The Financial Supervisory Service will begin on-site inspections of major domestic asset management companies starting next month. This seems to be in line with a request made earlier this month for data related to exchange-traded funds (ETFs), indicating an intention to look directly inside.

According to financial authorities and the financial investment industry on the 29th, the FSS will conduct inspections for a month starting from mid-next month, targeting key asset management companies including Samsung Asset Management, Mirae Asset Global Investments, Korea Investment Trust Management, KB Asset Management, Shinhan Asset Management, and Kiwoom Asset Management.

View of the Financial Supervisory Service./Courtesy of News1

The FSS is expected to focus on the appropriateness of collateral assets for synthetic ETFs, credit risk, settings with liquidity providers (LPs), and methods for reducing fees during this inspection.

This inspection reflects the FSS's determination to look into the realities of the asset management market in light of recent cutthroat competition and various incidents. Recently, there were issues with the miscalculation of the intraday real-time net asset value (iNAV) of ETFs, leading to overvaluations, a fee-reduction competition primarily among large asset management companies, and the controversy over reduced dividend payments by Mirae Asset.

Previously, the FSS issued warnings to asset management companies requesting details on synthetic ETF swap collateral, stock loan transaction history, ETF creation and redemption records, and ETF arbitrage disclosure details. Lee Bokhyun, the head of the FSS, also noted after a meeting with CEOs of asset management companies on the 11th of this month that "we will comprehensively review the product management and oversight system for firms that focus solely on noise marketing."