Financial firms to curb false and exaggerated YouTube ads, tighten review of ETFs and high-risk products

[Financial News] Going forward, advertisements for newly listed exchange-traded funds (ETFs) and high-risk financial investment products posted on a financial investment company’s own YouTube channel will also be subject to prior review by the Korea Financial Investment Association. Financial investment companies will also have to conduct follow-up checks at least once a year after posting ads.
The Financial Supervisory Service and the Korea Financial Investment Association announced a comprehensive plan on advertising operations for financial investment companies on the 1st. The move comes as competition in advertising for financial investment products, including ETFs, has intensified and ad channels such as YouTube have diversified, raising concerns over consumer harm from false and exaggerated advertising.
First, the plan requires financial investment companies to review in advance whether market and industry analysis materials provided to outside parties contain content that could induce trading in specific stocks. The industry will also be given examples to help determine whether a piece of content qualifies as an investment advertisement.
The Chief Consumer Protection Officer will also take part in the ad review process. This is intended to supplement the existing review system centered on compliance monitoring by allowing the CCO and others to examine in advance whether an advertisement could cause consumer harm.
Management of ads using online channel operators, including YouTubers, will also be strengthened. Financial investment companies must review advertisements according to step-by-step checklists covering contracts, screening and post-management. The measure is aimed at blocking so-called "backdoor advertising," in which economic ties with advertisers are not disclosed.
The Korea Financial Investment Association will establish an Advertising Committee with members from the industry, consumer groups and the media. The committee will decide major policies related to the association’s ad review process.
The scope of prior review by the Korea Financial Investment Association will also be expanded. At present, videos posted on a financial investment company’s own YouTube channel are excluded from the association’s review. Going forward, video ads for newly listed ETFs and high-risk financial investment products posted on those channels will also need to pass association review. Ads for products separately designated by the Advertising Committee will also be included.
A new standard for imposing penalties for violations of advertising rules will also be introduced. The plan is to define detailed assessment factors, such as the motive and consequences of a violation, to improve the effectiveness and predictability of sanctions.
Post-publication management procedures will also be strengthened. Financial investment companies must promptly confirm whether posted ads match the content approved in advance and conduct regular checks at least once a year. The aim is to prevent cases in which unreviewed content is improvised during live online broadcasts or correction requests from the association and compliance officers are not reflected in the ad.
The accessibility of the false and exaggerated advertising reporting center on the Korea Financial Investment Association’s website will also be improved, and internal procedures for receiving and handling reports will be specified.
Seo Jae-wan, deputy governor of the Financial Supervisory Service, said, "We must first correct the perception that advertisements, which are a major regulatory target under the Act on the Protection of Financial Consumers, are merely a means of attracting investors." He added, "We will strictly hold companies and their executives and employees accountable for false and exaggerated advertising that undermines investors' rational judgment."
The Korea Financial Investment Association plans to pre-announce revisions to related rules early this month and complete the amendments by mid-October after collecting opinions. After allowing time for financial investment companies and the association to reflect the changes in their internal rules and prepare operational adjustments, the new measures will take effect in January next year.
[email protected] Lee Jeong-hwa Reporter