🇰🇷 Financial Supervisory Service (FSS) Chief Urges Asset Managers to Prioritize Trust Over Short-Term Gains

Lee Bok-hyun, the head of South Korea’s Financial Supervisory Service (FSS), has called on asset management companies to prioritize trust and long-term value over immediate profits.

During a meeting with asset management CEOs, Lee emphasized that the asset management industry is a critical infrastructure for supporting the growth of innovative companies and securing the financial future of citizens in an aging society. He urged them to focus on building trust rather than chasing short-term gains.

Lee highlighted several key issues:

1. Investor Fiduciary Duty: Asset managers have a legal obligation to act in the best interests of investors. However, there have been frequent cases of conflicts of interest, such as prioritizing the interests of major shareholders or affiliates over those of investors. The FSS plans to disclose examples of good and bad practices in exercising voting rights.
2. Fee Reduction Competition: Excessive competition to lower fees, particularly among larger firms, has led to errors in fund pricing, undermining investor confidence. The FSS will scrutinize the overall fund management and control systems of firms that neglect their core responsibilities and focus solely on marketing.
3. Differentiation Strategies: The South Korean asset management market needs to develop unique strategies to compete in the global arena. While efforts have been made to expand product diversity, there is still a need to create distinct advantages that appeal to global investors.

Lee also addressed broader issues facing the South Korean capital market, including chronic undervaluation of the stock market, concerns about corporate earnings, and global trade tensions. He stressed the need for comprehensive efforts to overcome these challenges.

He acknowledged progress in capital market reforms, such as the abolition of the financial investment income tax (금투세 폐지, Geumtuse Peji – a tax on capital gains from financial investments) and improvements to short selling regulations, but noted that key tasks such as protecting shareholder interests and improving corporate governance remain. He called for swift legislative action to address these issues.

The meeting, held at the Korea Financial Investment Association (금융투자협회, Geumyungtujajeophoe) in Yeouido, Seoul, included the participation of the FSS chief, the chairman of the Korea Financial Investment Association, and representatives from 23 asset management companies.

In summary, Lee Bok-hyun’s message to asset managers was clear: prioritize trust, fulfill your fiduciary duties, avoid destructive competition, and develop unique strategies to thrive in the global market. 🚀