South Korea's financial authorities have launched an inspection of exchange-traded fund (ETF) advertisements by asset management companies. Amid growing investor enthusiasm in the stock market and mounting controversies over exaggerated promotions of certain products, regulators aim to review the entire advertising screening and compliance process to protect investors.
According to the financial investment industry on Monday, the Asset Management Supervision Department of the Financial Supervisory Service (FSS) summoned compliance officers from asset management firms on Monday morning and issued a verbal warning to ensure that no misleading information reaches investors during ETF product management and advertising.
The move is seen as a response to a series of recent controversies over exaggerated ETF advertisements. Hana Asset Management, for instance, emphasized exposure to SpaceX investments in its advertising for the "1Q US Aerospace Tech" ETF. However, the actual structure was an indirect investment using a US ETF holding SpaceX shares, and the related investment weighting was only around 0.3%. Shinhan Asset Management was also criticized for inflating its promoted weighting of SK hynix (000660.KS) by adding SK Square's weighting to it.
Accordingly, the FSS reportedly instructed compliance officers at each firm to avoid including stocks not part of the underlying index in passive ETFs and to be cautious of cases that exaggerate the weighting of specific stocks in promotional materials.
Separately, the FSS and the Korea Financial Investment Association (KOFIA) have requested that each asset manager submit digital advertising materials executed over the past year. Under the process, compliance departments at each firm will self-check adherence to advertising screening procedures before submitting results to the association. The review covers whether approval marks and investment warning phrases were included, and whether expressions that could mislead consumers were used, to identify any violations. Based on the submissions, the association plans to cross-check the self-inspection results from each asset manager.
"The inspection aims to check whether recently increased ETF advertisements contain any elements that could mislead or confuse consumers," a KOFIA official said. "We plan to verify whether each company has properly established its own advertising monitoring system."
Financial authorities have also been emphasizing the "investor protection" principle in brokerage firms' marketing processes. The FSS recently delivered a verbal warning to Mirae Asset Securities (006800.KS), which is pushing for domestic allocation of SpaceX shares in a public offering, urging it to refrain from excessive marketing. The concern is that related promotions could add to investor confusion at a time when allocation volumes and retail investor subscription availability have yet to be finalized.
This move aligns with the financial authorities' broader push to overhaul the advertising review system across the financial investment industry. On November 23, the FSS held the first meeting of the "Task Force for Improving the Financial Investment Firm Advertising System" at KOFIA, together with brokerage firms and asset managers, to discuss directions for improving the advertising review framework.
At the time, FSS Deputy Governor Seo Jae-wan stressed, "Some advertisements with potential for falsity or exaggeration have recently emerged," adding, "Improving the advertising system is necessary to protect investors and restore trust in the capital market." The task force plans to review measures including expanding the scope of pre-screening by the association and strengthening internal controls over companies' self-review processes. The FSS plans to announce a final improvement plan in the third quarter of this year after gathering opinions from the industry and financial consumers.
