Rival parties clash at Seoul audit over single-stock leveraged ETF losses
Version 2: First Vice Minister Kwon Dae-young's responses are new: he apologised for the market volatility, denied any political consideration in the launch and said the Financial Services Commission made the final decision, while the opposition added a detailed claim that the listing date was moved forward to just before the vote.
In short
Ruling and opposition lawmakers clashed at the National Assembly's Strategy and Finance Committee audit of the finance ministry on October 6 over single-stock leveraged ETFs and related documents. The opposition demanded presidential office meeting records and said the products caused about 54 trillion won in losses for individual investors, while the ruling party said financial market supervision belongs to the Political Affairs Committee. Finance Minister Lee Hyung-il said he regretted the investor losses, and First Vice Minister Kwon Dae-young apologised for the market volatility and denied political consideration in the launch.
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Ruling and opposition lawmakers clashed on October 6 at the National Assembly's Strategy and Finance Committee audit of the Ministry of Economy and Finance over the introduction of single-stock leveraged exchange-traded funds and the submission of related documents, Yonhap and Asia Economy reported. The audit was held at the National Assembly in Yeouido, Seoul, and was attended by Deputy Prime Minister and Finance Minister Lee Hyung-il and First Vice Minister Kwon Dae-young. [ 3 , 7 ]
Opposition People Power Party floor negotiator Rep. Bae Jun-young said the products had caused about 54 trillion won in losses for individual investors and had greatly damaged the credibility of the financial authorities, and demanded January 13 pre-review materials prepared for a presidential office meeting, presidential office instructions delivered to the ministry and implementation plans. He said Lee and Kwon attended that meeting, which he said was chaired by former policy chief Kim Yong-beom, when they were first vice minister and Financial Services Commission vice chairman. Fellow party lawmaker Rep. Park Soo-young said the National Assembly should receive requested materials unless they involve state secrets such as military, diplomatic or North Korea-related matters, called the ministry's submissions very insincere and said a strong committee-level complaint would be needed if refusals continued. [ 3 , 7 ]
Ruling Democratic Party floor negotiator Rep. Oh Ki-hyung said the audit covers institutions under the committee's jurisdiction and that supervision of financial markets and financial products should mainly be handled by the Political Affairs Committee. He added that handling of presidential office-related meetings has been entrusted to the National Assembly Operation Committee, whose audit is still to come, and said the two sides could debate the matter there. [ 3 , 7 ]
Lee told the audit that he found it regrettable the large losses of individual investors from single-stock leveraged ETFs had not been resolved in advance, Chosun Ilbo and Yonhap reported. Chosun Ilbo said he was answering a question from People Power Party Rep. Kang Min-kuk, and noted that the products include those tied to Samsung Electronics and SK Hynix. Newsis reported Lee saying he takes heavily the fact that losses expanded amid market volatility, and that the January 13 meeting covered many product proposals rather than focusing on one. [ 3 , 4 , 5 , 7 ]
First Vice Minister Kwon said he was aware of the product's risks in terms of regulatory arbitrage but that there was a consensus the system was needed in Korea, and apologised that volatility had widened contrary to policy intent, Newsis reported. He said there was no political consideration in the launch, and Maeil Business reported him saying the Financial Services Commission made the final decision on the introduction. Park cited Financial Services Commission internal documents in alleging the schedule was moved up: a launch planned for the second half was changed to the second quarter, the listing date was announced as May 22, a week before early voting, and the listing took place on May 27, a week before the main vote. [ 5 , 7 , 8 ]
The products are designed to track the daily return of an individual stock by a set multiple, amplifying gains when the underlying share rises and losses when it falls. They listed on May 27, and individual investor losses grew amid sharp market swings, prompting criticism of the authorities' judgment and questions over who decided to proceed with the introduction. [ 5 ]
Why it matters
The audit is the forum where parliament is testing who is responsible for introducing a product the opposition says cost individual investors about 54 trillion won, and where the parties are fighting over which committee should examine the finance ministry, the financial authorities and presidential office records. The public apologies by the finance minister and the first vice minister indicate the government is not disputing that investors were harmed, while the jurisdiction dispute leaves open how far the examination will go.
Key facts
- Ruling and opposition lawmakers clashed at the October 6 Strategy and Finance Committee audit over single-stock leveraged ETFs and document submission. [ 2 , 3 , 7 ]
- Opposition People Power Party floor negotiator Rep. Bae Jun-young said the products caused about 54 trillion won in losses for individual investors and demanded January 13 presidential office pre-review materials, presidential office instructions and implementation plans. [ 3 ]
- People Power Party Rep. Park Soo-young said requested materials must be submitted unless they involve state secrets, called the ministry's submissions very insincere and said a committee-level complaint would be needed if refusals continued. [ 3 , 7 ]
- Democratic Party floor negotiator Rep. Oh Ki-hyung said supervision of financial markets and financial products should mainly be handled by the Political Affairs Committee, and that presidential office-related meetings fall to the National Assembly Operation Committee. [ 3 , 7 ]
- Deputy Prime Minister and Finance Minister Lee Hyung-il said at the audit that he found it regrettable the large losses of individual investors had not been resolved in advance. [ 3 , 4 , 5 , 7 ]
- First Vice Minister Kwon Dae-young said he took the widened market volatility and investor losses seriously and apologised, and said there was no political consideration in the launch. [ 5 , 8 ]
- Kwon said the Financial Services Commission made the final decision on the introduction of the products. [ 8 ]
- Park cited Financial Services Commission internal documents in alleging the launch schedule was moved up, with the listing eventually set for May 27, a week before the main vote. [ 5 ]
Confirmed by several sources
- Ruling and opposition parties clashed at the National Assembly's Strategy and Finance Committee audit of the finance ministry over single-stock leveraged ETFs and related documents. [ 2 , 3 , 7 ]
- The opposition demanded presidential office meeting records and related materials, while the ruling party said the matter is not the committee's jurisdiction but belongs to the Political Affairs Committee. [ 3 , 7 ]
- Deputy Prime Minister and Finance Minister Lee Hyung-il said at the audit that he regretted or took heavily the large individual investor losses from single-stock leveraged ETFs. [ 3 , 4 , 5 , 7 ]
- First Vice Minister Kwon Dae-young said he took the investor losses and market volatility seriously and apologised. [ 5 , 8 ]
Still unclear
- The size and cause of individual investor losses from single-stock leveraged ETFs. The figure of about 54 trillion won is stated by an opposition lawmaker and is not corroborated by another document.
- Whether the launch was timed to precede the local elections. Opposition lawmakers allege political intervention and an accelerated schedule, while First Vice Minister Kwon Dae-young said there was no political consideration; the documents do not settle the dispute.
- Which National Assembly committee will ultimately handle the matter. The parties disagree, with the ruling party pointing to the Political Affairs Committee and later the Operation Committee, and the opposition pressing the Strategy and Finance Committee audit.
- Which body decided to introduce the products. Kwon said the Financial Services Commission made the final decision, a single-source statement, while the opposition questioned the role of the presidential office.
- Whether the finance ministry will submit the requested documents. One document says the ministry's submissions are insincere and that refusals continued, but no ministry response is reported.
What local media are saying
Timeline, local time
- On October 5, Seoul Shinmun publishes a piece asking whether the accountability debate over single-stock leveraged ETFs will spread from the Political Affairs Committee to the Strategy and Finance Committee. [ 1 ]
- On October 6, Newsis reports a clash over leveraged ETFs at the Strategy and Finance Committee audit, with the ruling party saying it should be dealt with at the Political Affairs Committee and the opposition calling for responsibility to be established. [ 2 ]
- Yonhap reports the audit in detail: the opposition demands presidential office meeting records and criticises the ministry's document submission, the ruling party cites committee jurisdiction, and Finance Minister Lee Hyung-il expresses regret over investor losses. [ 3 ]
- Chosun Ilbo reports Lee Hyung-il saying he finds it regrettable that the products' investor losses were not resolved in advance. [ 4 ]
- Newsis reports Lee saying he takes the losses heavily and First Vice Minister Kwon Dae-young denying political consideration in the launch. [ 5 ]
- Asia Economy reports the party positions in full, including the demand for ministry documents and the ruling party's argument that the Political Affairs Committee should handle the issue. [ 7 ]
- Maeil Business reports Kwon saying the Financial Services Commission made the final decision on the introduction of the products. [ 8 ]