South Korea’s Financial Supervisory Service (FSS), the country’s top financial regulator, has launched a dedicated task force to overhaul the way public fund prospectuses are disclosed to retail investors.
According to Seoul Economic Daily, the FSS established a “Public Fund Filing Improvement Task Force” to develop a standardised template for public fund filings, with the aim of making them more accessible to ordinary consumers.
The group brings together the FSS, the Korea Financial Investment Association, and representatives from the asset management sector, with input expected from consumer protection organisations before any changes are finalised.
The move comes in response to growing pressure for more consumer-oriented disclosure documents, particularly following losses incurred by investors in overseas real estate funds. The FSS had previously announced measures on 4 December last year to strengthen investor protection in fund design and manufacturing, which included a requirement for asset managers to prepare a standard template covering core investment risks and to attach due diligence reports.
A blind test carried out on 119 general consumers between February and March this year laid bare the extent of the problem. Over 70% of respondents said they had never read a prospectus, with 91.6% pointing to excessive length as a deterrent. Nearly two-thirds said existing documents were not sufficient to understand the product, while half said prospectuses fell short when it came to communicating investment risks. Additionally, 58% of respondents felt that simplified prospectuses failed to adequately capture core investment risks.
To address these shortcomings, the FSS intends to introduce a “Standard Template for Core Fund Risks” that distils the most critical investment risks into the most concise form possible, without overwhelming consumers. The template would place up to four key risks — including the risk of principal loss — on the opening page of the simplified prospectus, alongside consumer-friendly language and visual tools such as charts.
An FSS official said, “The improvements prepared by the task force will be finalized in disclosure forms after gathering opinions from consumer organizations. We will continue efforts to protect consumer rights and enhance trust in the capital markets.”
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