FSC: Detailed Reasons Required for Purchasing High-Risk Financial Products Beyond Investment Profile

Amendment to the Enforcement Decree of the Financial Consumer Protection Act Approved
Financial Services Commission to Strengthen Regulations Prohibiting Unfair Solicitation Practices

Yonhap News

The standards for the 'investment profile report' that financial companies are required to prepare when selling high-risk financial investment products will become more stringent going forward.

The Financial Services Commission announced on September 23 that it had approved a revision to the Enforcement Decree of the Financial Consumer Protection Act at a Cabinet meeting. This amendment is a follow-up measure aimed at preventing the mis-selling of complex financial investment products, such as last year's Hong Kong H Index ELS incident.

The revised decree stipulates that if consumers wish to purchase products that do not match their investment profile, they must prepare a '(In)appropriateness Assessment Report' that details the reasons for their decision. Previously, only a brief explanation was required, making it difficult for consumers to understand why a product was deemed unsuitable for them.

The Financial Services Commission stated, "By establishing the grounds to specify the content and format of the assessment report, consumer rights and interests will be further strengthened."

Additionally, a new procedure has been introduced whereby, if a case is filed with the Financial Supervisory Service’s Dispute Mediation Committee, the Governor of the Financial Supervisory Service will notify the court, causing any ongoing litigation to be automatically suspended.

Currently, if a lawsuit is filed regarding a case submitted to the Dispute Mediation Committee, the court is required to suspend the litigation until the mediation is concluded. However, there has been no established procedure for notifying the court, which has undermined the effectiveness of the litigation suspension system.

The revised enforcement decree will take effect three months after it is signed and promulgated by the President. Separately, the Financial Services Commission plans to improve the order in which financial products are explained and to strengthen regulations prohibiting unfair solicitation practices in October.

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