South Korea’s Financial Services Commission approved a record KRW 374.632 billion in financial penalties and administrative fines against seven banks and six securities firms for misselling equity-linked securities tied to the Hong Kong H Index. The Financial Consumer Protection Act violations included inadequate explanations of investment risks and failures to assess whether products were suitable for customers. The banks received KRW 361.96 billion in financial penalties and KRW 1.778 billion in administrative fines. Their sales materials for trusts holding the securities omitted backtesting results or changed the periods used for those simulations. Some banks also failed to explain risks arising from underlying asset price movements or assessed suitability without considering customers’ financial circumstances. The securities firms received KRW 9.282 billion in financial penalties and KRW 1.612 billion in administrative fines for violations including suitability failures, omitted warnings about risk ratings and improper solicitation. Guidelines explaining investment products are planned for implementation in the first quarter of 2027 to improve consumer understanding. Separately, amendments pending before the National Assembly would establish a principle requiring financial firms to conduct business in consumers’ best interests and incorporate it into internal control standards. Compliance with that principle would provide grounds for reducing sanctions.

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