Lee Chan-jin signals possible curbs on leveraged ETFs and new safeguards for overseas investment products after SpaceX allocation fallout Lee Chan-jin, governor of the Financial Supervisory Service, speaks during a media briefing at the FSS headquarters in Yeouido, Seoul, Monday. (FSS) Financial Supervisory Service Gov. Lee Chan-jin signaled possible regulatory measures on single-stock leveraged exchange-traded funds Monday, saying the products have delivered limited benefits while exposing retail investors to growing risks."The effect has been minimal, but the side effects have become too significant," Lee said during a media briefing at the FSS headquarters in Seoul.Single-stock leveraged ETFs tied to Samsung Electronics and SK hynix were introduced last month to encourage investors to gain leveraged exposure to popular stocks at home rather than turning to overseas markets. Lee said the products had delivered little of the intended benefit while creating growing risks for retail investors."I personally regret the timing of the approval," he said.Lee argued that the products encourage excessive trading and market concentration, benefiting financial firms more than investors."We are seeing a situation where the tail is wagging the dog," he said. "There is a risk that investors gain little while securities firms and liquidity providers earn most of the profits."He also questioned whether the products are suitable for retail investors."Trading has become excessively concentrated in what is effectively a closed environment, requiring investors to monitor the market throughout the day," Lee said. "I have doubts about whether such products are appropriate for retail investors."According to Lee, turnover in some single-stock leveraged ETFs reached 200 percent and remains around 130 percent. He estimated cumulative trading commissions generated by the products at between 5 trillion won ($3.25 billion) and 10 trillion won."In some cases, the commissions paid by investors amount to 40 percent to 70 percent of a product's market capitalization," he said.Assets under management in leveraged ETFs tied to Samsung Electronics and SK hynix have surpassed 14 trillion won since their launch on May 27, with retail investors accounting for roughly 92 percent of holdings.Lee said the FSS is discussing possible responses with the Financial Services Commission and other authorities, including measures related to margin and credit-backed trading.Lee also criticized the outcome of Mirae Asset Securities' SpaceX investment program, under which participating investors received no share allocations despite committing funds.The FSS is reviewing whether investor-protection procedures were properly followed, including the allocation process handled by overseas underwriters."Based on the SEC filings, I expected professional investors would receive allocations. Even now, I do not understand why domestic investors received no shares. It was an absurd situation," Lee said.Lee noted that investors had already completed fund transfers and foreign-exchange transactions before learning they would receive no allocations.While acknowledging the FSS has limited authority over foreign underwriters, Lee said the regulator plans to use the findings from its review to establish clearer guidelines for firms handling similar overseas investment products.The measures will aim to improve investor predictability, enhance transparency and prevent similar disputes from recurring, he said. "We are considering various safeguards."