Photo = FSS

[Alpha Biz= Reporter Kim Minyoung] On August 4, financial authorities announced that they would be focusing on the issue of collusion, or "jjamjami" (collusion), between asset management firms and securities companies. This decision comes in response to concerns about potentially unsound business practices in the ETF sector.

According to the Financial Supervisory Service (FSS), there will be an investigation into the potentially problematic business practices of asset managers related to ETFs. Specifically, the focus will be on whether asset management firms have engaged in practices where they place stock orders with securities firms under conditions that favor the latter, such as requiring the purchase of certain products or participation from investors in return for providing commission benefits.

Under the Capital Markets Act, asset managers can be deemed to engage in unsound business practices if they select investment brokers for executing trades without adhering to reasonable criteria. The FSS will also examine whether asset managers, in their efforts to compete on fees, have increased other sources of revenue or costs without properly disclosing this to investors.

In addition, the FSS has been tightening regulations across the industry, such as prohibiting misleading terms like target distribution rates or premiums related to covered call ETFs, to prevent investor confusion and ensure transparency.

 

 

 

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