South Korea’s Financial Supervisory Service (FSS), the country’s financial regulatory authority, has launched a dedicated task force to redesign public fund prospectuses and make investment risk disclosures more accessible to everyday consumers.
According to Seoul Economic Daily, the newly formed Public Fund Filing Improvement Task Force brings together the FSS, the Korea Financial Investment Association, and representatives from the asset management sector.
The group will work to develop a standardised disclosure template built around consumer comprehension, with input sought from consumer protection organisations before any revised forms are finalised.
The initiative follows a surge in calls for prospectus reform from the general public, itself partly triggered by the total loss of investor funds linked to overseas real estate products. Earlier, on 4 December last year, the FSS had already outlined measures to bolster investor protections across fund design and manufacturing, which included mandating that asset managers prepare a standard template covering core investment risks and attach due diligence reports to fund filings.
A blind study carried out on 119 general consumers between February and March this year laid bare the scale of the problem. More than seven in ten respondents — 70.6% — said they had never read a fund prospectus. Of those, the overwhelming majority, 91.6%, pointed to excessive document length as the barrier, while 63.9% said the materials were insufficient for understanding the product. Half of respondents said prospectuses fell short when it came to communicating investment risks, and 58% said even simplified versions failed to adequately convey core risks.
The FSS plans to address these shortcomings by introducing a Standard Template for Core Fund Risks. The template will consolidate the most critical investment risks into a concise format designed not to overwhelm readers. Under the proposals, up to four headline risks — including the possibility of losing the principal investment — would appear on the opening page of a simplified prospectus. The regulator also intends to make greater use of plain-language terminology and visual tools such as charts to help consumers digest information more readily.
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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