FSC sanctions 7 banks and 6 securities firms over Hong Kong ELS scandal, with fines and other penalties in the KRW 370 billion range (First report)

[Financial News] Financial authorities have finalized the amount of fines for the mis-selling of equity-linked securities (ELS) tied to Hong Kong’s Hang Seng Index (H Index), a decision they had put off.
On the 4th, the Financial Services Commission (FSC) gave final approval at its 19th regular meeting to fines totaling KRW 371.2 billion and penalties totaling KRW 3.3 billion for seven banks and six securities firms in connection with the mis-selling of Hong Kong H Index ELS. The action was taken for violations of the Financial Consumer Protection Act, and is the largest monetary sanction ever imposed by the FSC.
The FSC said the seven banks had omitted, during the product sales process, important information that could significantly affect financial consumers’ ability to make informed decisions. Specifically, they either omitted return simulation results explaining the risks of investing in equity-linked trusts (hereafter, “H Index ELTs”) that include ELS linked to the H Index, or used investment asset description documents that changed the period covered by the return simulation analysis (for example, to 10 years).
KB Kookmin Bank, Shinhan Bank, Hana Bank, NH Nonghyup Bank, SC First Bank, Woori Bank and Suhyup Bank were fined a total of KRW 361.96 billion and assessed penalties totaling KRW 1.778 billion. Key violations included omitting return simulation results needed to explain the investment risks of H Index ELTs; changing the analysis period in investment asset description documents; inadequate explanations of investment risks, including the price volatility of underlying assets; and assessing investor profiles without considering the financial circumstances of general financial consumers.
In the securities firm sector, six companies—Mirae Asset Securities, KB Securities, Shinhan Investment Securities, NH Investment & Securities, Korea Investment & Securities and Samsung Securities—were fined KRW 9.282 billion and assessed penalties of KRW 1.612 billion. The firms were cited for violations including failing to explain required information, such as risk-rating cautions; breaching the suitability principle; and violating the ban on unfair solicitation.
The FSC said it had reviewed the proposed sanctions several times, conducting thorough legal analysis and fact-checking to ensure strict and reasonable measures, given that this was the first case of a violation of the Financial Consumer Protection Act involving numerous financial consumers and major financial institutions. It also made clear that violations of the Act, including mis-selling, would carry serious consequences in accordance with the law and principles.
Going forward, the FSC plans to continue imposing swift and strict sanctions for violations, including mis-selling, in accordance with the Financial Consumer Protection Act and its enforcement regulations, and to actively pursue the recovery of unjust gains through fines. It also plans to develop guidelines for explaining investment products, which are scheduled to take effect in the first quarter of 2027, and to take an active part in legislative review to help secure passage in the National Assembly of amendments to the Act, including the introduction of financial consumer protection principles.
[email protected] Park Mun-su Reporter