Lawmakers Seek to Put Single-Stock Leveraged ETF Training Into Law

Rep. Kim Jong-yang pushes amendment to related law

Proposal would require investor comprehension tests

A South Korean office worker in his 30s, identified only by his surname A, played a pre-trade training video for single-stock leveraged exchange-traded funds on his office computer earlier this month while working. He completed the roughly one-hour course and began investing immediately, only to post steep losses within a week. “I invested without properly understanding the product structure,” he said.

Critics say the mandatory education required before investing in single-stock leveraged ETFs tied to shares such as Samsung Electronics Co. and SK Hynix Inc. has become a box-ticking exercise. They argue that individual investors have entered the market without fully understanding the products’ risks, fueling volatility. Lawmakers are pushing to codify the training requirement and bolster investor protections by the Financial Services Commission and brokerages.

Materials that Rep. Kim Jong-yang of the ruling People Power Party obtained from the Korea Financial Investment Association showed the Financial Investment Education Institute did not conduct separate comprehension tests or follow-up surveys for people who completed the leveraged ETF course as of July 31. There were also no studies or reports assessing the effectiveness of the training.

Oversight of inadequate training also appeared weak. Asked about course-completion patterns, including time spent on lectures, late-night completion and interruptions during playback, the Korea Financial Investment Association said it could not compile the data because no separate system existed. The association said it has been running 10 surprise quiz questions to improve understanding. Industry officials, however, say investors need practical training rather than simple concept questions, including exercises that require them to calculate leveraged ETF returns themselves. In particular, they say investors need to directly grasp key risks such as negative compounding.

Kim plans to propose an amendment to the Financial Consumer Protection Act. The bill would require the Financial Services Commission to mandate comprehension tests as part of pre-trade education. It would also require brokerages to confirm that investors completed the training and verify their test results before handling trades.

Bae Seong-su, Hankyung reporter baebae@hankyung.com

Kwak Yong-hee, Hankyung reporter kyh@hankyung.com