Financial authorities are reportedly reviewing an amendment to the Financial Investment Services and Capital Markets Act to allow changes to the contents of financial investment products, including single-stock leverage products.
Single-stock leverage products have been cited as one of the factors that amplified stock market volatility, prompting the government to prepare supplementary measures. The idea is to broaden the scope of emergency stock market measures to financial investment products so authorities can respond in a timely manner when needed.
According to the financial investment industry on the 30th, the Financial Services Commission is reviewing an amendment to the Financial Investment Services and Capital Markets Act to allow changes to the contents of financial investment products, including single-stock leverage, in situations requiring market stabilization and investor protection.
Earlier, on the 30th of last month, the government released that it would prepare an amendment to the Financial Investment Services and Capital Markets Act to enable measures on a range of financial investment products, including the relevant product, as part of additional steps on single-stock leverage.
Under current law, the financial authorities' power to issue action orders is partly guaranteed, but there is no provision that targets financial investment products themselves. If financial investment products are included as subjects of emergency measures, it could serve as a legal basis for the government to lower the leverage multiple of single-stock leverage products, currently set at 2x.
At present, changing the leverage multiple requires procedures such as a beneficiaries' general meeting. Because of this, it is difficult for the government to respond in a timely manner in line with market conditions. Therefore, the explanation is that more flexible responses would be possible once a legal basis is established.
The government plans to overhaul the system in a way that encompasses not only single-stock leverage products but financial investment products overall, so it can respond to similar emergencies. The financial authorities plan to submit the amendment as quickly as possible once it is prepared.