Park Dae-chul. Park noted that ETF listings normally go through two stages — a Korea Exchange preliminary screening followed by an FSS review — and asked whether it was the first time the FSS had begun its review before the exchange's preliminary screening was complete. "We checked, and it appears so," Lee said.

When Park pressed him for an explanation, Lee said the FSC had announced a policy-level listing schedule "around mid-April" for the single-stock leveraged ETFs. "There was a part where we moved quickly on the review in order to meet that schedule," he said.

Asked whether the FSS had obtained the Korea Exchange's preliminary screening results while its own review was still under way, Lee said, "That is something we would need to verify, but my understanding is that there were no particular problems."

The FSC set May 27 as the launch date for the single-stock leveraged ETFs, and 16 such products were listed that day.

Opposition lawmakers also took aim at remarks Lee made at a regular press briefing in June, in which he said of the single-stock leveraged product launch, "Should I have thrown myself on the floor to stop it?"

People Power Party lawmaker Kim Jae-seop asked why he had not done exactly that, to which Lee replied, "The policy had already been announced and finalized." His response was widely interpreted as an acknowledgment that blocking the launch had been practically impossible at that late stage.

Lee said he had made those comments on June 22 "because it was a situation where significant losses for investors were anticipated," adding that he had "sent a strong message to sound the alarm for investors."

When Kim asked whether the Kospi's sharp decline had been caused by the single-stock leveraged products, Lee acknowledged that the launch "was partly responsible."

Asked to identify the key figure behind the introduction of the single-stock leveraged products, Lee said it would not be appropriate to name anyone. "It was a matter decided through consultations between the government and regulators — it would be difficult to say any one individual played a central role," he said.


th5@heraldcorp.com