South Korea's Financial Supervisory Service has moved to rein in overheated marketing competition in the exchange-traded fund (ETF) market.

The watchdog on March 5 released five checkpoints for investors to consider when watching ETF advertisements and social media (SNS) content, to prevent investor losses from asset managers' false and exaggerated ads.

Net assets in the domestic ETF market stood at 297.2 trillion won as of end-December 2025, surging about fourfold from 2021.

The number of listed products also rose sharply over the same period to 1,058 from 533. As the market grew rapidly, marketing competition among asset managers intensified, and authorities said they confirmed many unsound sales practices that downplayed product risks or highlighted only advantages by using finfluencers and others.

The biggest point to watch is advertising that makes a product look like principal-protected.

Some asset managers promoted maturity-matched ETFs as safe as deposits, or presented a specific target distribution rate and described it as if fixed monthly income is guaranteed.

But ETFs are not covered by the Depositor Protection Act and losses can occur at any time. The watchdog also pointed to practices that highlight only the benefits of certain structures while omitting hidden risk factors.

A typical case is promoting overseas stock ETFs with currency exposure by stressing only the advantages of dollar exposure. That can make investors overlook that if the exchange rate falls, overall returns can drop due to foreign exchange losses even if the stock price rises, or principal losses can occur.

Investors should also carefully examine returns stated in ads or provocative promotional phrases.

In the case of covered call ETFs, authorities found examples of portraying strong performance during certain periods of temporarily high market volatility as if it were overall performance.

There were also ads that placed the terms "annual target distribution rate" and "month-end dividend" in a way that made investors mistakenly believe they would earn fixed monthly returns.

Authorities also warned that using phrases such as the industry's lowest fees or the first launch in the country without objective grounds can cloud reasonable investment decisions.

It is also important to identify hidden costs that investors actually bear in addition to the fees highlighted on the surface. Many ads stress they are at the lowest level by claiming total fees are in the 0.00 percent range, but that reflects emphasis on only some items such as management fees.

In reality, other costs such as index licensing fees and securities transaction costs can be added, and authorities confirmed cases in which the overall total expense ratio (TER) was higher than rivals. Fund-of-funds ETFs also used a method of highlighting only direct fees while omitting actual costs of the underlying overseas ETFs.

The watchdog said it will continue to check for improper cases so ETF advertising does not cause confusion for investors, and will encourage voluntary corrections by financial companies.