|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Laws of the Republic of Korea |
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
Act No. 8635, Aug. 3, 2007
Amended by Act No. 8852, Feb. 29, 2008
Act No. 8863, Feb. 29, 2008
PART GENERAL PROVISIONS
Article 1 (Purposes)
The purpose of this Act is to contribute to the development of the national economy by facilitating financial innovation and fair competition in the capital market, protecting investors, rearing the development of the financial investment business, and heightening the fairness, reliability, and efficiency of the capital market.
Article 2 (Applicability to Activities Conducted Abroad) Activities conducted in a foreign country shall be governed by this Act, if the effects of such activities extend to the territory of the Republic of Korea.
Article 3 (Financial Investment Instruments)
(1) The term "financial investment instrument" in this Act means a right acquired by an agreement to pay, at a specific time in the present or in the future, money or any other valuable thing (hereinafter referred to as "money or similar"), with an intention to earn a profit or avoid a loss, where there is a risk that the total amount of such money or similar, paid or payable, for the purpose of acquiring such right (excluding any sums specified by Presidential Decree, such as sales commissions) may exceed the total amount of money or similar already recovered or recoverable from the right (hereinafter referred to as "investment risk"): Provided, That the following instruments shall be excluded herefrom:
1. Negotiable certificates of deposit in Korean won; and
2. Beneficial interest in a trust with no power (excluding the power to CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT dispose of the trust property under Articles 42 and 43 of the Trust Act) granted to the trustee to dispose of the trust property (hereinafter referred to as "management trust").
(2) The financial investment instruments under paragraph (1) shall be classified as follows:
1. Securities; and
2. Derivatives: (a) Exchange-traded derivatives; and
(b) Over-the-counter derivatives.
Article 4 (Securities)
(1) The term "securities" in this Act means financial investment instruments issued by a citizen of Korea or a foreigner, for which investors do not owe any obligation to pay anything further on any ground, in addition to the money or similar that the investors paid at the time of acquiring such instruments (excluding obligations to pay where an investor assumes such an obligation by exercising a right to effectuate the purchase and sale of an underlying asset).
(2) The securities under paragraph (1) shall be classified as follows:
1. Debt securities;
2. Equity securities;
3. Beneficiary certificates;
4. Investment contract securities;
5. Derivatives-combined securities; and
6. Securities depositary receipts. (3) The term "debt securities" in this Act means state bonds, local government bonds, special bonds (referring to bonds issued by a legal entity established by direct operation of an Act; hereinafter the same shall apply), corporate bonds, corporate commercial papers (referring to promissory notes issued by a company for raising the funds required for its business, which shall meet the requirements prescribed by Presidential Decree; hereinafter the same shall apply), and other similar instruments, which bear the indication of a right to claim the payment.
(4) The term "equity securities" in this Act means stock certificates, instruments representing a preemptive right, investment securities issued by a legal entity established by direct operation of an Act, equity shares
in contribution to a limited partnership company, limited liability company, or undisclosed association under the Commercial Act, equity shares in contribution to an association under the Civil Act, and other similar instruments, which bear the indication of equity shares in contribution. (5) The term "beneficiary certificates" in this Act means the beneficiary certificates under Article 110, the beneficiary certificates under Article 189, and other similar instruments, which bear the indication of a beneficial interest in a trust.
(6) The term "investment contract securities" in this Act means instruments bearing the indication of a contractual right under which a specific investor is entitled to the profits earned, or liable for losses sustained, depending upon the results of a joint venture in which the investor makes an investment jointly with another person and which is to be run mainly by the other person.
(7) The term "derivatives-combined securities" in this Act means instruments bearing the indication of a right under which the amount payable or recoverable shall be determined according to a predetermined formula tied to fluctuations in the price of any underlying assets, an interest rate, an indicator, a unit, an index based upon any of the aforementioned, or any other similar factor.
(8) The term "securities depositary receipts" in this Act means instruments issued by a person with whom any of the securities enumerated in paragraph (2) 1 through 5 are deposited in a country other than the country where such underlying securities were issued, which bear the indication of the relevant right on the deposited underlying securities. (9) The rights that may or must be indicated on any of the securities under subparagraphs of paragraph (2) shall be deemed as securities, even where any certificate representing such rights is not issued in a physical form.
(10) The term "underlying assets" in this Act means:
1. Financial investment instruments;
2. Currency (including any foreign currency);
3. Ordinary commodities (referring to agricultural products, livestock products, fisheries products, forestry products, mining products, energies, the goods manufactured or processed with such products as raw materials, and other similar goods);
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
4. Credit risk (referring to a change in credit owing to a change in credit rating, bankruptcy, debt readjustment, etc. of a party or a third party); or
5. Other risk that is one of natural, environmental, or economic phenomena, which can be computed or assessed by price, interest, indicator, or unit in a reasonable and appropriate way.
Article 5 (Derivatives)
(1) The term "derivatives" in this Act means a contractual right falling under any of the following subparagraphs:
1. A contract in which it is agreed to deliver money or similar at a specific time in the future, which shall be computed on the basis of underlying assets, the price of the underlying assets, an interest rate, an indicator, a unit, or an index based on any of the aforesaid factors;
2. A contract in which the parties agree to grant, by either party's unilateral expression of willingness, a right to effectuate a transaction of delivering and accepting money or similar, which shall be computed on the basis of underlying assets, the price of the underlying assets, an interest rate, an indicator, a unit, or an index based on any of the aforesaid factors; and
3. A contract in which the parties agree to exchange money or similar during a certain period of time in the future at a predetermined price, which shall be computed on the basis of underlying assets, the price of the underlying assets, an interest rate, an indicator, a unit, or an index based on any of the aforesaid factors.
(2) The term "exchange-traded derivatives" in this Act means the instruments traded in the domestic derivatives market or an overseas derivatives market (referring to a market in a foreign country, similar to the domestic derivatives market, or a market in which foreign derivatives, specified by Presidential Decree, are traded).
(3) The term "over-the-counter derivatives" in this Act means the derivatives that are not exchange-traded derivatives. (4) The execution of a contract that falls within any of the subparagraphs of paragraph (1) which is not a sales contract, shall be deemed a sales contract for the purposes of this Act.
Article 6 (Financial Investment Business)
(1) The term "financial investment business" in this Act means activities conducted continuously or repeatedly for the purpose of earning a profit, which shall fall under:
1. Investment trading business;
2. Investment brokerage business;
3. Collective investment business;
4. Investment advisory business;
5. Discretionary investment business; or
6. Trust business. (2) The term "investment trading business" in this Act means a business carrying on trade in financial investment instruments, issuing and underwriting securities, inviting offers, offering, and accepting offers for securities on its own account in whosever named.
(3) The term "investment brokerage business" means a business carrying on trade in financial investment instruments, inducing offers, offering, and accepting offers for such instruments, or inducing offers, offering, and accepting offers for the issuance and acceptance of securities on another person's account in whosever named.
(4) The term "collective investment business" in this Act means a business carrying on collective investments.
(5) The term "collective investments" in paragraph (4) means the activities of acquiring, disposing of, and managing in any way such assets as are valuable for investment with money or similar pooled by inviting two or more persons for such investment, or with a surplus fund under Article 81 of the State Finance Act, without being bound by management instructions given from time to time by investors or by any fund management entity, and distributing the yields therefrom to vest in investors or any fund management entity: Provided, That a case falling under any of the following subparagraphs shall be excluded:
1. Money or similar is pooled through private placement for management and distribution in accordance with the Acts specified by Presidential Decree, and the total number of investors specified by Presidential Decree does not exceed the number prescribed by Presidential Decree;
2. Money or similar is pooled for management and distribution in accordance with an asset-backed securitization plan under Article 3 of the Asset-backed Securitization Act; and
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
3. The case falls within any case prescribed by Presidential Decree, taking into consideration the nature of the activities, the need to protect investors, etc.
(6) The term "investment advisory business" in this Act means a business providing advice on the value of financial investment instruments or related judgments (referring to judgments over class, item, acquisition, disposition, methods of acquisition or disposition, quantity, price, time, etc.; hereinafter the same shall apply).
(7) The term "discretionary investment business" in this Act means a business carrying on acquisition, disposition, and management in any way of financial investment instruments, earmarking them for investors, with authorization from investors for discretionary judgment, entirely or partially, over financial investment instruments. (8) The term "trust business" in this Act means a business carrying on trusts.
Article 7 (Exception of Financial Investment Business from Application) (1) A business shall not be deemed an investment trading business when it issues its own securities (excluding beneficiary certificates of an investment trust, derivatives-combined securities specified by Presidential Decree, and deposits and insurances in the nature of investment). (2) A business shall not be deemed an investment brokerage business when an investment solicitor under Article 51 (9) acts as an agent for recommending an investment.
(3) A business shall not be deemed an investment advisory business when it provides advice through a periodical, publication, correspondence, broadcast or any other medium that is issued or transmitted to a multiple number of unspecified people, and which is available to a multiple number of unspecified people for purchase or receipt from time to time. (4) A business shall not be deemed a discretionary investment business when it is necessary for an investment broker to be authorized to make discretionary judgments, entirely or partially, over investments in financial investment instruments in the course of dealing with the orders received from investors for trading, as prescribed by Presidential Decree. (5) A business shall not be deemed a trust business, in cases where it is a trust business for secured debentures under the Secured Debentures Trust Act, a copyright trust management business under the Copyright
Act, or it engages in entrusted management of computer program copyrights under the Computer Programs Protection Act.
(6) In addition to the businesses specified in paragraphs (1) through (5), a business shall not be deemed a financial investment business under each subparagraph of Article 6 (1) when it falls under any of the following subparagraphs, as prescribed by Presidential Decree:
1. When the Korea Exchange established pursuant to Article 373 (hereinafter referred to as the "Korea Exchange") establishes and operates the securities exchange and derivatives market;
2. When it sells or buys financial investment instruments directly to or from an investment trader or through an investment broker; and
3. When it is necessary to exclude the business from treatment as a financial investment business for any other reason, taking into consideration the nature of its activities, the need to protect investors, etc., as prescribed by Presidential Decree.
Article 8 (Financial Investment Business Entity)
(1) The term "financial investment business entity" in this Act means
a person who carries on a financial investment business under
subparagraphs of Article 6 (1) with a license from, or a registration with,
the Financial Services Commission.
(3) The term "investment broker" in this Act means a person who carries
on an investment brokerage business.
(4) The term "collective investment business entity" in this Act means
a financial investment business entity that carries on a
collective investment
business;
(5) The term "investment advisory business entity" in this Act means
a financial investment business entity that carries on an investment
advisory
business.
(6) The term "discretionary investment business entity" in this Act means
a financial investment business entity that carries on
a discretionary
investment business.
(7) The term "trust business entity" in this Act means a financial investment
business entity that carries on a trust business.
Article 9 (Other Definitions)
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(1) The term "major shareholder" in this Act means a shareholder who
falls
under any of the following subparagraphs:
1. A principal who holds the greatest number of stocks out of the total
number of outstanding voting stocks when the number of stocks
held
by him/herself and the number of stocks held by his/her specially related
persons, as defined by Presidential Decree, in whosever
named on the
principal's account (hereinafter referred to as "specially related
persons") are summed up (hereinafter referred to
as the "largest
shareholder"); and
2. A person who falls under any of the following items (hereinafter referred
to as "significant shareholder"):
(a) A person who holds ten percent or more of the total number of
outstanding voting stocks of a corporation in whosever named on
his/her account; and
(b) A shareholder who exercises de facto control over the matters material
to a corporation through appointment and dismissal of
executives
or in any other way, as prescribed by Presidential Decree.
(2) The term "executives" in this Act means directors and
auditors.
(3) The term "outside director" in this Act means a director who is not
engaged in ordinary business affairs of a company
and appointed pursuant
to Article 25.
(4) The term "investment recommendation" in this Act means the act of
making a recommendation to a specific investor to make a contract
for
trading financial investment instruments, for investment advising, for
discretionary investment, or for a trust (excluding
a management trust
contract and a trust contract with no investment risk).
(5) The term "professional investor" in this Act means
an investor who
has an ability to take risks accompanying the investment in light of the
expertise that it possesses in connection
with financial investment
instruments, the scale of assets owned by it, etc., and who falls under
any of the following subparagraphs:
Provided, That a financial investment
business entity shall give consent to a professional investor when the investor
notifies
the financial investment business entity in writing of its willingness
to be treated as an ordinary investor, unless there is a
justifiable ground
otherwise, and such investor shall be treated as an ordinary investor when
the financial investment business
entity gives such consent:
1. State;
2. The Bank of Korea;
3. Financial institutions specified by Presidential Decree;
4. Stock-listed corporations; and
5. Other persons specified by Presidential Decree.
(6) The term "ordinary investor" in this Act means any investor other
than professional
investors.
(7) The term "public offering" in this Act means the invitation of fifty
or more investors, as computed by a formula prescribed
by Presidential
Decree, to make offers to acquire securities newly issued.
(8) The term "private placement" in this Act means the
invitation of people
to acquire securities newly issued without putting them on public offering.
(9) The term "public sale" in
this Act means offering fifty or more investors,
as computed by a formula prescribed by Presidential Decree, to make an
offer to
sell or invite offers to purchase securities already issued.
(10) The term "issuer" in this Act means a person who has already issued
or intends to issue securities: Provided, That the term means a person
who has issued or intends to issue the securities that underlie
securities
depositary receipts in the context of issuing securities depositary receipts.
(11) The term "underwriting" in this Act
means any of the following acts
conducted in public offering, private placement, or public sale of securities:
1. Acquiring all or part of such securities with an intent to have third
parties acquire such securities; and
2. Making a contract which provides that if there are no third parties
who are willing to acquire all or part of such securities,
the acquiring
party under the contract shall take over all remaining securities.
(12) The term "underwriter" in this Act means
a person who conducts
the acts set forth in any subparagraph of paragraph (11) in the context
of public offering, private placement,
or public sale of securities.
(13) The term "securities exchange" in this Act means the markets
established by the Korea Exchange
for trading securities, which shall be
divided into the following markets:
1. A market established for trading the securities defined under
subparagraphs of Article 4 (2) (hereinafter referred to as the "securities
market"); and
2. A market established for trading specific securities designated by
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
Presidential
Decree among the securities defined under subparagraphs
of Article 4 (2) (hereinafter referred to as "KOSDAQ market").
(14) The
term "derivatives market" in this Act means a market established
by the Korea Exchange for trading exchange-traded derivatives.
(15) The terms "listed corporation," "unlisted corporation," "stock-listed
corporation," and "stock-unlisted corporation" in this
Act refer to the
following persons respectively:
1. Listed corporation: A corporation that issues securities listed on the
securities exchange (hereinafter referred to as "listed
securities");
2. Unlisted corporation: Any corporation other than listed corporations;
3. Stock-listed corporation: A corporation that issues stocks listed in the
securities exchange; and
4. Stock-unlisted corporation: Any corporation other than stock-listed
corporations.
(16) The term "foreign corporation or similar" in this Act means:
1. A foreign government;
2. A foreign local government;
3. A foreign public institution;
4. A foreign company established pursuant to Acts and subordinate statutes
of a foreign country;
5. Any international organizations specified by Presidential Decree; or
6. Other juristic person in a foreign country, as specified by Presidential
Decree.
(17) The term "institutions related to financial investment business" in
this Act means:
1. Korea Financial Investment Association established pursuant to Article
283 (hereinafter referred to as the "Association");
2. Korea Depository established pursuant to Article 294 (hereinafter
referred to as the "Depository");
3. A person with a license under Article 324 (1) (hereinafter referred
to as "financial securities company");
4. A merchant bank under Article 336;
5. A person with a license under Article 355 (1) (hereinafter referred
to as "financial brokerage company");
6. A person with a license under Article 360 (1) (hereinafter referred
to as "short-term financial company");
7. A person with a license under Article 365 (1) (hereinafter referred
to as "transfer agency company"); and
8. An organization related to financial investment, established pursuant
to Article 370.
(18) The term "collective investment scheme" in this Act means any of
the following schemes established for carrying on collective
investment:
1. A collective investment scheme in the form of a trust, in which trustors,
who are collective investment business entities, require
a trust business
entity to invest and manage the property entrusted to the trust business
entity in compliance with instructions
provided by the collective
investment business entities (hereinafter referred to as "investment
trust");
2. A collective investment scheme in the form of a stock company under
the Commercial Act (hereinafter referred to as "investment
company");
3. A collective investment scheme in the form of a limited liability company
under the Commercial Act (hereinafter referred to as
"investment limited
liability company");
4. A collective investment scheme in the form of a limited partnership
company under the Commercial Act (hereinafter referred to
as
"investment limited partnership company");
5. A collective investment scheme in the form of an association under
the Civil Act (hereinafter referred to as "investment association");
6. A collective investment scheme in the form of an undisclosed association
under the Commercial Act (hereinafter referred to as
"undisclosed
investment association"); and
7. A collective investment scheme in the form of a limited partnership
company that invests and manages its fund in equity securities,
etc.
for participation in management, improvement of business structure,
corporate governance, etc. by issuing equity securities
only through
private placement (hereinafter referred to as "private equity fund").
(19) The term "privately placed fund" in this
Act means a collective
investment scheme that issues collective investment securities only through
private placement, in which
the total number of the investors specified
by Presidential Decree shall not exceed the number prescribed by
Presidential Decree.
(20) The term "collective investment property" in this Act means the
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
property
of a collective investment scheme, which means the property of
an investment trust, the property of an investment company, the property
of an investment limited liability company, the property of an investment
limited partnership company, the property of an investment
association,
or the property of an undisclosed investment association.
(21) The term "collective investment securities" in this
Act means
instruments by which the equity shares in a collective investment scheme
(referring to the beneficial interest in the
case of an investment trust)
are indicated.
(22) The term "collective investment agreement" in this Act means an
agreement that provides for the organization and management
of a collective
investment scheme and the rights and duties of investors therein, which
means the trust contract of an investment
trust, the articles of incorporation
of an investment company, an investment limited liability company, or
an investment limited
partnership company, or the association agreement
of an investment association or an undisclosed investment association.
(23) The
term "general meeting of collective investors" in this Act means
a decision-making body composed of all investors in a collective
investment
scheme, which means the general meeting of beneficiaries, the general
meeting of shareholders, the general meeting of
partners, or the general
meeting of undisclosed members.
(24) The term "trust" in this Act means a trust as defined in Article 1
(2) of the Trust Act.
Article 10 (Relation to Other Acts)
(1) Except as specifically provided for in other Acts, all financial investment
businesses shall be governed by the provisions of
this Act.
(2) Article 246 of the Criminal Act shall not apply to a financial investment
business entity in the carrying out of
its financial investment business
activities.
PART FINANCIAL INVESTMENT
BUSINESS
CHAPTER LICENSE FOR AND
REGISTRATION OF
FINANCIAL INVESTMENT
BUSINESS
SECTION 1 Requirements and Procedure for Licensing
Article 11 (Prohibition against Unlicensed Business Activities)
Anyone shall
not engage in a financial investment business (excluding
an investment advisory business and a discretionary investment business;
hereafter the same shall apply in this Section) without a license (including
a revised license) for the financial investment business
under this Act.
Article 12 (Financial Investment Business License)
(1) A person who desires to engage in a financial investment
business
shall select all or part of its business units (hereinafter referred to as
"licensed business units"), as defined by Presidential
Decree, by specifying
the constituents enumerated in the following subparagraphs, and shall
obtain a license for a single financial
investment business from the Financial
Services Commission: 1. The type of financial investment business (referring to investment
trading business, investment brokerage business, collective
investment
business, and trust business, and also including an underwriting
business in the category of investment trading businesses);
2. The range (referring to the type of collective investment scheme under
Article 229 in the case of a collective investment business,
or referring
to the trust property under subparagraphs of Article 103 (1) in the
case of a trust business) of financial investment
instruments (referring
to securities, exchange-traded derivatives, and over-the-counter
derivatives, including state bonds, corporate
bonds, and other
instruments specified by Presidential Decree in the category of
securities, and also including derivatives based
on underlying assets
of stocks and other instruments as specified by Presidential Decree
in the category of derivatives); and
3. The class of investors (referring to the classification of professional
investors and ordinary investors; hereinafter the same
shall apply).
(2) A person who desires to obtain a license for a financial investment
business under paragraph (1) shall satisfy
all of the following requirements:
1. The person shall fall under any of the following items: Provided, That
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
an
investment brokerage business entity willing to carry on an electronic
securities brokerage business under Article 78 shall be a
stock company
under the Commercial Act and a member of the Korea Exchange:
(a) A stock company under the Commercial Act or one
of the financial
institutions specified by Presidential Decree; and
(b) A foreign financial investment business entity (referring
to a person
who carries on a business corresponding to a financial investment
business in a foreign country in accordance with
the Acts and
subordinate statutes of the foreign country), who has installed a
branch office or any other business office necessary
for carrying
on a financial investment business consistent with the business
it currently carries on in the foreign country;
2. The person shall have its own equity capital equivalent to or more
than the amount set by Presidential Decree, which shall be
at least
500 million won for each licensed business unit;
3. The person's business plan shall be feasible and sound;
4. The person shall be equipped with manpower, an electronic computer
system, and other physical facilities adequate for protecting
investors
and carrying on the financial investment business in which the person
intends to engage;
5. There shall be no executive who falls under any subparagraph of Article
24;
6. The major shareholders or the foreign financial investment business
entity shall meet all of the requirements set forth under
the following
categories:
(a) In the case of subparagraph 1 (a), its largest shareholder (including
shareholders who are specially related persons of the
largest
shareholder; and where the largest shareholder is a legal entity,
persons who exercise de facto control over the matters
material
to the management of the legal entity, as specified further by
Presidential Decree, shall be included herein) shall have
adequate
investing capabilities, good financial standing and social credibility;
and
(b) In the case of subparagraph 1 (b), the foreign financial investment
business entity shall have adequate investing capabilities,
good
financial standing and social credibility; and
7. The person shall have a system for preventing conflicts of interest
between the financial investment business entity and investors,
as
well as between a specific investor and other investors.
(3) Further details necessary for fulfilling licensing requirements
under
paragraph (2) shall be prescribed by Presidential Decree.
Article 13 (Licensing Application and Examination)
(1) A person
who desires to obtain a license for a financial investment
business under Article 12 (1) shall file a licensing application with
the
Financial Services Commission.
(4) The Financial Services Commission may, when granting a license for
a financial investment business pursuant to paragraph (2),
attach
conditions as may be necessary for securing soundness in management
and protecting investors.
1. The contents of the license for the financial investment business;
2. The conditions attached to the license for the financial investment
business (limited to cases where such conditions are attached
therewith); and
3. The contents of revocation of, or revision to, the conditions attached
to the license for the financial investment business (limited
to cases
where such conditions have been revoked or revised).
(7) The matters concerning the licensing application under paragraphs
(1) through (6), including mandatory descriptions in the licensing
application, its accompanying documents, and other necessary
matters,
including the method and procedure for the licensing examination, shall
be prescribed by Presidential Decree.
Article 14 (Preliminary License)
(1) A person who desires to obtain a license for a financial investment
business under Article 12 (hereafter referred to as "final
license" in this
Article) may file an advance application for a preliminary license with
the Financial Services Commission.
(3) In calculating the examination time period under paragraph (2), the
duration for correcting a deficiency in the application
for preliminary license,
or other duration specified by Ordinance of the Prime Minister shall not
be included in the examination
time period.
(4) The Financial Services Commission may, when granting a preliminary
license pursuant to paragraph (2), attach conditions as may
be necessary
for securing soundness in management and protecting investors.
(5) The Financial Services Commission shall, upon receiving an application
for final license from a person to whom a preliminary
license has been
granted, verify whether the applicant has fulfilled the conditions attached
to the preliminary license under paragraph
(4), and whether the applicant
meets all requirements under subparagraphs of Article 12 (2) in order
to determine whether to grant
a final license.
(6) The matters concerning the application for preliminary license under
paragraphs (1) through (5), including the mandatory descriptions
in the
application and its accompanying documents, and other necessary matters,
including the method and procedure for the preliminary
license, shall be
prescribed by Presidential Decree.
Article 15 (Maintenance of Licensing Requirements)
Every financial investment business entity shall continue to meet the
licensing
requirements under subparagraphs of Article 12 (2) (referring
to the mitigated requirements prescribed by Presidential Decree in
the
cases of subparagraphs 2 and 6 of the same paragraph of the same Article),
while carrying on a financial investment business
with a proper license
under Article 12.
Article 16 (Addition of Businesses and Revision to License)
(1) Every financial investment business entity shall, whenever it desires
to carry on the financial investment business for any other business unit
subject to licensing in addition to the business unit
already licensed pursuant
to Article 12, obtain a revised license from the Financial Services Commission
in accordance with Articles
12 and 13. In such cases, Article 14 shall
not apply.
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
SECTION 2 Requirements and Procedure for
Registration
Article 17 (Prohibition against Unregistered Business Activities)
No one shall engage in an investment advisory business or a discretionary
investment business, without a registration (including a revised
registration) for the financial investment business under this
Act.
Article 18 (Registration of Investment Advisory Business or Discretionary
Investment Business)
(1) A person who desires to engage in an investment advisory business
or a discretionary investment business shall select all or
part of the business
units (hereinafter referred to as "registered business units"), as defined
by Presidential Decree, specifying
the items set forth in the following
subparagraphs, and shall register each financial investment business with
the Financial Services
Commission: 1. The investment advisory business or the discretionary investment
business;
2. The range of financial investment instruments (referring to securities,
exchange-traded derivatives, and over-the-counter derivatives);
and
3. The class of investors.
(2) A person who desires to register a financial investment business under
paragraph (1) shall satisfy
all the prerequisites set forth in the following
subparagraphs:
1. The person shall fall under any of the following items: Provided, That
the same shall not apply to a foreign investment advisory
business
entity (referring to a person who currently carries on a business,
consistent with an investment advisory business in
a foreign country
in accordance with the Acts and subordinate statutes of the foreign
country; hereinafter the same shall apply)
or a foreign discretionary
investment business entity (referring to a person who currently carries
on a business, consistent with
a discretionary investment business
in a foreign country in accordance with the Acts and subordinate statutes
of such foreign country;
hereinafter the same shall apply) who carries
on a business directly engaging domestic residents in a foreign country
or an investment
advisory business or discretionary investment
business, via any telecommunications medium:
(a) A stock company under the Commercial Act;
(b) A foreign investment advisory business entity that has installed
a branch office or any other business office necessary for
carrying
on an investment advisory business; and
(c) A foreign discretionary investment business entity that has installed
a branch office or any other business office necessary
for carrying
on a discretionary investment business;
2. The person shall have equity capital equivalent to, or more than, the
amount set by Presidential Decree, which shall be at least
100 million
won for each registered business unit;
3. The person shall retain professional advisors for investment
recommendation (referring to the professional advisors for investment
recommendation under Article 286 (1) 3 (a); hereinafter the same
shall apply) or professional investment managers (referring to
the
professional investment managers under Article 286 (1) 3 (c);
hereinafter the same shall apply) according to the classifications
of
the following items. In such cases, any person specified in the proviso
to other portion than items of subparagraph 1 above
shall be deemed
to have met all relevant requirements if the person secures manpower
corresponding to the requirements for professional
advisors for
investment recommendation or professional investment managers in
its own country, the number of which shall be equivalent
to, or more
than, the number set forth in the following items:
(a) For an investment advisory business, the person shall retain
professional advisors for investment recommendation, the number
of which shall be equivalent to, or more than, the number prescribed
by Presidential Decree; and
(b) For a discretionary investment business, the person shall retain
professional investment managers, the number of which shall
be
equivalent to, or more than, the number prescribed by Presidential
Decree;
4. There shall be no executive who falls under any of the subparagraphs
of Article 24;
5. The major shareholders, or the foreign investment advisory business
entity or foreign discretionary investment business entity
shall meet
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
all the requirements under the following classifications:
(a)
In the case of subparagraph 1 (a), major shareholders (referring
to major shareholders as defined in Article 12 (2) 6 (a)) shall
have
good social credibility as prescribed by Presidential Decree; and
(b) In the case of the proviso to other portion than items
of subparagraph
1 above and items (b) and (c) of the same subparagraph, the foreign
investment advisory business entity or foreign
discretionary
investment business entity shall have good social credibility as
prescribed by Presidential Decree; and
6. The person shall have a system for preventing conflicts of interest
between the financial investment business entity and investors,
as
well as between a specific investor and other investors, in compliance
with the requirements prescribed by Presidential Decree.
Article 19 (Application for Registration, etc.)
(1) A person who desires to register a financial investment business under
Article 18 shall file a registration application with
the Financial Services
Commission.
(4) In making a decision whether to approve the registration of the financial
investment business under paragraph (2), the Financial
Services
Commission shall not reject such registration, unless any of the following
grounds exist: 1. The applicant fails to meet the prerequisites for registration of a financial
investment business under Article 18 (2);
2. The registration application under paragraph (1) contains false
information; and
3. The applicant has not complied with the demand for correction under
the latter part of paragraph (2).
(5) The Financial Services Commission shall, upon making a decision to
approve the registration of the financial investment business
under
paragraph (2), make an entry of the necessary descriptions in the register
of the investment advisory business entities or
in the register of the
discretionary investment business entities, and shall give public notice
of the details of such registration
through the Official Gazette, its Internet
homepage, or any other medium.
Article 20 (Maintenance of Registration Prerequisites)
Every investment advisory business entity and discretionary investment
business
entity shall continue to meet the prerequisites under
subparagraphs of Article 18 (2) (referring to the mitigated prerequisites
pursuant to Presidential Decree in the cases of subparagraphs 2 and 5
of the same paragraph of the same Article), while carrying
on a financial
investment business after registration,
Article 21 (Addition of Businesses and Revision to Registration)
(1) Every financial investment business entity shall, whenever
it desires
to add another business unit subject to registration to the business unit
already registered pursuant to Article 18
while carrying on the financial
investment business, make a revised registration with the Financial
Services Commission in accordance
with Articles 18 and 19.
(2) In approving a revised registration under paragraph (1), the mitigated
prerequisites pursuant to Article 20 shall apply as to
the prerequisites
for registration under Article 18 (2) 5, notwithstanding the provision of
the aforesaid subparagraph.
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
CHAPTER GOVERNANCE OF FINANCIAL
INVESTMENT BUSINESS
ENTITY
Article 22 (Scope of Application)
This Chapter shall not apply to a person who falls under any of the following
subparagraphs and who concurrently runs a financial
investment business
(hereinafter referred to as "concurrently-run financial investment business
entity"):
1. A financial institution under Article 2 of the Banking Act and a credit
business division treated as a financial institution under
Article 5 of
the same Act (hereinafter referred to as "bank");
2. An insurance company under Article 2 of the Insurance Business Act
(hereinafter referred to as "insurance company"); and
3. Other financial institutions or similar as specified by Presidential
Decree.
Article 23 (Approval on Change of Major Shareholders, etc.)
(1) A person who intends to become a major shareholder (referring to
a major shareholder as defined in Article 12 (2) 6 (a), and the persons
specified by Presidential Decree shall be excluded herefrom;
hereafter the
same shall apply in this Article) of a financial investment business by
acquiring stocks issued by the financial
investment business entity
(excluding an investment advisory business entity or discretionary
investment business entity) shall
meet the requirements for major
shareholders under Article 12 (2) 6 (a) prescribed by Presidential Decree
to ensure soundness in
management, and shall obtain the approval of the
Financial Services Commission.
(3) Any person who has acquired stocks without the required approval
under paragraph (1) may not exercise his/her voting right for
the portion
of stocks acquired without such approval.
(4) Every investment advisory business entity and discretionary investment
business entity shall, when any of its major shareholders
is changed, submit
a report of such change to the Financial Services Commission within two
weeks. In such cases, it shall be deemed that a person who
concurrently
runs an investment advisory business or discretionary investment business
and a financial investment business under
any of Article 6 (1) 1 through
3 and 6 has submitted the report when it obtains an approval under
paragraph (1).
Article 24 (Qualification of Executives)
A person who falls under any of the following subparagraphs shall not
become an executive of a financial investment business entity,
and an
executive shall lose his/her office if he comes to fall hereunder after taking
the office:
1. A minor, an incompetent, or a quasi-incompetent;
2. A person declared bankrupt, not yet reinstated;
3. A person for whom five years have not elapsed since the completion
(or deemed completion) of, or exemption from, a sentence of
imprisonment without prison labor or greater punishment, pronounced
against him/her, or payment of a fine for negligence or greater,
imposed
upon him/her pursuant to this Act, other finance-related Acts and
subordinate statutes, as specified by Presidential Decree
(hereafter
referred to as "finance-related Acts and subordinate statutes" in this
Article) or finance-related Acts and subordinate
statutes of a foreign
country (referring to Acts and subordinate statutes of a foreign country,
similar to this Act or any finance-related
Acts and subordinate statutes;
hereafter the same shall apply in this Article);
4. A person against whom a sentence of suspension of imprisonment without
labor, or greater punishment, was pronounced and who is
still under
the suspension period;
5. A person who was once an executive or an employee of a corporation
or company whose business permit, license, or registration
was revoked
pursuant to this Act, other finance-related Acts and subordinate
statutes, or finance-related Acts and subordinate
statutes of a foreign
country (limited to a person who is directly or substantially liable for
the occurrence of the cause or event
that gave rise to the revocation
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
as specified by Presidential Decree) and
for whom five years have not
elapsed since such revocation;
6. A person for whom five years have not elapsed since he/she was removed
or dismissed pursuant to this Act, other finance-related
Acts and
subordinate statutes, or finance-related Acts and subordinate statutes
of a foreign country;
7. A person against whom a notice was given that he/she should, as a
retired executive or employee, have been subjected to a disposition
of demand for removal or dismissal pursuant to this Act or other
finance-related Acts and subordinate statutes if he/she was in
service
or in employment at the time of such notice, and for whom five years
have not elapsed since such notice was delivered (or
seven years since
the date of his/her retirement or resignation, in cases where the period
of five years after the date of such
notice exceeds the period of seven
years after such retirement or resignation); and
8. A person who is likely to undermine the protection of investors or sound
order in trading, as specified by Presidential Decree.
Article 25 (Appointment of Outside Directors and Composition of Board
of Directors)
(1) Every financial investment business entity (excluding the financial
investment business entities specified by Presidential Decree,
considering
the size of assets; hereafter the same shall apply in this Article) shall
have three or more outside directors, and
the number of outside directors
shall account for at least one half of the total number of directors.
(2) Every financial investment
business entity shall organize a committee
under Article 393-2 of the Commercial Act for recommendation of candidates
for outside
directors (hereinafter referred to as the "committee on the
recommendation of candidates for outside directors"). In such cases,
the
committee shall have outside directors as its members, who shall account
for one half or more of the total number of committee
members.
(3) The latter part of paragraph (2) shall not apply when a financial
investment business entity that is to appoint outside
directors as it comes
to fall under the requirements under paragraph (1) for the first time appoints
such outside directors.
(4) A financial investment business entity shall, whenever it intends to
appoint an outside director at the general meeting of shareholders,
appoint
such director from among the persons recommended by the committee on
the recommendation of candidates for outside directors. In
such cases,
the committee on the recommendation of candidates for outside directors
shall, when recommending candidates for outside
directors, include
candidates recommended by shareholders who satisfy the requirements
for exercising the shareholder's proposal
right set forth in Article 29 (6).
(5) A person who falls under any of the following subparagraphs shall
not qualify as an outside
director of a financial investment business entity
under paragraph (1), and an outside director shall lose his/her office if
he/she
comes to fall under any of the following subparagraphs after being
appointed as an outside director: Provided, That in applying
subparagraph
2, if a person comes to fall under a specially related person of the largest
shareholder as he/she becomes an outside
director, he/she shall qualify
as an outside director:
1. The largest shareholder;
2. A specially related person of the largest shareholder;
3. A significant shareholder, his/her spouse, and his/her lineal ascendants
and descendants;
4. A person who is a standing executive or a full-time employee of the
company or an affiliated company (referring to an affiliated
company
as defined in the Monopoly Regulation and Fair Trade Act; hereinafter
the same shall apply) or who was a standing executive
or a full-time
employee during the preceding two years;
5. The spouse or lineal ascendants or descendants of an executive of the
company;
6. A person who is a standing executive or a full-time employee of a
corporation, which has a significant business relationship with
the
company, as specified further by Presidential Decree, or which is a
competitor of the company in business, or which has a cooperative
relationship with the company, or a person who was a standing executive
or a full-time employee of such corporation during the
preceding two
years;
7. A person who is a standing executive or a full-time employee of a company,
of which any executive or employee of the company concurrently
serves
as a non-standing director; and
8. A person who has a difficulty in performing the duties of an outside
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
director
faithfully due to any other reason or who possesses a potential
to influence the management of the company, as specified further
by
Presidential Decree.
(6) Where the number of outstanding directors does not comply with the
requisites for the formation of the board of directors under
paragraph (1),
owing to retirement or death of an outside director or any other unexpected
cause or event, the financial investment
business entity shall fill such
vacancy at the first general meeting of shareholders held after such cause
or event occurs for
the purpose of coming into compliance with the requisites
of paragraph (1).
Article 26 (Formation of Audit Committee)
(1) Every financial investment business entity (excluding those specified
by Presidential Decree, considering the size of assets,
etc.; hereafter the
same shall apply in this Article) shall possess an audit committee under
Article 415-2 of the Commercial Act
(hereinafter referred to as the "audit
committee").
(2) The audit committee shall comply with the following requisites:
1. Two-thirds or more of all committee members shall be outside directors;
2. At least one of the committee members shall be an expert in accounting
or finance as prescribed by Presidential Decree; and
3. The representative of the audit committee shall be an outside director.
(3) A person who falls under any of the following subparagraphs
may not
become a non-outside-director member of the audit committee, and a
non-outside-director member of the audit committee shall
lose his/her
office if he/she comes to fall under any of the following subparagraphs
after being appointed as a member of the audit
committee: Provided, That
a person who currently serves or served as a member of the audit committee
and is not a standing auditor
or an outside director of the company may
become a non-outside-director member of the audit committee,
notwithstanding subparagraph
2:
1. A significant shareholder of the company;
2. A person who is a standing executive or a full-time employee of the
company or a person who was a standing executive or a full-time
employee
during the preceding two years; and
3. A person who possesses a potential to influence the management of
the company or who has a difficulty in faithfully performing
his/her
duties as a non-outside-director member of the audit committee due
to any other reason, as specified further by Presidential Decree.
(4) Where the number of outside directors does not comply with the requisites
for the formation of an audit committee under paragraph
(2), owing to
retirement or death of an outside director or any other unexpected cause
or event, the financial investment business
entity shall fill such vacancy
at the first general meeting of shareholders held after such cause or event
occurs in order to come
into compliance with the requisites of paragraph
(2).
(5) The proviso to Article 415-2 (2) of the Commercial Act shall not apply
to the formation of the audit committee under paragraph
(1).
(6) Article 409 (2) and (3) of the Commercial Act shall apply mutatis
mutandis to the appointment of outside directors who
become members
of the audit committee.
Article 27 (Standing Auditors)
(1) Each financial investment business entity (excluding those specified
by Presidential Decree, considering the size of assets,
etc.) shall have
one or more standing auditors: Provided, That it may not have a standing
auditor if there is an audit committee
formed in accordance with this Act
(including cases where a financial investment business entity has
established an audit committee
in compliance with the requisites of Article
26 (2) and (3), although it is not obligated to have an audit committee).
(2) Article
26 (3) shall apply mutatis mutandis to the qualifications for
standing auditors under paragraph (1).
Article 28 (Internal Control Guidelines and Compliance Officer)
(1) Each financial investment business entity shall establish appropriate
guidelines and procedures that shall be complied with when its executives
and employees perform their duties (hereinafter referred
to as the "internal
control guidelines") so as to abide by the Acts and subordinate statutes,
manage its assets in a sound manner,
prevent conflicts of interest, and
protect investors in every aspect.
(2) A financial investment business entity (excluding an investment
advisory business entity or a discretionary investment business
entity as
specified by Presidential Decree, considering the size of assets, etc.;
hereafter the same shall apply in this Article)
shall have one or more
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
persons, who shall be responsible for monitoring compliance
with the internal
control guidelines, investigating violations of the internal control guidelines,
and reporting to the audit committee
or the auditors (hereinafter referred
to as "compliance officers").
(3) Every financial investment business entity shall, whenever intending
to appoint or dismiss a compliance officer, refer the case
to the board
of directors for resolution.
(4) Every compliance officer shall meet all of the following requirements,
and a compliance officer shall lose his/her position
if he/she fails to meet
the requirements under subparagraph 2 or 3 after being appointed as
compliance officer:
1. Each compliance officer shall have any of the following professional
experience: Provided, That a person shall not be qualified
for the position
of compliance officer, if five years have not passed since the person
falling under any of items (a) through (d)
retired or resigned from
an institution specified in item (d):
(a) A person who has a total of at least ten years professional experience
working for the Bank of Korea or the institutions subject
to audit
under Article 38 of the Act on the Establishment, etc. of Financial
Services Commission (including foreign financial institutions
corresponding to such institutions);
(b) A holder of a master's or higher degree in a finance-related area,
who has a total of at least five years professional experience
working
for research institutes, universities, or colleges in the position of
researcher, full-time lecturer, or higher;
(c) A holder of a qualification for attorney-at-law or certified public
accountant, who has a total of at least five years professional
experience engaging in a business related to the qualification; and
(d) A person who has a total of at least five years professional
experience
working for the Ministry of Strategy and Finance, the Financial
Services Commission, the Securities and Futures Commission,
the
Financial Supervisory Service (referring to the Financial Supervisory
Service under the Act on the Establishment, etc. of Financial
Services
Commission; hereinafter the same shall apply), the Korea Exchange,
the Association, or institutions specialized in finance-related
legislation;
2. No compliance officer shall fall under any of subparagraphs of Article
24; and
3. No compliance officer shall have any record of having been subjected
to a disposition equivalent to, or greater than, a warning
of reprimand
under Article 422 (1) 1 hereof or a demand for censure under paragraph
(2) 4 of the same Article from the Financial
Services Commission, the
Governor of the Financial Supervisory Service (hereinafter referred
to as the "Governor of the Financial
Supervisory Service"), or any other
institution specified by Presidential Decree due to a violation of this
Act or any finance-related
Acts and subordinate statutes specified by
Presidential Decree during the preceding five years.
(5) A compliance officer shall
perform his/her duties with due fiduciary
care, and shall not take charge of a job engaging in the following work:
1. Management of the proprietary assets of the financial investment
business entity;
2. Matters related to the financial investment business that are carried
on by the financial investment business entity and any work
incidental
thereto; and
3. Work carried on by the financial investment business entity pursuant
to Article 40.
(6) A financial investment business entity shall ensure that the compliance
officer can perform his/her duties independently.
(7)
A financial investment business entity shall, whenever it appoints
or dismisses its compliance officer, notify the Financial Services
Commission
thereof.
(9) No financial investment business entity shall unfairly prejudice a person
who has served as compliance officer in relation to
personnel management
decisions on any ground related to the performance of his/her duties.
(10) Other necessary matters concerning
the guidelines for internal control
and the compliance officer shall be prescribed by Presidential Decree.
Article 29 (Minority
Shareholder Rights)
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(1) Any person who has owned (including cases where the person has
acquired
proxies for exercising a shareholder right or where two or more
shareholders jointly exercise a shareholder right; hereafter the
same shall
apply in this Article) 5/100,000 or more of the total outstanding stocks
of a financial investment business entity (excluding
financial investment
business entities specified by Presidential Decree, considering the size
of their assets, etc.; hereafter
the same shall apply in this Article)
continuously for the preceding six months, may exercise the shareholder
right provided for
in Article 403 of the Commercial Act (including cases
to which the same Article shall apply mutatis mutandis pursuant to Article
324, 415, 424-2, 467-2, or 542 of the same Act).
(2) Any person who has owned 250/1,000,000 (or 125/1,000,000 in the
case of a financial investment business entity specified by
Presidential
Decree) or more of the total outstanding stocks of a financial investment
business entity continuously for the preceding
six months, may exercise
the shareholder right provided for in Article 402 of the Commercial Act
(including cases to which the
same Article shall apply mutatis mutandis
pursuant to Article 542 of the same Act).
(3) Any person who has owned 50/100,000 (or 25/100,000 in the case
of a financial investment business entity specified by Presidential
Decree)
or more of the total outstanding stocks of a financial investment business
entity continuously for the preceding six months,
may exercise the
shareholder right provided for in Article 466 of the Commercial Act.
(4) Any person who has owned 250/100,000
(or 125/100,000 in the case
of a financial investment business entity specified by Presidential Decree)
or more of the total outstanding
stocks of a financial investment business
entity continuously for the preceding six months, may exercise the
shareholder rights
provided for in Articles 385 (including cases to which
the same Article shall apply mutatis mutandis pursuant to Article 415
of
the same Act) and 539 of the Commercial Act.
(5) Any person who has owned 150/10,000 (or 75/10,000 in the case of
a financial investment business entity specified by Presidential
Decree)
or more of the total outstanding stocks of a financial investment business
entity continuously for the preceding six months,
may exercise the
shareholder rights provided for in Articles 366 (including cased to which
the same Article shall apply mutatis
mutandis pursuant to Article 542
of the same Act; hereafter the same shall apply in this paragraph) and
467 of the Commercial Act. In such cases, the exercise of
the shareholder
right under Article 366 of the same Act shall be based on voting stocks.
(6) Any person who has owned 50/10,000
(or 25/10,000 in the case of
a financial investment business entity specified by Presidential Decree)
or more of the total outstanding
voting stocks of a financial investment
business entity continuously for the preceding six months, may exercise
the shareholder
rights provided for in Article 363-2 of the Commercial
Act.
(7) The provisions of paragraph (1) through (6) shall not affect the exercise
of a minority shareholder right under each relevant
provision of the
Commercial Act stated in each of the said paragraphs.
(8) Any shareholder under paragraph (1) may, if he/she wins
a lawsuit
filed by him/herself in accordance with Article 403 of the Commercial Act
(including cases to which the same Article
shall apply mutatis mutandis
pursuant to Article 324, 415, 424-2, 467-2, or 542 of the same Act), claim
litigation expenses from
the financial investment business entity, and all
other expenses incurred by him/her in connection with the lawsuit.
CHAPTER MAINTENANCE
OF SOUND
BUSINESS MANAGEMENT
SECTION 1 Supervision over Soundness in Business
Management
Article 30 (Maintenance of Financial Soundness)
(1) A financial investment business entity (excluding business entities
that run a financial investment business concurrently and
other financial
investment business entities specified by Presidential Decree; hereafter
the same shall apply in this Article)
shall maintain the enumerated amounts,
calculated by subtracting the sum under subparagraph 2 from the sum
under subparagraph 1
(hereinafter referred to as "net operating capital"),
to the level of the amount equivalent to or more than the aggregate of
the
risks inherent to the assets and liabilities of the financial investment
business entity and accompanying its business, as converted
into a monetary
value (hereinafter referred to as "gross risks"):
1. Capital, reserves, and other amount prescribed by Ordinance of the
Prime Minister; and
2. Fixed assets and assets difficult to make liquid in the short term, as
specified by Ordinance of the Prime Minister.
(2) Further specific guidelines and formula for calculation of the net
operating capital and gross risks under paragraph (1) shall
be determined
by the Financial Services Commission, and public notice of such shall be
provided.
Article 31 (Guidelines for Soundness in Business Management)
(1) A financial investment business entity (excluding business entities
that run a financial investment business concurrently; hereafter the same
shall apply in this Section) shall comply with the guidelines
for soundness
in business management determined by the Financial Services Commission,
and provided by public notice, in relation
to the following matters to maintain
soundness in business management, and shall establish and implement
a system appropriate for
such compliance:
1. The ratio of net worth to total capital, and other matters concerning
the adequacy of capital;
2. Matters concerning the soundness of assets;
3. Matters concerning liquidity; and
4. Other matters prescribed by Presidential Decree as may be necessary
for securing soundness in business management.
(2) In establishing the guidelines for soundness in business management
pursuant to paragraph (1), the Financial Services Commission
may
prescribe different guidelines applicable to each financial investment
business, considering the type, etc. of financial investment
business run
by each business entity.
(4) If any financial investment business entity fails to meet the guidelines
under paragraphs (1) and (2) and violates Article 30
(1) or (2), the Financial
Services Commission may order such entity to take measures necessary
for securing the soundness in business
management, such as increasing
the capital and placing restriction on distribution of dividends.
Article 32 (Accounting)
(1) Every financial investment business entity shall comply with the
following in accounting: 1. The fiscal year shall be the term specified by Ordinance of the Prime
Minister for each type of financial investment business;
2. The proprietary property of each financial investment business entity,
the trust property, and other property of investors specified
by Ordinance
of the Prime Minister shall be clearly separated in accounting; and
3. A financial investment business entity shall follow the general
accounting principles of the financial investment and corporate
accounting standards determined by the Financial Services Commission,
and provided by public notice, after going through a resolution
of the
Securities and Futures Commission.
(2) Matters not provided for in paragraph (1) in relation to the accounting
of the proprietary property of a financial investment
business entity, types
of account titles and order of arrangement, and other necessary matters
shall be determined by the Financial
Services Commission, and provided
by public notice.
(2) A financial investment business entity shall keep a summary of the
business reports submitted under paragraph (1) containing
the material
facts of each business report for public disclosure, in the head office, branch
offices, and sales offices for one
year from the date on which the report
is submitted to the Financial Services Commission, and shall also disclose
it to the public
through its Internet homepage, etc.
(3) In the event that anything that is likely to produce a significant impact
on the business management status of a financial investment
business
entity, such as occurrence of a non-performing loan or an extraordinary
loss, as prescribed by Presidential Decree for
each type of financial
investment business, the financial investment business entity shall report
it to the Financial Services
Commission, and shall disclose it to the public
through its Internet homepage, etc.
SECTION 2 Restriction on Trading with Major
Shareholders
Article 34 (Restriction on Trading, etc. with Major Shareholders)
(1) Any financial investment business entity (excluding business
entities
that run a financial investment business concurrently; hereafter the same
shall apply in this Section) shall not commit
any of the following acts,
except where it is necessary for exercising such right as a security right,
where the business entity
conducts manipulation for stabilization under
Article 176 (3) 1 or market creation under subparagraph 2 of the same
paragraph,
or where it is otherwise required for carrying on the financial
investment business efficiently, as prescribed by Presidential Decree,
to
the extent that it does not undermine the soundness of the financial
investment business entity:
1. An act of owning securities issued by a major shareholder of the financial
investment business entity;
2. An act of owning stocks, bonds, or promissory notes (limited to those
issued to raise funds required by an enterprise for business)
issued
by any specially related person (excluding major shareholders of the
financial investment business entity) of the financial
investment
business entity, as specified further by Presidential Decree: Provided,
That the same shall not apply in cases where
the above issuances are
owned within the limit of the ratio prescribed by Presidential Decree;
and
3. Any other act that is likely to undermine the sound management of
the assets of the financial investment business entity, as prescribed
further by Presidential Decree.
(2) No financial investment business entity shall grant credit (referring
to lending an asset possessing economic value, such as
money and securities,
guaranteeing performance of an obligation, purchasing securities with a
view to providing financial support,
or any other direct or indirect transaction
accompanying a credit risk, as specified further by Presidential Decree;
hereafter
the same shall apply in this Section) to its major shareholders
(including their specially related persons; hereafter the same shall
apply
in this Article), and no major shareholder shall receive a credit grant from
his/her financial investment business entity:
Provided, That such credit
grant may be allowed where there is no possibility of undermining the
soundness of the financial investment
business entity, as prescribed further
by Presidential Decree.
(3) Every financial investment business entity shall, when it intends to
conduct any act under the provisos to paragraph (1) 2 or
(2) (excluding
any act specified by Presidential Decree), refer the case, in advance, to
the board of directors for resolution.
In such cases, the resolution of the
board of directors shall be adopted by a unanimous vote of all incumbent
directors.
(4) Any financial investment business entity that conducted an act falling
under the provisos to paragraph (1) 2 or (2) (excluding
any act specified
by Presidential Decree) shall report it to the Financial Services Commission
without delay, and shall disclose
it to the public through its Internet
homepage, etc.
(6) The Financial Services Commission may, if it suspects that a financial
investment business entity or its major shareholder violated
any provisions
of paragraphs (1) through (5), order the financial investment business
entity or its major shareholders to submit
materials as may be necessary.
(7) If it is anticipated that the soundness in business management of
any financial investment business entity will be significantly
undermined
by its worsened financial structure because the liabilities of a major
shareholder (limited to a company) of the financial
investment business
entity exceed its assets, or owing to any other cause, as specified further
by Presidential Decree, the Financial
Services Commission may impose
a restriction on the financial investment business entity in connection
with any new acquisition
of securities issued by the major shareholder
and any credit grant under the proviso to paragraph (2).
Article 35 (Prohibition on Exercise of Undue Influence of Major
Shareholders)
No major shareholder (including his/her specially related persons; hereafter
the same shall apply in this Article and Article 36)
of a financial investment
business entity shall commit an act under any of the following subparagraphs
with an intention to pursue
his/her own interest in conflict with the interest
of the financial investment business entity:
1. Demanding that the financial investment business entity furnish
him/her with any data or information not disclosed to outsiders
for
the purposes of exercising an undue influence: Provided, That the cases
that fall within the exercise of a right under Article
29 (3) hereof or
Article 466 of the Commercial Act shall be excluded herefrom;
2. Exercising an undue influence over personnel or the business
management of the financial investment business entity under an
arrangement made with other shareholders based on a condition to
provide any benefit, such as economic interest; and
3. Any other act similar to those under subparagraphs 1 and 2, as specified
further by Presidential Decree.
Article 36 (Order of Financial Services Commission to Submit Materials)
The Financial Services Commission may, if it suspects that
a major
shareholder of any financial investment business entity has violated Article
35, order the financial investment business
entity or its major shareholders
to submit materials as may be necessary.
CHAPTER BUSINESS CONDUCT RULES
SECTION 1 Common Rules of Business Conduct
Sub-Section 1 Duty of Good Faith, etc.
Article 37 (Duty of Good Faith, etc.)
(1) A financial investment business entity shall engage in the financial
investment business in a fair manner in compliance with
the duty of good
faith.
(2) No financial investment business entity shall, while carrying on the
financial investment business, pursue its own self-interest,
or help a third
party pursue his/her self-interest, by undermining the interests of its
investors without justifiable reason.
Article 38 (Trade Name)
(1) No person, other than a person who engages in an investment trading
business or an investment brokerage business for securities,
may use the
word "securities" or any word in a foreign language with the same meaning,
as specified further by Presidential Decree,
in his/her trade name: Provided,
That a collective securities investment scheme under subparagraph 1 of
Article 229 may use the
word "securities" or any word in a foreign language
with the same meaning, as specified further by Presidential Decree, in
accordance
with Article 183 (1).
(2) No person, other than a person who engages in an investment trading
business or an investment brokerage business for exchange-traded
derivatives or over-the-counter derivatives, may use the word "derivative"
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
or any word in a foreign language with the same meaning, as specified
further by Presidential Decree, in his/her trade name.
(3)
No person, other than a collective investment business entity, may
use the word "collective investment," "investment trust," or
"asset
management," or any expression in a foreign language with the same
meaning, as specified further by Presidential Decree,
in his/her trade name:
Provided, That an investment trust that is a collective investment scheme
may use the word "investment trust"
or any word in a foreign language
with the same meaning, as specified further by Presidential Decree.
(4) No person, other than
an investment advisory business entity, may
use the word "investment advice" or any word in a foreign language with
the same meaning,
as specified further by Presidential Decree, in his/her
trade name: Provided, That a real estate consulting company under the
Real
Estate Investment Company Act may use the word "investment
consulting" or any word in a foreign language with the same meaning,
as specified further by Presidential Decree.
(5) No person, other than a discretionary investment business entity, may
use the word "discretionary investment" or any word in
a foreign language
with the same meaning, as specified further by Presidential Decree, in
his/her trade name.
(6) No person, other than a trust business entity, may use the word "trust"
or any word in a foreign language with the same meaning,
as specified
further by Presidential Decree, in his/her trade name: Provided, That
a collective investment business entity or a
person who engages in a business
under Article 7 (5) may use the word "trust" or any word in a foreign
language with the same meaning,
as specified further by Presidential Decree,
in its or his/her trade name.
Article 39 (Prohibition on Lending of Name)
No financial investment business entity may allow any other person to
carry on a financial investment business under its name as
lent to him/her.
Article 40 (Financial Investment Business Entity Engaging in Other
Financial Business)
A financial investment business entity (excluding business entities that
run a financial investment business concurrently and other
financial
investment business entities specified by Presidential Decree; hereafter
the same shall apply in this Article) may carry on any of the following
financial businesses, which shall have no possibility of
undermining the
protection of investors and sound order in trading. In such cases, a financial
investment business entity that
intends to engage in a business under
subparagraphs 2 through 5 shall report its intention to the Financial Services
Commission
at least seven days before the day on which it plans to commence
such business: 1. A business of insurance agency or insurance broker under Article 91
of the Insurance Business Act or any other financial business
specified
by Presidential Decree for which this Act or any finance-related Act
and subordinate statute specified by Presidential
Decree requires a
license, permit, registration, etc.;
2. A financial business specified by this Act or any finance-related Act
and subordinate statute specified by Presidential Decree,
as one that
a financial investment business entity is allowed to engage in, pursuant
to the relevant Act and subordinate statute;
3. Vicarious performance of a business of the State or a public organization;
4. Money transfer carried out for an investor using a deposit of the investor
(referring to an investor's deposit under Article 74
(1)); and
5. Any other financial business specified by Presidential Decree as one
that has no possibility of undermining the protection of
investors or
sound order in trading.
Article 41 (Financial Investment Business Entity Engaging in Incidental
Business)
(1) Any financial investment business entity that intends to engage in
any business incidental to the financial investment business
shall report
such intention to the Financial Services Commission at least seven days
before the day on which it commences the business.
(2) If any item in a report on the incidental business under paragraph
(1) falls under any of the following subparagraphs, the Financial
Services
Commission may place a restriction on engagement in the incidental business
or issue an order to rectify the item: 1. If it undermines the soundness in business management of the financial
investment business entity;
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
2. If it causes any impediment to the protection of investors in connection
with the engagement in an authorized or registered financial
investment
business; and
3. If it undermines the stability of the financial market.
(3) An order of restriction or rectification under paragraph (2) shall
be
provided in writing with specific descriptions of the details and grounds
for such order.
(4) The Financial Services Commission shall provide public notice of the
incidental business reported in accordance with paragraph
(1) and the
order of restriction or rectification given pursuant to paragraph (2) through
its Internet homepage, etc. in compliance
with the method and procedure
prescribed by Presidential Decree.
(2) Any financial investment business entity that entrusts a third party
with any of its affairs in accordance with the main sentence
of paragraph
(1) shall make an entrustment agreement that includes the following terms
and conditions, and such agreement shall
be reported to the Financial
Services Commission in compliance with the method and procedure
prescribed by Presidential Decree:
1. Scope of affairs entrusted;
2. Restrictions on the trustee's activities;
3. Terms and conditions for maintaining records on the performance of
entrusted affairs; and
4. Other matters specified by Presidential Decree as those necessary for
the protection of investors or sound order in trading.
(3) If any term or condition of the entrustment agreement under paragraph
(2) falls under any of the following subparagraphs, the
Financial Services
Commission may place a restriction on the entrustment of the pertinent
affair or issue an order to rectify it: 1. If it undermines the soundness in business management of the financial
investment business entity;
2. If it causes any impediment on the protection of investors;
3. If it undermines the stability of the financial market; and
4. If it disturbs the financial trading order.
(4) If the affair entrusted in accordance with the main sentence of paragraph
(1)
is one of essential affairs (referring to the affairs specified by Presidential
Decree as essential affairs directly related to
the business for which the
relevant financial investment business entity obtained a license or
completed a registration; hereafter
the same shall apply in this paragraph),
the person to whom such essential affair is entrusted shall be the one
who holds the license
or completed the registration necessary for carrying
out the entrusted affair. In such cases, the person to whom such affair
is
entrusted shall be deemed to have obtained a license or completed a
registration, if it is a foreign financial investment business
entity that
satisfies the requirements prescribed by Presidential Decree.
(5) Any person to whom any affair under paragraph (1)
is entrusted shall
not entrust the entrusted affair again to a third party: Provided, That
such affair may be entrusted again to
a third party subject to the consent
of the entrusting person within the extent that it shall not undermine
the protection of investors,
if it is necessary to do so for carrying out the
financial investment business and if it is based upon a ground specified
by Presidential
Decree.
(6) A person who entrusts an affair under paragraph (1) may furnish
the person to whom such affair is entrusted with information
related to
trading of the financial investment instruments of investors and other
transactions, and information related to the
money and other property
deposited by investors in trust within the scope of the entrusted affair,
in compliance with the guidelines
prescribed by Presidential Decree.
(7) Every financial investment business entity that intends to entrust
its affairs to another
in accordance with the main sentence of paragraph
(1) shall establish guidelines for management of entrusted affairs concerning
the protection of investors' information and management, assessment,
etc. of risks.
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(8) Every financial investment business entity shall state the details of
the affairs entrusted in accordance with the main sentence of paragraph
(1) in the contract documents under Article 59 (1) and the
investment
prospectus under Article 123 (1), and shall give notice of any change thereof
to investors, whenever there is any affair
entrusted or any change made
in the contents, after making a contract with investors.
(9) Article 756 of the Civil Act shall apply
mutatis mutandis to the damages
inflicted on investors by a person to whom any affair under paragraph
(1) is entrusted in the course
of carrying on the affair.
(10) Articles 54 and 55 hereof and Article 4 of the Act on Real Name
Financial Transactions and Guarantee
of Secrecy shall apply mutatis
mutandis to the case where a person to whom an affair under paragraph
(1) is entrusted carries on
the entrusted affair.
(11) Other matters concerning the guidelines, method and procedure for
entrustment and re-entrustment of
affairs as may be necessary for the
protection of investors or sound order in trading shall be prescribed by
Presidential Decree.
Article 43 (Inspection and Disposition)
(1) A person to whom an affair is entrusted in accordance with Article
42 (1) shall receive an inspection conducted by the Governor
of the Financial
Supervisory Service of its business and current status of property in
connection with the entrusted affairs. In
such cases, Article 419 (5) through
(7) and (9) shall apply mutatis mutandis.
(2) If a person to whom any affair is entrusted in accordance with Article
42 (1) falls under any of the following subparagraphs,
the Financial Services
Commission may order either party to the entrustment contract or both,
to cancel or amend the entrustment
agreement:
1. If the person violated any provision of Articles 54 and 55 hereof, which
shall apply mutatis mutandis pursuant to Article 42 (10)
hereof, or
Article 4 (1), and (3) through (5) of the Act on Real Name Financial
Transactions and Guarantee of Secrecy;
2. If the person rejects, interferes with, or evades an inspection under
the former part of paragraph (1);
3. If the person fails to comply with a demand for a report, etc. under
Article 419 (5), which shall apply mutatis mutandis pursuant
to the
latter part of paragraph (1); and
4. If the person falls under any of the subparagraphs of the attached
Table 1 (limited to the grounds related to the entrusted affair).
(3) The Financial Services Commission shall record the details of the
disposition taken pursuant to paragraph (2), and shall keep
and maintain
such records.
(5) The Financial Services Commission shall, upon receiving a request
for inquiry under paragraph (4), notify the requesting person
of whether
a disposition has been made and the details of the disposition, if any,
unless there is a justifiable reason otherwise.
(6) Article 425 shall apply mutatis mutandis to an order to cancel or amend
an entrustment agreement pursuant to paragraph (2).
Article 44 (Control of Conflicts of Interest)
(1) A financial investment business entity shall probe and assess the
likelihood of conflicts of interest, which may arise between
the financial
investment business entity and any investor or between a specific investor
and other investor in connection with
the financial investment business
in which it engages, in order to prevent such conflicts of interest, and
it shall control such
conflicts properly in compliance with the method and
procedure prescribed by internal control guidelines.
(2) A financial investment
business entity shall, if it is anticipated as
a result of its probe and assessment conducted in accordance with paragraph
(1)
that there is a likelihood of conflicts of interest, notify the relevant
investors thereof in advance, and shall commence trading
or any other
transaction, after reducing the likelihood of a conflict of interest in
compliance with the method and procedure prescribed
by internal control
guidelines to the level that it will cause no impediment to the protection
of investors.
(3) No financial investment business entity shall, if it is found difficult
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
to reduce the likelihood of a conflict of interest in compliance with paragraph
(2), commence trading or any other transaction.
Article 45 (Cut-off of Exchanges of Information)
(1) If there is a great possibility of conflicts of interest between financial
investment businesses run by a financial investment
business entity
(including the management of its proprietary property; hereafter the same
shall apply in this Article), as prescribed
by Presidential Decree, the
financial investment business entity shall not commit any of the following
acts:
1. Furnishing information related to trading of financial investment
instruments or other information specified by Presidential Decree;
2. Assigning any of its executives (excluding the representative director,
an auditor, or a member of the audit committee who is
not an outside
director) and employees to concurrent offices;
3. Using an office space or an electronic computer system in common in
a manner specified by Presidential Decree; and
4. Other acts specified by Presidential Decree as an act likely to cause
a conflict of interest.
(2) If there is a great possibility of conflicts of interest between a financial
investment business entity and its affiliated company
or any company
specified by the company, as prescribed by Presidential Decree, the financial
investment business entity shall not
commit any of the following acts:
1. Furnishing information related to trading of financial investment
instruments or other information specified by Presidential Decree;
2. Assigning any of its executives (excluding non-standing auditors) or
employees to concurrent offices or dispatching him/her to
work for the
company;
3. Using an office space or an electronic computer system in common in
a manner specified by Presidential Decree; and
4. Other acts specified by Presidential Decree as an act likely to cause
a conflict of interest.
Sub-Section 2 Investment Recommendations
Article 46 (Principle of Suitability, etc.)
(1) Every financial investment business entity shall confirm whether an
investor is an ordinary investor or a professional investor.
(2) Every financial investment business entity shall obtain information
about the investment purpose, status of property, experience in investment,
etc. of an ordinary investor through interviews, inquiries,
etc. before
recommending him/her to make an investment, and shall require the
ordinary investor to make a signature (including
a digital signature under
subparagraph 2 of Article 2 of the Digital Signature Act; hereinafter the
same shall apply), print his/her
name and affix his/her seal, record
conversations, or have a confirmation in any other manner, and keep and
maintain the confirmation
safely, and shall furnish the investor with the
confirmed information without delay.
(3) No financial investment business entity shall recommend an ordinary
investor to make an investment, if the investment is considered
unsuitable
for the investor in light of the investment purpose, status of property,
experience in investment, etc. of the investor.
Article 47 (Duty to Explain)
(1) A financial investment business entity shall, whenever it makes an
investment recommendation to an ordinary investor, explain
the details
of the financial investment instrument, the risks contingent upon the
investment, and other matters specified by Presidential
Decree with such
sufficiency as to allow the ordinary investor to understand them.
(2) A financial investment business entity shall
obtain a confirmation from
each ordinary investor, stating that he/she has understood the details
as explained pursuant to paragraph
(1), in one or more manners, such
as providing a signature, printing his/her name and affixing his/her seal,
or any other manner
prescribed by Presidential Decree.
(3) No financial investment business entity shall, when it provides an
explanation under paragraph
(1), provide false information while explaining
material facts that may produce a significant impact on the investor's
reasonable
judgment or the value of the relevant financial investment
instrument (hereinafter referred to as "material facts") or omit an
explanation of any of the material facts.
Article 48 (Liability for Damages)
(1) A financial investment business entity shall be liable for the damages
inflicted upon ordinary investors by its violation of
Article 47 (1) or (3).
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(2) The amount calculated by subtracting the total
amount (including
the amount prescribed by Presidential Decree) of money, etc. recovered
or recoverable by an ordinary investor
by disposal of a certain financial
investment instrument or through any other means from the total amount
(excluding the amount
prescribed by Presidential Decree) of money, etc.
paid or payable by the ordinary investor for acquisition of a financial
investment
instrument shall be presumed as the damages provided for
in paragraph (1).
Article 49 (Prohibition on Undue Recommendation)
No financial investment business entity shall commit any of the following
acts in making an investment recommendation:
1. Providing false information;
2. Providing a decisive judgment on an uncertain matter, or information
that is likely to mislead, causing an uncertain matter to
be believed
to be certain;
3. Using a method of real-time conversation, such as a personal visit
and telephone call without an investor's request for an investment
recommendation: Provided, That any of the acts specified by Presidential
Decree as those unlikely to undermine the protection of
investors, or
sound order in trading shall be excluded herefrom;
4. Repeating investment recommendations continuously although the
investor to whom an investment was recommended has already
manifested
his/her intention to reject it: Provided, That any of the
acts specified by Presidential Decree as those unlikely to undermine
the protection of investors or sound order in trading shall be excluded
herefrom; and
5. Other acts specified by Presidential Decree as an act likely to undermine
the protection of investors or sound order in trading.
Article 50 (Working Rules on Investment Recommendations)
(1) A financial investment business entity shall establish specific guidelines
and procedures with which its executives and employees shall comply in
making investment recommendations (hereinafter referred
to as the
"working rules on investment recommendations").
(2) A financial investment business entity shall announce its established
working rules on investment recommendations to the public
through its
Internet homepage, etc. The same shall also apply to an amendment to
the working rules on investment recommendations.
(3) The Association may establish standard working rules on investment
recommendations which can be enforced by financial investment
business
entities in common.
Article 51 (Registration of Investment Solicitors, etc.)
(1) A financial investment business entity may entrust a person (limited
to a private individual) who satisfies all the following requirements with
investment recommendations. In such cases, Article 42
shall not apply:
1. The person shall not be a person registered with the Financial Services
Commission in accordance with paragraph (3);
2. The person shall have expertise in financial investment instruments
and shall also have the qualifications prescribed by Presidential
Decree;
and
3. Where the registration under Article 53 (2) has been revoked, at least
three years shall have passed since such revocation.
(2)
A person to whom investment recommendation is entrusted in accordance
with paragraph (1) shall not commence investment recommendation
before
the registration required under paragraph (3) has been completed.
(3) A financial investment business entity that entrusts
investment
recommendation to a person in accordance with paragraph (1) shall register
the entrusted person with the Financial Services
Commission. In such
cases, the Financial Services Commission may entrust the affairs of
registration with the Association as prescribed
by Presidential Decree.
(4) A financial investment business entity that intends to register a person
to whom investment recommendation is to be entrusted
in accordance with
paragraph (3) shall file a registration application with the Financial Services
Commission (referring to the
Association if the affairs are entrusted with
the Association pursuant to the latter part of paragraph (3); hereafter
the same
shall apply in this Article).
(6) The time period specified by Ordinance of the Prime Minister, such
as the duration for supplementary correction of deficiency
in the registration
application, shall not be included in the examination time period, in
calculating the period of examination
under paragraph (5).
(7) The Financial Services Commission shall not refuse to approve the
registration, when it makes a decision on whether to approve
the registration
under paragraph (5), unless any of the following grounds exist:
1. If any of the requirements under paragraph (1) are not met;
2. If the registration application under paragraph (4) contains false
information; and
3. If the financial investment business entity has not complied with the
demand for supplementary correction under the latter part
of paragraph
(5).
(8) The Financial Services Commission shall, upon making a decision on
whether to approve the registration under paragraph (5),
enter the
necessary descriptions in the register of investment solicitors, and shall
provide public notice of the details of its
decision through its Internet
homepage, etc. 1. Making a contract on behalf of the entrusting financial investment
business entity;
2. Receiving money, securities, or any other property from an investor;
3. Entrusting his/her investment-recommending agency business
entrusted by a financial investment business entity again to a third
party; and
4. Other acts specified by Presidential Decree as an act likely to undermine
the protection of investors or sound order in trading.
(3) An investment solicitor shall post a notification showing that he/she
is an investment solicitor or present an identification
of his/her status
to investors and shall inform investors of the following matters in advance
of carrying on investment recommendations
vicariously:
1. The name of the financial investment business entity that has entrusted
such investment recommendations to the investment solicitor;
2. The fact that he/she has no authority to make a contract on behalf
of the financial investment business entity that has entrusted
him/her
with investment recommendations;
3. The fact that an investment solicitor is prohibited from receiving money,
securities, or any other property from investors, and
that the financial
investment business entity shall collect or receive such directly; and
4. Other matters prescribed by Presidential Decree as necessary for the
protection of investors or sound order in trading.
(4) A
financial investment business entity shall, in entrusting an investment
solicitor with the affairs of investment recommendation,
observe Acts and
subordinate statutes, control the agent in good faith such that he/she
shall not undermine sound order in trading,
and shall establish guidelines
for vicarious investment recommendation.
(5) Article 756 of the Civil Act shall apply mutatis mutandis to the damages
inflicted upon investors by an investment solicitor
while carrying on the
affairs of investment recommendation vicariously.
(6) Articles 46 through 49, 54 and 55 hereof and Article
4 of the Act
on Real Name Financial Transactions and Guarantee of Secrecy shall apply
mutatis mutandis where an investment solicitor
carries on the affairs of
investment recommendation vicariously.
Article 53 (Inspection and Disposition)
(1) An investment solicitor shall receive inspections conducted by the
Governor of the Financial Supervisory Service of his/her
business and status
of property in connection with his/her vicarious investment
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS
ACT
recommendation. For this purpose, Article 419 (5) through (7) and (9)
shall apply mutatis mutandis.
(2) The Financial Services Commission shall, if an investment solicitor
falls under any of the following subparagraphs, revoke the
registration
of the investment solicitor, or suspend the business of the investment
solicitor for six months or less: 1. If he/she breaches the duty to continue to meet the prerequisites for
registration under Article 51 (9);
2. If he/she violates Article 52 (2), (3), or (6) (limited to cases to which
Article 46, 47, 49, 54, or 55 hereof or Article 4 (1),
or (3) through
(5) of the Act on Real Name Financial Transactions and Guarantee
of Secrecy shall apply mutatis mutandis);
3. If he/she rejects, interferes with, or evades an inspection under the
former part of paragraph (1); and
4. If he/she does not comply with a demand for reporting, etc. under
Article 419 (1), which shall apply mutatis mutandis pursuant
to the
latter part of paragraph (1).
(3) The Financial Services Commission shall, whenever it revokes the
registration of an investment solicitor or suspends the business
of the
investment solicitor pursuant to paragraph (2), make an entry of the details,
and shall keep and maintain relevant records.
(4) The Financial Services Commission shall, whenever it revokes the
registration of an investment solicitor or suspends the business
of the
investment solicitor pursuant to paragraph (2), provide public notice thereof
through its Internet homepage. etc.
(7) Article 423 (excluding subparagraph 2) shall apply mutatis mutandis
to the revocation of the registration of an investment solicitor,
while Article
425 shall apply mutatis mutandis to the revocation of an investment solicitor
and the suspension of the business
of an investment solicitor pursuant
to paragraph (2).
Sub-Section 3 Prohibition of Use of Job-related
Information, etc.
Article 54 (Prohibition on Use of Job-related Information)
No financial investment business entity shall use information known to
it in the course of its business and undisclosed to the public, for its own
or a third party's interest without a justifiable ground.
Article 55 (Prohibition on Compensation for Loss, etc.)
No financial investment business entity shall commit any of the following
acts, except where losses are compensated for or returns are guaranteed
pursuant to Article 103 (3) in connection with the trading
of financial
investment instruments and other transactions, or where there is no
possibility of undermining sound order in trading
and there is a justifiable
ground. The same shall also apply where any executive or employee of
a financial investment business
entity commits any of the following acts
on his/her own account:
1. Promising in advance to compensate for all or part of losses that an
investor may sustain;
2. Compensating for all or part of losses sustained by an investor after
the fact;
3. Promising an investor in advance to guarantee a certain amount in
returns; and
4. Offering an investor a certain amount in returns after the fact.
Article 56 (Standardized Contract Form)
(1) A financial investment business entity that intends to establish or
amend a standardized contract form in connection with the
financial
investment business shall report it in advance to the Financial Services
Commission: Provided, That the standardized
contract form newly
established or amended shall be reported to the Financial Services
Commission and the Association within seven
days after such establishment
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
or amendment in any of the following cases:
1. When any term or condition of the standardized contract form, which
has nothing to do with investors' rights and obligations,
is amended;
2. When the standard contract form under paragraph (3) is used as is;
3. When the terms and conditions to be established or amended are identical
with those already reported by other financial investment
business
entities to the Financial Services Commission; and
4. When a standardized contract form applicable only to professional
investors is established or amended.
(2) A financial investment business entity that has established or amended
a standardized contract form shall publish it through
its Internet homepage,
etc.
(3) The Association may establish a contract form, which will serve as
a standard form in connection with the operation of a financial
investment
business (hereafter referred to as "standard contract form" in this Article),
in order to establish sound order in trading
and prevent the wide use
of a contract form with unfair terms or conditions.
(4) The Association shall, whenever it intends to
establish or amend the
standard contract form, report such intention to the Financial Services
Commission in advance: Provided,
That the standard contract form newly
established or amended shall be reported to the Financial Services
Commission within seven
days after such establishment or amendment,
if the form is applicable only to professional investors.
(5) The Financial Services Commission shall, upon receiving a report on
or being informed of the contract form under paragraph (1)
or the standard
contract form under paragraph (4), notify the Fair Trade Commission of
the contract form or the standard contract
form. In such cases, if a violation
of any provision of Articles 6 through 14 of the Regulation of Standardized
Contracts Act is
found in the contract form or the standard contract form
as notified, the Fair Trade Commission may notify the Financial Services
Commission of the violation, request it to take measures as may be necessary
for rectification of such violation, and the Financial
Services Commission
shall, in return, comply with such request, unless there is an extraordinary
reason otherwise.
(6) The Financial Services Commission may, if it is deemed that any contract
form or standard contract form is likely to violate
this Act or any
finance-related Act and subordinate statute or impinge on investors'
interests, order the financial investment
business entity involved or the
Association to amend the contract form or the standard contract form in
writing, indicating such
foreseeable violation or infringement in specific
detail.
Article 57 (Advertisements Soliciting Investment)
(1) No person, other than financial investment business entities, shall
advertise
for any business run by a financial investment business entity
or for any financial investment instrument (hereinafter referred
to as
"advertisement for investment"): Provided, That the Association and any
financial holding company under the Financial Holding
Companies Act
which has a financial investment business entity as its subsidiary company
or sub-subsidiary company, may advertise
for investment, and an issuer
or seller of securities may also advertise for investment in the securities.
(2) A financial investment
business entity (including any person under
the proviso of paragraph (1); hereafter the same shall apply in this Article)
shall,
when it advertises for investment (excluding an advertisement for
investment in collective investment securities), include the name
of the
financial investment business entity, descriptions of the financial
investment instruments, the risks contingent upon the
investment, and
other matters prescribed by Presidential Decree therein.
(3) A financial investment business entity shall, when
it advertises for
investment in collective investment securities, include the following
statements therein, and shall not contain
any statement other than the
name of the collective investment scheme, matters concerning the type
of the collective investment
scheme, matters concerning the investment
purpose and operational strategy of the collective investment scheme, and
matters prescribed
by Presidential Decree, considering the characteristics,
etc. of the collective investment securities, in the advertisement for
investment:
1. A statement recommending that the investor read the investment
prospectus before acquiring the collective investment securities;
2. A statement indicating the fact that there is a risk of loss of the invested
principal in the collective investment scheme depending
upon the result
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
of its management and that such loss shall be imputed to investors;
and
3. A statement that the past performance of the collective investment
scheme does not guarantee a return on investment for the future
where
the advertisement for investment contains the past performance of the
collective investment scheme.
(4) In advertising for investment, no financial investment business entity
shall include any indication that may cause a misunderstanding
resulting
in a belief that compensation for losses or guarantee for returns shall be
provided, except where any loss is compensated
for or returns are guaranteed
in accordance with Article 103 (3).
(5) If an advertisement for investment contains any indication or
advertisement under Article 4 (1) of the Act on Fair Indication
and
Advertisement, such indication or advertisement shall be governed by the
relevant provisions of the said Act.
(6) Other matters pertaining to the method, procedure, etc. for
advertisement for investment shall be prescribed by Presidential
Decree.
Article 58 (Fees)
(1) A financial investment business entity shall determine the matters
concerning the guidelines and procedure for imposition of
fees upon
investors, and shall announce them through its Internet homepage, etc.
(2) No financial investment business entity shall
discriminate against an
investor in determining the guidelines for imposition of fees pursuant to
paragraph (1) without a justifiable
ground.
(3) A financial investment business entity shall notify the Association
of the matters concerning the guidelines and procedure for
imposition of
fees under paragraph (1).
(4) The Association shall compare the matters notified by each financial
investment business entity in accordance with paragraph
(3) and disclose
its findings to the public.
Article 59 (Delivery of Contract Documents and Cancellation of Contract)
(1) A financial investment business entity shall, upon
executing a contract
with an investor, deliver the contract documents without delay: Provided,
That the delivery of contract documents
may be omitted if there is no
possibility of undermining the protection of investors in light of the contents
of the contract, etc., as prescribed further by Presidential Decree.
(2) An investor who has entered into a contract (limited to
contracts specified
by Presidential Decree, considering the nature of the contract and other
circumstances) with a financial investment
business entity may cancel
the contract within seven days from the day on which the contract documents
under paragraph (1) are
delivered.
(3) The cancellation of a contract under paragraph (2) shall become effective
when a written notice manifesting the intent to cancel
is dispatched to
the financial investment business entity.
(4) When a contract is cancelled in accordance with paragraph (3), the
financial investment business entity shall not require an
investor to pay
damages or penalty, ensuing from the cancellation of the contract in excess
of an amount prescribed by Presidential
Decree as the fee and remuneration
adequate for the period of time preceding cancellation of the contract and
other consideration
that the investor is obligated to pay in connection
with the contract.
(5) If there is any consideration received in advance from an investor
in connection with a contract, the financial investment business
entity
shall, upon cancellation of a contract under paragraph (3), return such
consideration to the investor: Provided, That the
financial investment
business entity is not obligated to return such consideration, if the
consideration does not exceed the amount
prescribed by Presidential Decree.
(6) Special terms and conditions in contravention of the provisions of
paragraphs (2) through
(5) shall be void and null, if they are unfavorable
to investors.
Article 60 (Keeping and Maintaining Records)
(1) A financial investment business entity shall keep and maintain records
of data related to the operation of the financial investment
business
according to the types of data specified by Presidential Decree for the
period of time prescribed by Presidential Decree.
(2) A financial investment business entity shall establish and implement
measures appropriate for preventing the data, the records
of which shall
be kept and maintained in accordance with paragraph (1), from being
destroyed, fabricated, or altered.
Article 61 (Deposit of Acquired Securities)
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
Each financial investment business entity (excluding business entities that
run a financial investment business concurrently) shall deposit the
securities (including those specified by Presidential Decree)
acquired in
the course of the management of its proprietary property with the Depository
without delay: Provided, That it is not
required to deposit foreign currency
securities (referring to the foreign currency securities under Article 3 (1)
8 of the Foreign
Exchange Transactions Act; hereinafter the same shall
apply) so acquired and as specified by Presidential Decree.
Article 62 (Public
Announcement of Discontinuance of Financial
Investment Business, etc.)
(1) A financial investment business entity that intends to discontinue
its financial investment business or the business of a branch
office or any
other sales office shall announce its intention to the public at least thirty
days before the intended discontinuance
through two or more daily
newspapers circulated nationwide, and shall give an individual notice
thereof to each known creditor.
(2) A financial investment business entity that comes to fall under any
of the following subparagraphs shall close trading of financial
investment
instruments and other transactions carried on by it. In such cases, such
a financial investment business entity shall
be deemed a financial
investment business entity until trading and other transactions are closed:
1. When it obtains an approval for discontinuance of the financial
investment business in accordance with Article 417 (1) 6;
2. When it obtains an approval for discontinuance of the financial
investment business in accordance with Article 417 (1) 7; and
3. When its license or registration for financial investment business is
revoked pursuant to Article 420 (1) or 421 (1) (including
the case
where the said paragraph shall apply mutatis mutandis pursuant to
paragraph (4) of the same Article).
Article 63 (Trading of Financial Investment Instruments by Executives
and Employees)
(1) An executive or an employee of a financial investment business entity
(limited to an executive or an employee who executes the
affairs of the
financial investment business, where such financial investment business
entity is specified by Presidential Decree
from among the business entities
that run a financial investment business concurrently; hereafter the same
shall apply in this Article) shall comply with the following
subparagraphs
in trading financial investment instruments specified by Presidential Decree
on his/her own account:
1. Such trading shall be done in his/her own name;
2. Trading shall be executed through a single account in a single company
chosen from among investment brokers (in the case of an
executive
or an employee of an investment broker, limited to the investment
broker for which he/she works, and he/she may use another
investment
broker, which shall not deal with the financial investment instruments
that he/she intends to trade): Provided, That
two or more companies
or two or more accounts may be used for such trading where it is allowed
by Presidential Decree, considering
the type of financial investment
instruments, the nature of the accounts, etc.;
3. Details of any such trading shall be notified on a quarterly basis to
the financial investment business entity for which he/she
works (and
it shall be done on a monthly basis in the case of professional advisors
for investment recommendation and professional
researchers and
analysts under Article 286 (1) 3 (b), and those for investment
management; hereafter the same shall apply in this
Article); and
4. He/she shall comply with other methods and procedures prescribed
by Presidential Decree for preventing any unfair conduct or conflicts
of interest with investors.
(2) A financial investment business entity shall establish proper guidelines
and procedures with which its executives and employees
shall comply in
connection with their trading of financial investment instruments on their
own accounts in order to prevent any
unfair conduct or conflicts of interest
with investors.
(3) A financial investment business entity shall confirm the details of
any trading of financial investment instruments by its executives
and
employees on a quarterly basis in accordance with the guidelines and
procedures under paragraph (2).
Article 64 (Liability for Damages)
(1) A financial investment business entity shall be liable for damages caused
by its violation of any Act and subordinate statute,
term, or condition
of its standardized contract form, collective investment agreement, or
CAPITAL MARKET AND FINANCIAL INVESTMENT
BUSINESS ACT
investment prospectus (referring to the investment prospectus under Article
123 (1)) or damages sustained by its investors
due to its negligence in
carrying on its business: Provided, That where a financial investment
business entity that shall be otherwise
liable for such damages violated
Article 37 (2), 44, 45, 71, or 85 (limited to cases where the violation
is related to a conflict
of interest arising as a consequence of engaging
in an investment trading business or an investment brokerage business
and a collective
investment business concurrently), but if the business
entity proves that it exercised reasonable care, or that the investor involved
knew the facts at the time he traded the financial investment instruments
or made any other transaction, the financial investment
business entity
shall not be held liable for such damages.
(2) Where any financial investment business entity shall be liable for
damages under paragraph (1) and the executive involved in
the case is
found to be culpable for the cause, the financial investment business entity
shall be jointly liable for damages with
the executive involved.
Article 65 (Special Provisions for Foreign Financial Investment Business
Entities)
(1) In applying this Act to a branch office or any other sales office of
a foreign financial investment business entity, the operating
fund specified
by Presidential Decree shall be deemed the capital, and the aggregate
of capital, reserves, and carried-over retained
earnings shall be deemed
equity capital, while the domestic representative shall be deemed an
executive of the business entity.
(2) Each branch office and other sales office of any foreign financial
investment business entity shall hold its assets, amounting
to the aggregate
of the operating fund under paragraph (1) and its liabilities within this
country in a manner prescribed by Presidential
Decree.
(3) In the event that a branch office or any other office of a foreign financial
investment business entity is wound up
or becomes bankrupt, its assets
within this country shall be appropriated first for the performance of its
obligations owed to
the persons who have their domicile or abode in this
country.
(4) Matters pertaining to the operation of a financial investment business
by a branch office or any other sales office of each
foreign financial investment
business entity, including matters concerning the settlement of accounts
and its domestic representative, shall be prescribed by
Presidential Decree.
SECTION 2 Rules on Business Conduct by Financial
Investment Business Entities
Sub-Section 1 Rules on Business Conduct by Investment
Traders and Investment Brokers
Article 66 (Explicit Indication of Form of Trading)
An investment trader or investment broker shall disclose its identity in
advance,
whether it is an investment trader or an investment broker, to
an investor, whenever it receives an order for trading a financial
investment
instrument from the investor.
Article 67 (Prohibition of Self-contracting)
No investment trader or investment broker shall simultaneously act on
its own behalf and as the investment broker for another party
in a single
transaction involving a financial investment instrument.
Article 68 (Duty to Trade in Market)
An investment broker shall ensure that a transaction entrusted by an
investor for trading in the securities exchange or the derivatives
market
is in fact made through the securities exchange or the derivatives market.
In such cases, Article 67 shall not apply.
Article 69 (Exceptional Acquisition of One's Own Stocks)
An investment trader may, when it receives an order for selling stocks
issued by the investment trader itself in a quantity less than the unit
sellable in the securities exchange, acquire such stocks
outside the securities
exchange. In such cases, its own stocks so acquired shall be disposed of
within a time period prescribed
by Presidential Decree.
Article 70 (Prohibition on Discretionary Trading)
No investment trader or investment broker shall trade
financial investment
instruments with property deposited by an investor in the absence of an
order for trading such financial investment
instruments from the investor
or his/her agent.
Article 71 (Prohibition on Unsound Business Conduct)
No investment trader or investment broker shall commit any of the following
acts: Provided, That such acts may be allowed if there is no possibility
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
of undermining the protection of investors and sound order in trading,
as prescribed by Presidential Decree:
1. Buying or selling any financial investment instrument on its own account,
or recommending a third party to buy or sell any financial
investment
instrument, before closing a trade for an order from an investor for
buying or selling such instrument that may produce
a significant impact
on the price of the instrument, where it has received such order or
there is a great possibility of receiving
such order;
2. Trading any financial investment instrument included in certain
research and analysis data which contain an assertion or a forecast
of the value of the financial investment instrument (hereinafter referred
to as "research and analysis data") on its own account
during the period
of time beginning when the contents of such research and analysis
data are fixed and ending with the lapse of
24 hours after such research
and analysis data are disclosed to the public, where such research
and analysis data are disclosed
to the public;
3. Paying any contingent remuneration to a person in charge of the
preparation of research and analysis data in connection with the
corporate financial affairs specified by Presidential Decree;
4. Disclosing to the public, or providing to a specific person, certain research
and analysis data on certain stocks (including stock-related
corporate
bonds as specified by Presidential Decree; hereafter the same shall
apply in this subparagraph) during the time period
from the time when
a contract is executed in connection with a public offering or sale of
the stocks to the time specified by Presidential
Decree after the stocks
are listed for the first time in the securities exchange;
5. Engaging any person other than an investment solicitor or professional
investment recommendation advisor to make investment
recommendations;
6. Acquiring, disposing of, or managing financial investment instruments
separately for each investor with a discretionary power
authorized by
investors, in whole or in part, for making judgments on whether or
not investing in financial investment instruments:
Provided, That it
may be allowed if it is performed as a discretionary investment business
and it falls under Article 7 (4); and
7. Other acts specified by Presidential Decree as an act unlikely to
undermine the protection of investors or sound order in trading.
Article 72 (Credit Grant)
(1) An investment trader or investment broker may grant credit to investors
by means of lending money or securities: Provided, That
no investment
trader shall lend money or grant credit to an investor with an intention
to solicit the investor to buy any securities
within three months after it
underwrites the securities.
(2) Matters pertaining to the guidelines and methods for credit granted
under paragraph (1) shall be prescribed by Presidential
Decree.
Article 73 (Notification of Details of Trading)
An investment trader or investment broker shall, upon closing a trade
of financial investment instruments, notify the investor of
the details in
accordance with the method prescribed by Presidential Decree.
Article 74 (Separate Depositing of Investor's Deposit)
(1) An investment trader or investment broker shall separate an investor's
deposit (referring to money deposited by investors in
connection with trading
of financial investment instruments and other transactions; hereinafter
the same shall apply) from its
proprietary property and shall place it in
a deposit or trust account with a financial securities company.
(2) Notwithstanding
paragraph (1), any investment trader or investment
broker specified by Presidential Decree, from among the business entities
that
run a financial investment business concurrently, may deposit the
investor's deposit in a trust business entity (excluding financial
securities
companies; hereafter the same shall apply in this Article) instead of placing
it in a deposit or trust account under
paragraph (1). In such cases, the
investment trader or investment broker may execute a self contract,
notwithstanding Article 2
of the Trust Business Act, if it runs a trust
business.
(3) An investment trader or investment broker shall, when it places an
investor's deposit in a deposit or trust account with a financial
securities
company or a trust business entity (hereafter referred to as "deposited
institution" in this Article) in accordance
with paragraph (1) or (2), make
it clear that the investor's deposit is the investor's property.
(4) No one may set off or seize
(including provisional seizure) an investor's
deposit placed in a deposit or trust account with a deposit institution
in accordance
with paragraph (1) or (2), and the investment trader or
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
investment broker
who placed the investor's deposit in a deposit or trust
account (hereafter referred to as "depositing financial investment business
entity" in this Article) may not transfer the investor's deposit placed in
a deposit or trust account with a deposit institution
or offer it as security,
except as prescribed by Presidential Decree.
(5) A depositing financial investment business entity shall, when it comes
to fall under any of the following subparagraphs, withdraw
the investor's
deposit placed in a deposit or trust account with a deposit institution
to be paid to the investor first. In such
cases, the depositing financial
investment business entity shall provide public notice of such fact, and
the matters concerning
the time and place of payment of the investor's
deposit, and other matters related to the payment of the investor's deposit
through
two or more daily newspapers, and shall also disclose such matters
to the public through its Internet homepage, etc.:
1. When the license for its business is revoked;
2. When a resolution for dissolution is adopted;
3. When bankruptcy is declared against it;
4. When the whole transfer of the financial investment business under
Article 6 (1) 1 or 2 is approved;
5. When the whole discontinuance of the financial investment business
under Article 6 (1) 1 or 2 is approved;
6. When an order to suspend the financial investment business, in whole,
under Article 6 (1) 1 or 2 is issued; and
7. When any cause or event similar to the events under subparagraphs
1 through 6 occurs.
(6) A deposit institution shall, when it comes to fall under any subparagraph
of paragraph (5), return to the depositing financial
investment business
entity the investor's deposit placed in a deposit or trust account in the
first place.
(7) A deposit institution shall manage the investor's deposit in any of
the following manners:
1. Purchasing national bonds or local government bonds;
2. Purchasing obligation certificates with a guarantee of payment by the
State, a local government, or any financial institution
specified by
Presidential Decree; and
3. A method prescribed by Presidential Decree as one unlikely to undermine
the stable management of the investor's deposit.
(8) The scope of an investor's deposit which an investment trader or
investment broker is obligated to place in a deposit or trust
account with
a deposit institution in accordance with paragraph (1) or (2), the proportion
of the deposit or trust, the withdrawal
of the investor's deposit placed
in a deposit or trust account, the management of the investor's deposit
by a deposit institution,
and other matters pertaining to the deposit or
trust of investors' deposits shall be prescribed by Presidential Decree.
In such
cases, the proportion of deposit or trust applicable to each authorized
investment trader or investment broker may differ depending
upon the
financial status of each investment trader or investment broker.
Article 75 (Depositing of Securities Deposited by Investors)
An investment trader or investment broker shall, upon receiving securities
(including those specified by Presidential Decree) owned
and deposited
by investors in connection with trading of financial investment instruments
and other transactions, deposit them
in the Depository without delay:
Provided, That it is not required to deposit securities owned and deposited
by an investor in
the Depository, if they are foreign currency securities
specified by Presidential Decree.
Article 76 (Special Provisions concerning Sale of Collective Investment
Securities, etc.)
(1) An investment trader or investment broker shall, when it sells collective
investment securities, sell them at the base price
(referring to the base
price under Article 238 (6); hereinafter the same shall apply) calculated
first after it pays money, etc.
for acquiring the collective investment
securities: Provided, That they shall be sold at a base price prescribed
by Presidential
Decree, where there is no possibility of undermining
investors' interests, as prescribed by Presidential Decree.
(2) No investment
trader or investment broker shall sell collective
investment securities at issue upon receiving notice under Article 92 (1)
(including
the case to which the same Article shall apply mutatis mutandis
pursuant to Article 186 (2)): Provided, That the sale may be resumed
upon receiving notice under Article 92 (2) (including cases to which the
same Article shall apply mutatis mutandis pursuant to
Article 186 (2)).
(3) No investment trader or investment broker shall sell collective
investment securities or commence advertising
for such sale before the
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
collective investment scheme is registered in accordance
with Article 182:
Provided, That advertising for the sale may be commenced where there
is no possibility of undermining investors'
interests, as prescribed by
Presidential Decree.
(4) Where an investment trader or investment broker receives a sales
commission (referring to money received directly from investors
as
consideration for the sale of collective investment securities or consideration
for service provided continuously to investors;
hereinafter the same shall
apply) or sales remuneration (referring to money received from a collective
investment scheme as consideration
for the sale of collective investment
securities or consideration for service provided continuously to investors;
hereinafter the
same shall apply), it shall not receive such sales commission
or sales remuneration contingent upon the performance of management
of the collective investment scheme.
(5) The limitations on sales commissions and sales remuneration under
paragraph (4), ways of imposition thereof, and other matters
pertaining
to sales commissions and sales remuneration shall be prescribed by
Presidential Decree.
Article 77 (Special Provisions concerning Deposits and Insurance with
Investment Risk)
(1) A bank shall be deemed to have obtained a license for a financial
investment business under Article 12 in regard to an investment
trading
business, when it signs a contract for a deposit in the nature of an investment.
In this regard, Articles 15, and 39 through
45, subparagraph 3 of Article
49, Articles 56, 58 and 61 through 65, and Part , Chapters and ,
and Chapter , Section 2, Sub-Section
1 shall not apply, while Part ,
Chapter I shall not apply in cases where a bank signs a contract for a
foreign currency deposit
in the nature of an investment.
(2) An insurance company shall be deemed to have obtained a license
for a financial investment
business under Article 12 in regard to an
investment trading business or an investment brokerage investment, when
it signs an insurance
contract with investment risk or acts as a broker
or an agent for such contract. In such cases, Articles 15 and 39 through
45,
subparagraph 3 of Article 49, Articles 51 through 53, 56, 58, and
61 through 65, and Part , Chapters and , Chapter , Section 2,
Sub-Section 1, and Part , Chapter shall not apply.
Article 78 (Brokerage of Securities by Electronic Means)
(1) An electronic investment brokerage business entity (hereinafter referred
to as "electronic securities brokerage company") who acts as a broker for
trading listed stocks at trading prices set forth in
any item of subparagraph
1 for a multiple number of parties simultaneously through an information
telecommunications network or
an electronic information processing system
(hereinafter referred to as "electronic securities brokerage") shall comply
with the
guidelines prescribed by Presidential Decree (hereafter referred
to as "business guidelines" in this Article) concerning the matters
set forth
in items of subparagraph 2, in carrying on such business:
1. Trading prices falling under any of the following items:
(a) The latest price of the pertinent listed stocks publicly announced
at the securities exchange; and
(b) A uniform price determined by a formula prescribed by Ordinance
of the Prime Minister; and
2. The subject matters that may be prescribed by the business guidelines
shall be as follows:
(a) Matters concerning listed stocks as the subject matter of a trading
brokerage;
(b) Matters concerning suspension of trading of listed stocks as the
subject matter of a trading brokerage and the release of such
suspension;
(c) Matters concerning the execution of trading contracts and the
settlement of payments, including the method, liability, etc.
for
settlement;
(d) Matters concerning trading entrustment, including entrustment
guarantee money;
(e) Matters concerning reporting and public disclosure by issuers of
listed stocks as the subject matter of a trading brokerage;
(f) Matters concerning public announcements and reporting on trading
results;
(g) Matters concerning the opening, closing, suspension, and
discontinuance of a trading brokerage business; and
(h) Other matters
as may be necessary in relation to a trading brokerage
of listed stocks as the subject matter of the trading brokerage.
CAPITAL
MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(2) Part , Chapter (excluding Articles 28 and 29), Articles 40, 66,
67, 72, 73, and
386 (2) shall not apply to persons who engage in an electronic
securities brokerage.
(3) Article 413 shall apply mutatis mutandis to investment brokers who
engage in an electronic securities brokerage.
Sub-Section 2 Rules on Business Conduct by Collective
Investment Business Entities
Article 79 (Fiduciary Duty of Due Care and Duty of Good Faith)
(1) A collective investment business entity owes investors the fiduciary
duty of due care in managing collective investment property.
(2) A collective investment business entity shall carry out the business
in good faith for the purpose of protecting investors' interests.
Article 80 (Instruction and Execution of Asset Management)
(1)
A collective investment business entity of an investment trust shall,
in managing the investment trust property, give the trust
business entity
instructions necessary for acquisition, disposition, etc. of assets for
investment separately for each investment
trust property in accordance
with the method prescribed by Presidential Decree, and the trust business
entity shall, in return,
acquire, dispose of, etc. the assets for investment
in compliance with the instructions from the collective investment business
entity: Provided, That if it is unavoidable for the purpose of managing
the investment trust property efficiently, as prescribed
by Presidential
Decree, the collective investment business entity may acquire, dispose
of, etc. any asset for investment directly
in its name.
(2) A collective investment business entity of an investment trust (including
a trust business entity that keeps in
custody and manages the investment
trust property; hereafter the same shall apply in this paragraph) shall,
when it acquires, disposes
of, etc. an asset for investment in accordance
with paragraph (1), be liable for the performance within the extent of
the investment
trust property: Provided, That the same shall not apply
in cases where the collective investment business entity is liable for damages
pursuant to Article 64 (1).
(3) A collective investment business entity shall, when it carries out the
acquisition, disposal, etc. of assets for investment
in accordance with the
proviso of paragraph (1), distribute the outcome of the acquisition, disposal,
etc. in accordance with the asset distribution schedule
predetermined for
each investment trust property. In such cases, the collective investment
business entity shall prepare, maintain,
and control the asset distribution
schedule and account books and documents for the outcome of acquisition,
disposal, etc. and
the results of distribution, etc. in accordance with the
method prescribed by Ordinance of the Prime Minister.
(4) Matters pertaining to the asset distribution schedule, etc. under
paragraph (3) shall be prescribed by Ordinance of the Prime
Minister.
(5) In managing the collective investment property, a collective investment
business entity of any collective investment scheme,
other than an
investment trust, shall acquire, dispose of, etc. the assets for investment
in the name of the collective investment
scheme (referring to the name
of the collective investment business entity in the case of an undisclosed
investment association),
give the trust business entity of the collective
investment scheme instructions necessary for safekeeping and management
of the
asset acquired, disposed of, etc., and the trust business entity shall
comply with such instructions from the collective investment
business
entity. In such cases, the collective investment business entity shall make
it clear that it represents the collective
investment scheme whenever it
acquires, disposes of, etc. the assets for investment.
Article 81 (Restrictions on Asset Management)
(1) No collective investment business entity shall commit any of the following
acts while managing the collective trust property:
Provided, That the entity
may be allowed to undertake such act if there is no possibility of undermining
the protection of investors
and the stable management of the collective
investment property, as prescribed by Presidential Decree:
1. Any act falling under any of the following items, committed while
investing the collective investment property in securities (excluding
collective investment securities and the other securities specified by
Presidential Decree, but including the assets for investment
as specified
by Presidential Decree; hereafter the same shall apply in this
subparagraph) or derivatives:
(a) Investing the assets of each collective investment scheme managed
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
by each
collective investment business entity in an identical item
of securities in excess of the ratio prescribed by Presidential Decree
within the limit of 10/100 of the total assets of each collective
investment scheme. In such cases, equity securities (including
securities depositary receipts that are related to equity securities
issued by a corporation, etc.; hereafter the same shall apply
in
this Sub-Section) and other securities, excluding any equity
securities issued by the identical corporation, etc., shall be
deemed
identical securities respectively;
(b) Investing the total assets of all collective investment schemes
managed by each collective investment business entity in equity
securities issued by an identical corporation, etc. in excess of 20/100
of the total number of equity securities;
(c) Investing the total assets of each collective investment scheme in
equity securities issued by an identical corporation, etc.
in excess
of 10/100 of the total number of equity securities;
(d) Trading over-the-counter derivatives with a person who does not
meet the qualification requirements prescribed by Presidential
Decree;
(e) Investing assets in excess of the guidelines prescribed by Presidential
Decree for the assessed risks contingent to trading
derivatives;
(f) Investing the assets of each collective investment scheme to the
extent that the assessed risks ensuing from price
fluctuation in
the securities issued by an identical corporation, etc. (including
securities depositary receipts related to the
securities issued by
the corporation, etc.) out of the underlying assets exceed 10/100
of the total assets of each collective investment
scheme; and
(g) Investing assets of each collective investment scheme to the extent
that the assessed risks of the opposite trading
party ensuing from
trading over-the-counter derivatives with the same opposite party
exceed 10/100 of the total assets of each
collective investment
scheme;
2. Any act falling under any of the following items, committed while
investing the collective investment property in real property;
(a) Disposing of real estate within a period of time prescribed by
Presidential Decree not exceeding five years after the acquisition
of real estate: Provided, That in cases where a parcel of land,
buildings, etc. developed or constructed by a real estate development
project (referring to a project for developing a parcel of land into
housing lots, lots for industrial purposes, etc. or constructing
or
reconstructing a building or any other structure on the tract of land;
hereinafter the same shall apply) are sold in lots or
in units or
where it is otherwise necessary for the protection of investors, as
prescribed further by Presidential Decree, such
disposal shall be
excluded herefrom; and
(b) Disposing of a parcel of land without any building or other structure
thereon before executing a real estate development project
for such
a parcel of land: Provided, That in cases where the collective
investment scheme is merged, terminated, or dissolved or
where
it is otherwise necessary for the protection of investors, as prescribed
further by Presidential Decree, such disposal shall
be excluded
herefrom;
3. Any act falling under any of the following items, committed while
investing the collective investment property in collective investment
securities (including foreign collective investment securities under
Article 279 (1); hereafter the same shall apply in this subparagraph):
(a) Investing the assets of each collective investment scheme in the
collective investment securities of a collective investment
scheme
(including foreign collective investment schemes under Article 279
(1)) managed by the same collective investment business
entity
(including foreign collective investment business entities under
Article 279 (1)), in excess of 50/100 of the total assets
of the collective
investment scheme;
(b) Investing the assets of each collective investment scheme in the
collective investment securities of the same collective investment
scheme (including foreign collective investment schemes under
Article 279 (1)), in excess of 20/100 of the total assets of the
collective
investment scheme;
(c) Investing assets in the collective investment securities of a collective
investment scheme (including foreign collective investment
schemes
under Article 279 (1)), which is allowed to invest in collective
investment securities in excess of 40/100 of the total
assets;
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(d) Investing assets in the collective investment securities of a
privately
placed fund (including foreign privately placed funds corresponding
to the privately placed fund hereunder);
(e) Investing the collective investment property of each collective
investment scheme in the collective investment securities of
the
same collective investment scheme (including foreign collective
investment schemes under Article 279 (1)), in excess of 20/100
of the total number of the collective investment securities. In such
cases, the calculation of the ratio shall be based on the
day on
which such investment is made; and
(f) Investing assets in collective investment securities to the extent
that the aggregate of sales commissions or sales remuneration
paid
to the investment trader or the investment broker, who sells the
collective investment securities of a collective investment
scheme,
and sales commission or sales remuneration paid to the investment
trader [including foreign investment traders (referring
to the persons
who engage in a business corresponding to an investment trading
business in a foreign country in accordance with
the Acts and
subordinate statutes of the foreign country), who sells the collective
investment securities of other collective investment
schemes
(including foreign collective investment schemes under Article 279
(1)) in which the aforesaid collective investment scheme
invests
in, or the investment broker [including foreign investment brokers
(referring to the persons who engage in a business corresponding
to an investment brokerage business in a foreign country in
accordance with the Acts and subordinate statutes of the foreign
country)],
exceeds the guidelines prescribed by Presidential Decree;
and
4. Any other act specified by Presidential Decree as an act likely to
undermine the protection of investors, the stable management
of
collective investment property, etc.
(2) Matters pertaining to the method, etc. of determining the assessed
risks under paragraph (1) 1 (e), the assessed risks under
paragraph (1)
1 (f), and the assessed risks of the opposite trading party under paragraph
(1) 1 (g) shall be determined by the
Financial Services Commission and
provided by public notice.
(3) In cases where an investment has exceeded the investment limit under
paragraph (1) owing to an unavoidable cause or event specified
by
Presidential Decree, such as price fluctuation in any investment asset,
which belongs to the collective investment property,
during the period
prescribed by Presidential Decree beginning with the day on which the
investment exceeded the prescribed limit,
it shall be deemed that such
investment was made in compliance with the investment limit.
(4) Paragraph (1) 1 (a) and (e) through
(g) and 3 (a) and (b) shall not
apply to the period of time specified by Presidential Decree, not exceeding
six months from the
date of the original creation or establishment of the
collective investment scheme.
Article 82 (Restriction on Acquisition of One's Own Collective Investment
Securities)
No collective investment business entity of an investment trust or an
undisclosed investment association shall acquire the collective
investment
securities of the collective investment scheme, or receive such securities
as the subject matter of a pledge right on
the collective investment scheme's
account: Provided, That the entity may acquire the collective investment
securities of the collective
investment scheme on the collective investment
scheme's account in any of the following cases:
1. Where it is necessary for exercising a security right or any other right.
In such cases, the collective investment securities
so acquired shall
be disposed of in accordance with the method prescribed by Presidential
Decree; and
2. Where beneficiary certificates are purchased in accordance with Article
191.
Article 83 (Restrictions on Borrowing Money, etc.)
(1) No collective investment business entity may borrow money on its
collective
investment scheme's account in managing the collective
investment property: Provided, That it is allowed to borrow money on
its
collective investment scheme's account in any of the following cases:
1. When it is difficult to pay a redemption price momentarily because
of rush claims for redemption of collective investment securities
under
Article 235; or
2. When it is difficult to pay a repurchase price momentarily because
of rush claims for repurchasing under Articles 191 and 201
(4).
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(2) In cases where money is borrowed on a collective investment scheme's
account in accordance with paragraph (1), the total amount of such loans
shall not exceed 10/100 of the total amount of the collective
investment
property at the time of borrowing.
(3) Matters pertaining to the method of borrowing money in accordance
with paragraph (1), restrictions on acquisition of the investment
assets
before repayment of loans, etc. shall be prescribed by Presidential Decree.
(4) In managing the collective investment property,
no collective investment
business entity shall lend money out of the collective investment property
(excluding short-term loans
to any financial institution specified by
Presidential Decree for a period not exceeding 30 days).
(5) In managing the collective
investment property, no collective investment
business entity shall guarantee the performance of obligations or offer
any security
for any person other than the pertinent collective investment
scheme with the collective investment property.
Article 84 (Restrictions on Transactions with Interested Parties, etc.)
(1) In managing the collective investment property, no collective
investment
business entity shall conduct any transactional activity with an interested
party, as specified by Presidential Decree
(hereafter referred to as
"interested party" in this Section): Provided, That the entity is allowed
to make a transaction falling
under any of the following subparagraphs,
if there is no possibility of a conflict of interest with the collective investment
scheme:
1. A transaction under a contract entered into with a person at least
six months before the person becomes an interested party;
2. A transaction through an open market in which a multiple number
of unspecified people participate, such as the securities exchange;
3. A transaction favorable to the collective investment scheme in
comparison to the standard terms and conditions of such a transaction;
and
4. Other transactions specified by Presidential Decree.
(2) A collective investment business entity shall, when a transaction with
an interested party is allowed pursuant to the proviso to paragraph (1)
or when there is a change of interested parties, notify
the details of such
event to the trust business entity who keeps in custody and manages the
relevant collective investment property
without delay.
(3) In managing the collective investment property, no collective investment
business entity shall acquire securities (excluding
beneficiary certificates
under Article 189) issued by the collective investment business entity
itself on its collective investment
scheme's account.
(4) In managing the collective investment property, no collective investment
business entity shall acquire securities
(excluding beneficiary certificates
under Article 189 and other securities specified by Presidential Decree,
but including securities
depositary receipts related to equity securities
issued by its affiliated company and assets for investment as specified
by Presidential
Decree; hereafter the same shall apply in this Article)
issued by an affiliated company of the collective investment business entity
in excess of the limit prescribed by Presidential Decree.
(5) Matters pertaining to the restriction on acquisition of securities
issued
by an affiliated company under paragraph (4) shall be prescribed by
Presidential Decree.
Article 85 (Prohibition on Unsound Business Conduct)
No collective investment business entity shall commit any of the following
acts: Provided, That such an act is allowed in cases where there is no
possibility of undermining the protection of investors and
sound order in
trading, as prescribed by Presidential Decree:
1. Buying or selling financial investment instruments or any other asset
for investment on its own account, or soliciting a third
party to buy
or sell such instruments or assets, after determining to make a purchase
or sale which may produce a significant impact
on the price of the
financial investment instruments or other assets for investment, but
before putting the decision into action,
while managing the collective
investment property;
2. Buying securities underwritten by itself or a related underwriter, as
specified by Presidential Decree (hereafter referred to
as "related
underwriter" in this Section) for the collective investment property;
3. Buying specific securities, etc. (referring to specific securities, etc.
under Article 172 (1); hereafter the same shall apply
in this
subparagraph) with the collective investment property while intending
to create an artificial market value (referring to
the market value under
Article 176 (2) 1) for the specific securities, etc. of a corporation for
which the corporation itself or
its related underwriter was in charge
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
of underwriting, as prescribed by Presidential
Decree;
4. Undermining a specific collective investment scheme's interest to pursue
its own or a third party's interest;
5. Trading a specific collective investment property for the collective
investment business entity's proprietary property or other
collective
investment property, discretionary investment property (referring to
the property managed pursuant to the discretionary
power authorized
by investors for making judgments on investments; hereinafter the
same shall apply), or trust property managed
by the collective
investment business entity;
6. Investing the collective investment property one with another
interactively within a specific asset according to an agreement,
arrangement, etc. with a third party;
7. Engaging any persons other than professional investment managers
to manage the collective investment property; and
8. Other acts specified by Presidential Decree as an act likely to undermine
the protection of investors or sound order in trading.
Article 86 (Restriction on Contingent Remuneration)
(1) No collective investment business entity shall receive remuneration
that
is contingent upon the performance of its collective investment scheme
(hereinafter referred to as "contingent remuneration") in
accordance with
a predetermined calculation formula: Provided, That such contingent
remuneration may be allowed in any of the following
cases:
1. If the collective investment scheme is a privately placed fund; and
2. If there is no possibility of undermining the protection of investors
and sound order in trading, as prescribed by Presidential
Decree,
considering the calculation method used for remuneration of
management for any collective investment scheme other than
privately
placed funds, the composition of investors, etc.
(2) A collective investment business entity shall, when it intends to receive
contingent remuneration in accordance with the proviso
of paragraph (1),
state the calculation method of the contingent remuneration and other
matters prescribed by Presidential Decree
in the relevant investment
prospectus (referring to the investment prospectus under Article 123 (1))
and the collective investment
agreement.
Article 87 (Voting rights, etc.)
(1) In exercising voting rights for stocks which are part of the collective
investment property, a collective investment business
entity (limited to
collective investment business entities of an investment trust or an
undisclosed investment association; hereafter
the same shall apply in this
Article) shall exercise its voting rights so as not to produce an impact
on a resolution made by the
number of stocks, as calculated by subtracting
the number of the stocks, which are part of the collective investment property
from
the stocks held by shareholders present at the general meeting of
shareholders of the corporation that issued the stocks which are
part of
the collective investment property, in any of the following subparagraphs:
Provided, That the same shall not apply in cases
where the corporation
that issued the stocks which are part of the collective investment property,
is merged, its business is transferred,
it acquires any transferred business,
an executive is appointed or dismissed, its articles of incorporation are
amended, or there
is any cause or event similar to the aforesaid, and
if it is obviously foreseeable that such event or cause will result in any
loss to the collective investment property:
1. When any of the following persons attempts to include the corporation
that issued the stocks which are part of the collective
investment
property, in a group of its affiliated companies:
(a) The collective investment business entity or any person who has
an interest in the business entity as specified by Presidential Decree;
and
(b) A person who has de facto control over the collective investment
business entity, as specified by Presidential Decree;
2. When the corporation that issued the stocks which are part of the
collective investment property has any of the following relationships
in the collective investment business entity:
(a) When it is an affiliated company; and
(b) When it has a relationship under which it exercises de facto control
over the collective investment business, as prescribed
further by
Presidential Decree; and
3. When there is a possibility of undermining the protection of investors
or the appropriate management of the collective investment
property,
as prescribed by Presidential Decree.
(2) The proviso to other portion than the subparagraphs of paragraph
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(1) shall
not apply to any collective investment business entity that belongs
to an enterprise group subject to a restriction on mutual investment
under
Article 9 (1) of the Monopoly Regulation and Fair Trade Act (hereinafter
referred to as "enterprise group subject to a restriction
on mutual
investment"): Provided, That in cases where a collective investment
business entity that belongs to an enterprise group
subject to a restriction
on mutual investment holds stocks issued by a stock-listed corporation,
which is one of its affiliated
companies, and it is obviously foreseeable
that the collective investment property will sustain a loss if it exercises
its voting
rights concerning any of the following matters in accordance
with the main sentence of paragraph (1), it may exercise its voting
rights
in accordance with the proviso to other portion than the subparagraphs
of paragraph (1). In such cases, the number of stocks
for which it may
exercise its voting rights after adding up the number of stocks for which
related persons (referring to the specially
related persons under Article
7 (1) 5 (a) of the Monopoly Regulation and Fair Trade Act) of the corporation
may exercise voting
rights shall not exceed 15/100 of the total number
of outstanding stocks of the corporation:
1. Merging the corporation with another corporation or transferring the
whole or essential part of the corporation's business to
another
corporation;
2. Appointing or dismissing an executive of the corporation; and
3. Amending the articles of incorporation.
(3) Notwithstanding paragraph (2), any collective investment business
entity that belongs
to an enterprise group subject to a restriction on mutual
investment shall, when it owns stocks issued by a corporation which is
one of its affiliated companies, as part of the collective investment property,
exercise its voting rights for the stocks acquired
in accordance with the
proviso to other potion than the subparagraphs of Article 81 (1) in excess
of the investment limit under
Article 81 (1) 1 (a) so as not to produce
any impact on the resolution made by the number of stocks calculated
by subtracting the
number of stocks held as part of the collective investment
property from the number of stocks held by the shareholders who were
present at the general meeting of shareholders of the corporation that
issued the stocks.
(4) No collective investment business entity may exercise voting rights
for the stocks acquired in excess of the investment limit under Articles
81 (1) and 84 (4).
(5) No collective investment business entity shall commit any act to avoid
the application of the provisons of paragraphs (1) through
(4) by exercising
the voting right one with another interactively according to an agreement
with a third party.
(6) The Financial Services Commission may, when a collective investment
business entity exercises voting rights for stocks that
belong to the collective
investment property in violation of paragraphs (1) through (5), issue an
order to dispose of such stocks
within a given period of time, not exceeding
six months.
(8) A collective investment business entity shall make a public disclosure
of the details of the exercised voting rights for the
stocks that belong
to the collective investment property, etc. according to each of the following
categories. In this regard, matters
pertaining to the method of public
disclosure, etc. shall be prescribed by Presidential Decree:
1. When the voting rights were exercised in accordance with the provisions
of paragraphs (1) through (3) in relation to the matters
concerning
the change of business control, such as corporate merger, transfer of
business, appointment or dismissal of an executive,
and amendment
to the articles of incorporation: Specific details of how the voting rights
were exercised;
2. When the voting rights were exercised over a corporation subject to
public disclosure of voting rights: Specific details of how
the voting
rights were exercised in accordance with paragraph (7); and
3. When the voting rights were not exercised over a corporation subject
to public disclosure of voting rights: Specific reason why
the voting
rights were not exercised in accordance with paragraph (7).
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(9)
A collective investment business entity shall, when it discloses to the
public the matters concerning whether voting rights were
exercised in
accordance with paragraph (8), also disclose the data specified by
Presidential Decree as those necessary for investors
to grasp whether the
exercise or non-exercise of voting rights was proper, etc.
Article 88 (Report on Asset Management)
(1) A collective investment business entity shall prepare a report on asset
management at least once every three months and shall
furnish investors
of the relevant collective investment scheme with the report after obtaining
confirmation from the trust business
entity that keeps in custody and
manages the relevant collective investment property: Provided, That
furnishing investors with
such a report on asset management may be omitted
in cases where investors are changed from time to time or there is no
possibility
of undermining investors' interests, as prescribed further by
Presidential Decree.
(2) A collective investment business entity shall state the following matters
in the report on asset management under paragraph
(1):
1. Assets and liabilities of the collective investment scheme and the base
price of the collective investment securities as of any
of the following
days (hereinafter referred to as the "reference date"):
(a) The date on which three months has elapsed from the
commencement
date of the fiscal term;
(b) The last day of the fiscal term;
(c) The last day of the contract term or the expiry date of the existence
term; and
(d) The date of termination or dissolution;
2. A summary of management progress during the time period from the
immediately preceding reference date (referring to the date of
original
creation or formation of the relevant collective investment scheme,
if there is no immediately preceding reference date
available) to the
pertinent reference date (hereafter referred to as the "pertinent
management period" in this Article) and the
matters concerning profit
and loss during the pertinent management period;
3. The ratio of the assessed value of each type of asset that belongs to
the collective investment property to the total value of
the collective
investment property as of the reference date;
4. The total number of stocks traded, total trading amount, and turnover
rate as prescribed by Presidential Decree during the pertinent
management period; and
5. Other matters prescribed by Presidential Decree.
(3) Matters pertaining to the time and method of furnishing the report
on asset
management under paragraph (1), liability for expenses, etc.
shall be prescribed by Presidential Decree.
Article 89 (Ad Hoc Public Disclosure)
A collective investment business entity of an investment trust or an
undisclosed investment association shall, when any of the following
events
or causes occur, disclose such events or causes to the public in accordance
with the manner prescribed by Presidential Decree
through its Internet
homepage, etc. without delay:
1. Any change in professional investment managers;
2. Decisions on deferment or resumption of redemption and the reason
therefor;
3. Details of non-performing assets, if any, as specified by Presidential
Decree, and the depreciation rate thereof;
4. Details of resolutions of the general meeting of collective investors;
and
5. Other matters prescribed by Presidential Decree as those necessary
for the protection of investors.
Article 90 (Reporting on Collective Investment Property, etc.)
(1) A collective investment business entity (limited to the collective
investment business entities of an investment trust or an undisclosed
investment association; hereafter the same shall apply in
this Article)
shall prepare a business report for each quarter concerning the collective
investment property in accordance with
the manner prescribed by
Presidential Decree, and shall submit it to the Financial Services
Commission and the Association no later
than 20 days after the end of
each quarter.
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
1. The end of the fiscal term of a collective investment scheme;
2. The end of the contract term or existence term of a collective investment
scheme; and
3. Termination or dissolution of a collective investment scheme.
(3) The Financial Services Commission and the Association shall
disclose
the documents submitted in accordance with paragraphs (1) and (2) to
the public through its Internet homepage, etc.
(4) The Association shall compare management performance of each
collective investment property including the details of change
in net asset
value of each collective investment property in accordance with the manner
prescribed by Presidential Decree, and
shall disclose the result thereof
to the public through its Internet homepage, etc.
Article 91 (Inspection, Public Disclosure,
etc. of Account Books and
Documents)
(1) An investor may request a collective investment business entity (limited
to the collective investment business entities of an
investment trust or
an undisclosed investment association, but including the investment trader
and the investment broker who sold
the relevant collective investment
securities; hereafter the same shall apply in this Article), in writing with
the reasons contained
therein, to allow him/her to inspect account books
and documents related to the collective investment property in which he/she
has an interest during business hours or issue a certified copy or abstract
of such account books and documents. In such cases,
the collective
investment business entity shall not reject such request, unless there is
a justifiable ground as prescribed by
Presidential Decree.
(2) Matters pertaining to the extent of the account books and documents
subject to the request for inspection
or issuance of a certified copy or abstract
thereof under paragraph (1) shall be prescribed by Presidential Decree.
(3) An investment
business entity shall publicly disclose its collective
investment agreement through its Internet homepage, etc.
Article 92 (Notice
of Deferment of Redemption, etc.)
(1) A collective investment business entity (limited to collective investment
business entities
of an investment trust or an undisclosed investment
association; hereafter the same shall apply in this Article) shall, when
any
of the following events occur, notify the investment trader or the
investment broker who sold the relevant collective investment securities
thereof without delay:
1. When the redemption of the collective investment securities is deferred
in accordance with Article 237 (1); and
2. When the accounting auditor's audit opinion on the collective investment
scheme under Article 240 (3) is not an unqualified one.
(2) A collective investment business entity shall, when the event under
paragraph (1) terminates, notify the investment trader
or the investment
broker who sold the relevant collective investment securities thereof without
delay.
Article 93 (Special Provisions concerning Management of Derivatives)
(1) When the collective investment property of a collective
investment
scheme, which is allowed to invest its property in derivatives to the extent
that the assessed risks contingent to the
trading of derivatives (referring
to the assessed risks under Article 81 (1) 1 (e); hereafter the same shall
apply in this Article)
exceed the guidelines prescribed by Presidential
Decree, is invested in derivatives, the collective investment business entity
shall publicly disclose the contract amount and other indexes related to
risks, as prescribed by Presidential Decree, through its
Internet homepage,
etc. In such cases, the investment prospectus (referring to the investment
prospectus under Article 123 (1))
of the collective investment scheme shall
contain a statement that the summary of indexes related to contingent
risks and the indexes
related to such risks shall be publicly disclosed.
(2) When the collective investment property of a collective investment
scheme,
which is allowed to invest its property in over-the-counter
derivatives to the extent that the assessed risks contingent to the
trading
of over-the-counter derivatives exceed the guidelines prescribed by
Presidential Decree, is invested in such over-the-counter
derivatives, the
collective investment business entity shall prepare a risk management
scheme for management of over-the-counter
derivatives, and shall report
it the Financial Services Commission subject to a prior confirmation of
the trust business entity
that keeps in custody and manages the collective
investment property.
(2) A collective investment business entity may lend money to a corporation
which carries on a real estate development project (including
real estate
trust business entities and other persons specified further by Presidential
Decree) out of the collective investment
property in accordance with the
manner prescribed by Presidential Decree, notwithstanding Article 83 (4).
(3) A collective investment
business entity shall, whenever it acquires
or disposes of real estate for the collective investment property, prepare
and keep
a due-diligence report, which shall contain the current status
of the real estate, its trading price, and other matters prescribed
by
Presidential Decree.
(4) A collective investment business entity shall, whenever it intends to
invest the collective investment property in a real estate
development
project, prepare a business plan, which shall contain the timetable and
method for promotion, and other matters prescribed
by Presidential Decree,
subject to confirmation from an appraiser under the Public Notice of Values
and Appraisal of Real Estate
Act on whether the business plan is feasible,
and shall publicly disclose it through its Internet homepage, etc.
(5) When real
estate is acquired as part of the collective investment property,
the description of beneficiaries may be omitted in the written
statement
that shall be attached to an application for the registration of trust, in
applying Article 123 of the Registration of
Real Estate Act.
(6) Matters pertaining to the limits of borrowing and lending money under
paragraphs (1) and (2), the restriction
on management of borrowed money,
etc. shall be prescribed by Presidential Decree.
Article 95 (Liquidation)
(1) The Financial Services Commission shall supervise the affairs related
to liquidation of a financial investment business entity
that has engaged
in a collective investment business.
(3) The Financial Services Commission shall, when a financial investment
business entity that has engaged in a collective investment business is
dissolved due to the revocation of its license for its financial
investment
business, appoint a liquidator ex officio.
(4) The Financial Services Commission shall, if a financial investment
business entity that has engaged in a collective investment
business is
dissolved by an order or a judgment of a court or if there is no liquidator,
appoint a liquidator ex officio or upon
request of an interested party.
(5) The Financial Services Commission may, when it appoints a liquidator,
require a financial investment business entity that has
engaged in a
collective investment business to pay remuneration to the liquidator. In
such cases, the Financial Services Commission
shall determine the amount
of remuneration and provide public notice of such.
(6) If a liquidator is significantly unfit for executing such affairs or commits
a serious violation of any Act and subordinate
statute, the Financial Services
Commission may remove the liquidator ex officio or upon request of an
interested party.
Investment Business Entities
Article 96 (Fiduciary Duty of Due Care and Duty of Good Faith)
(1) An investment advisory business entity owes the fiduciary duty
of
due care to investors in providing advice for investment, and a discretionary
investment business entity owes the fiduciary
duty of due care to investors
in managing the discretionary investment property.
(2) An investment advisory business entity and
discretionary investment
business entity shall execute its business affairs in good faith to protect
investors' interests.
Article 97 (Execution of Contract)
(1) An investment advisory business entity or discretionary investment
business entity shall, when it intends to execute an investment
advisory
contract or a discretional investment contract with an ordinary investor,
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS
ACT
deliver written materials containing the following matters in advance to
the ordinary investor:
1. The scope of advising for investment, the method of providing such
service, the scope of discretionary investment, and the financial
investment instruments advisable for investment;
2. General guidelines and procedure established by the investment
advisory business entity or discretionary investment business entity,
in connection with the execution of the investment advisory business
or discretionary investment business;
3. Names and major professional experience of executives and employees
who actually carry on the investment advisory business or
discretionary
investment business;
4. Guidelines and procedure established by the investment advisory
business entity or discretionary investment business entity in
order
to prevent conflict of interests with investors;
5. The fact that the results of investment shall be imputed to each investor
in relation to the investment advisory contract or discretionary
investment contract and matters concerning the liability of each
investor;
6. Matters concerning fees;
7. The method of notifying investors of the evaluation of performance
of investments and the outcomes of investments (limited to
a
discretionary investment contract); and
8. Other matters prescribed by Presidential Decree as those that serve
as important guidelines for investors' judgment when they
determine
whether to sign a contract.
(2) An investment advisory business entity or discretionary investment
business entity shall, whenever it executes an investment
advisory contract
or a discretionary investment contract with an ordinary investor, state
the following matters in the contract
documents delivered to the ordinary
investor in accordance with Article 59 (1). In such cases, the descriptions
therein shall not
differ from those contained in the written materials
delivered in accordance with paragraph (1):
1. Matters under the subparagraphs of paragraph (1);
2. Matters concerning contractual parties;
3. Contract term and contract date;
4. Matters concerning amendment to and termination of the contract;
and
5. The investment trader or investment broker in which the discretionary
investment property is deposited, and names of other financial
institutions and their sales offices.
Article 98 (Prohibition on Unsound Business Conduct)
(1) No invest advisory business entity or discretionary investment business
entity shall commit any of the following acts: Provided, That such acts
may be allowed if there is no possibility of undermining
the protection
of investors and sound order in trading, as prescribed by Presidential Decree:
1. Receiving money, securities, or any other property from an investor
for keeping in custody or deposit;
2. Lending money, securities, or any other property to an investor, or
acting as a broker, making an arrangement, or acting as an
agent of
a third party for lending a third party's money, securities, or any other
property to an investor;
3. Engaging any person other than a professional advisor for investment
recommendation or professional manager to carry on the investment
advisory business or discretionary investment business; and
4. Receiving any consideration in addition to the fees stipulated in the
agreement.
(2) In managing the discretionary investment property, no discretionary
investment business entity shall commit any of the following
acts: Provided,
That such acts may be allowed if there is no possibility of undermining
the protection of investors and sound order
in trading, as prescribed by
Presidential Decree:
1. Buying or selling on its own account, or soliciting a third party to
buy or sell, a financial investment instrument or any other
asset for
investment, after determining to make a purchase or sale, which may
produce a significant impact on the price of the
financial investment
instrument or other asset for investment, while managing the
discretionary investment property, but before
putting the determination
into action;
2. Buying securities underwritten by itself or a related underwriter for
the discretionary investment property;
3. Buying specific securities, etc. (referring to specific securities, etc.
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
under Article 172 (1); hereafter the same shall apply in this
subparagraph), using the discretionary investment property with an
intention to create an artificial market value (referring to the market
value under Article 176 (2) 1) for the specific securities,
etc. of a
corporation for which the corporation itself or its related underwriter
was in charge of the underwriting affairs as
prescribed by Presidential
Decree;
4. Undermining a specific investor's interest to pursue its own or a third
party's interest;
5. Trading the discretionary investment property for another discretionary
investment property, collective investment property, or
trust property
managed by itself;
6. Trading the discretionary investment property for the proprietary
property of the discretionary investment business entity or
its interested
party;
7. Investing the discretionary investment property in securities issued
by the discretionary investment business entity or its interested
party
without the investor's consent;
8. Managing several investors' assets collectively instead of managing
the discretionary investment property separately for each
investor;
9. Obtaining authorization for any of the following acts from an investor:
(a) Designating or changing the investment trader, investment
broker,
or any other financial institution for depositing the discretionary
investment property;
(b) Depositing or withdrawing the discretionary investment property;
and
(c) Exercising voting rights or any other rights in securities that belong
to the discretionary investment property; and
10. Other act specified by Presidential Decree as an act likely to undermine
the protection of investors or sound order in trading.
Article 99 (Delivery of Discretionary Investment Report)
(1) A discretionary investment business entity shall prepare a report
on
the following matters (hereafter referred to as the "discretionary investment
report" in this Article) at least once every three
months, and shall furnish
it to each ordinary investor who signed the discretionary investment
contract:
1. Current status of management of the discretionary investment property;
and
2. Time and outcome of trading in a specific asset out of the discretionary
investment property for the proprietary property of the
discretionary
investment business entity and the balance thereof, if there was such
transaction.
(2) Matters pertaining to the mandatory descriptions of the discretionary
investment report, the delivery method thereof, etc. shall
be prescribed
by Presidential Decree.
Article 100 (Special Provisions concerning Offshore Investment Advisory
Business Entity, etc.)
(1) Articles 22 through 36, 38, 40, 41, 44, 45, 50 through 52, 56, and
61 through 63 shall not apply to foreign investment advisory
business
entities (hereinafter referred to as "offshore investment advisory business
entities") or foreign discretionary investment
business entities (hereinafter
referred to as "offshore discretionary investment business entities") who
engage in the investment
advisory business or discretionary investment
business under the proviso to other portion than the items of Article 18
(2) 1.
(2) An offshore investment advisory business entity or offshore discretionary
investment business entity shall have a person in
charge of liaison, who
shall meet the requirements prescribed by Ordinance of the Prime Minister,
within this country for protection
of investors.
(3) An offshore investment advisory business entity or offshore discretionary
investment business entity shall include in the contents
of an investment
advisory contract or a discretionary investment contract made with a
domestic resident, conditions stating that
the contract shall be governed
by the laws of the Republic of Korea and that the courts of the Republic
of Korea shall have jurisdiction
over lawsuits arising from the contract.
(4) An offshore investment advisory business entity or offshore discretionary
investment
business entity shall prepare the proper guidelines and
procedures with which its executives and employees shall comply in
performing
their duties in order to monitor whether the matters provided
for in Article 98 are complied with, and shall monitor the actual
status
of its operation on a regular basis.
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(5) An offshore investment advisory business entity or offshore discretionary
investment business entity shall prepare a business report in accordance
with the manner prescribed by Presidential Decree, and
shall submit it
to the Financial Services Commission.
(7) An offshore discretionary investment business entity shall keep foreign
currency securities acquired as the discretionary investment
property in
a foreign depository institution specified by Presidential Decree.
(8) Other matters pertaining to the business method,
procedure, etc. for
offshore investment advisory business entities or offshore discretionary
investment business entities shall
be prescribed by Presidential Decree.
Article 101 (Reporting on Quasi-investment Advisory Business)
(1) A person who intends to
engage in a business for providing advice
concerning judgments on investment in financial investment instruments
or the value of
financial investment instruments, as prescribed further
by Presidential Decree, through a periodical published for a multiple number
of unspecified people, by electronic mail, etc. (hereafter referred to as
"quasi-investment advisory business" in this Article)
shall file a report
with the Financial Services Commission in the form determined by the
Financial Services Commission, and provided
by public notice.
(2) A person who engages in a quasi-investment advisory business shall,
if any of the following events occur, report such event
to the Financial
Services Commission within two weeks:
1. When the quasi-investment advisory business is closed down;
2. When its name or domicile is changed; and
3. When its representative is changed.
(3) The Financial Services Commission may, if deemed necessary for
maintaining order in the
quasi-investment advisory industry, protecting
customers, etc., demand that a person who engages in a quasi-investment
advisory
business submit materials concerning the details of its business,
the business method, etc.
(4) Article 98 (1) (excluding subparagraph 3 thereof) shall apply mutatis
mutandis to any person who is obligated to file a report
in accordance
with paragraph (1).
Sub-Section 4 Rules on Business Conduct by Trust
Business Entities
Article 102 (Fiduciary Duty of Due Care and Duty of Good Faith)
(1) A trust business entity owes the fiduciary duty of due care
to beneficiaries
in managing the trust property.
(2) A trust business entity shall execute its business affairs in good faith
to protect beneficiaries' interests.
Article 103 (Restrictions on Trust Property, etc.)
(1) No trust business entity shall accept for trust any property other than
those set forth in the following subparagraphs:
1. Money;
2. Securities:
3. Monetary claims;
4. Chattels;
5. Real property; and
6. Superficies, a right to lease on a deposit basis, a right to lease a real
estate, a claim for registration of transfer of ownership
of a real estate,
and other rights related to real property; and
7. Intangible property rights (including intellectual property rights).
(2) Any trust business entity may be entrusted with two or
more assets
comprehensively among the assets under the subparagraphs of paragraph
(1) by a trustor under a single trust contract.
(3) Matters pertaining to the entrustment of assets under subparagraphs
of paragraph (1), the kinds of trust in connection with
acceptance of a
comprehensive property trust under paragraph (2), compensation for losses,
guarantee for returns, and other terms
and conditions of trust transactions
shall be prescribed by Presidential Decree.
(4) A trust business entity may, when it executes a trust contract for
the purpose of real estate development projects, be entrusted
with an asset
under paragraph (1) 1 for each real estate development project under such
trust contract within the limit of 15/100
of the project cost prescribed
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
by Presidential Decree.
Article 104 (Separation of Trust Property from Proprietary Property)
(1) The proviso to Article 31 (1) of the Trust Business Act
shall not apply
to any trust business entity.
(2) A trust business entity may acquire a trust asset as part of its proprietary
property in accordance with the terms and conditions
of a trust contract
in any of the following cases:
1. Where it is necessary for performing the obligation that it owes to
beneficiaries as a consequence of its trust activities [limited
to cases
where the asset acquired in the course of a management of monetary
trust asset has a market value (referring to the market
value under
Article 176 (2) 1) in the securities exchange, the derivatives market,
or an overseas market similar to any of the
aforesaid markets]; and
2. Where it is unavoidable in order to terminate the trust contract or
to protect beneficiaries for any other reason, as prescribed
by Presidential
Decree (limited to a trust contract under which losses shall be
compensated or returns shall be guaranteed, in
accordance with Article
103 (3)).
Article 105 (Restrictions on Management of Trust Property, etc.)
(1) A trust business entity shall manage the money within the trust
property
in accordance with the following methods:
1. Purchasing securities (limited to the securities specified by Presidential
Decree);
2. Purchasing exchange-traded or over-the-counter derivatives;
3. Depositing the money in a financial institution, as specified by
Presidential Decree;
4. Purchasing monetary claims;
5. Making loans;
6. Purchasing bills;
7. Purchasing commodities;
8. Purchasing intangible property rights;
9. Purchasing or developing real estate; or
10. The methods specified by Presidential Decree, considering the safety,
profitability, etc. of the trust property.
(2) No trust business entity shall borrow money for the proprietary property
of the trust business entity on the trust's account,
except where it is
entrusted with only the assets under Article 103 (1) 5 and 6 or where
there exists any ground prescribed otherwise by Presidential
Decree.
(3) Matters pertaining to the specific extent, conditions, limitations of
management of trust property under paragraphs
(1) and (2), and other
methods of, and restrictions on, management of trust property shall be
prescribed by Presidential Decree.
Article 106 (Management of Surplus Fund)
A trust business entity shall, when it is entrusted with only the assets
under Article 103 (1) 5 and 6, manage the surplus fund
raised in the
course of management of such trust property in accordance with the following
methods:
1. Depositing the money in a financial institution specified by Presidential
Decree;
2. Purchasing national bonds, local government bonds, or special bonds;
3. Purchasing securities for which the payment is guaranteed by the
Government or a financial institution specified by Presidential
Decree;
or
4. Other methods specified by Presidential Decree as those that will not
undermine the safety, profitability, etc. of trust property
under Article
103 (1) 5 and 6.
Article 107 (Duty to Deposit, etc.)
(1) A trust business entity shall deposit money or national bonds equivalent
to or more than 1/10 of its capital as security for
damages that may be
inflicted on beneficiaries by its breach of the duties of a trustee: Provided,
That any trust business entity
specified by Presidential Decree, considering
the size of its capital, etc., shall deposit money or national bonds equivalent
to
or more than 25/1,000 of its capital.
(2) As regards the amount exceeding 3/5 of the deposit amount under
paragraph (1), national bonds may be substituted with local
government
bonds, special bonds, corporate bonds, or stocks.
(3) Beneficiaries shall have the right to have their claims satisfied
preferentially prior to other creditors with the money and securities
deposited by the trust business entity in accordance with
paragraph (1)
or (2).
(4) Matters pertaining to the annual reserve rate of the deposit amount
under paragraph (1), the time, method, etc. of such reserve
shall be
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
prescribed by Presidential Decree.
Article 108 (Prohibition on Unsound Business Conduct)
No trust business entity shall commit any of the following acts: Provided,
That such acts may be allowed if there is no possibility of undermining
the protection of beneficiaries and sound order in trading,
as prescribed
further by Presidential Decree:
1. Buying or selling financial investment instruments or any other asset
for investment on its own account or soliciting a third
party to buy
or sell such instruments or assets after determining to make a purchase
or sale, which may produce a significant impact
on the price of the
financial investment instruments or other assets for investment, but
before putting the decision into action,
while managing the trust
property;
2. Buying securities underwritten by itself or a related underwriter for
the trust property;
3. Buying specific securities, etc. (referring to specific securities, etc.
under Article 172 (1); hereafter the same shall apply
in this
subparagraph), using the trust property with an intention to create
an artificial market value (referring to the market
value under Article
176 (2) 1) for the specific securities, etc. of a corporation for which
it itself or its related underwriter
was in charge of the underwriting
affairs as prescribed by Presidential Decree;
4. Undermining a specific trust property's interest to pursue its own or
a third party's interest;
5. Trading the trust property for any other trust property, collective
investment property, or discretionary investment property
managed
by the trust business entity;
6. Trading the trust property for the proprietary property of the trust
business entity or its interested party;
7. Investing the trust property in securities issued by the trust business
entity or its interested party without consent of beneficiaries;
8. Engaging any person other than professional investment managers to
manage the trust property; and
9. Other acts specified by Presidential Decree as an act likely to undermine
the protection of beneficiaries or sound order in trading.
Article 109 (Trust Contract)
A trust business entity shall, whenever it executes a trust contract with
a trustor, state the following matters in the contract
documents delivered
to the trustor in accordance with Article 59 (1):
1. Name or designation of the trustor, the beneficiaries, and the trust
business entity;
2. Matters concerning designation and change of beneficiaries;
3. Kinds, quantity and value of the trust property;
4. Purpose of trust;
5. Contract term;
6. Details of specific assets, if there are assets specified for acquisition
in the course of management of the trust property;
7. Matters concerning the rate of compensation or guarantee, if losses
shall be compensated for or returns shall be guaranteed;
8. Matters concerning remuneration to which the trust business entity
shall be entitled;
9. Matters concerning termination of the trust contract; and
10. Other matters prescribed by Presidential Decree as necessary for the
protection of beneficiaries or sound order in trading.
Article 110 (Beneficiary Certificate)
(1) A trust business entity may issue beneficiary certificates that represent
the beneficial interest under a monetary trust contract.
(2) A trust business entity shall, whenever it intends to issue beneficiary
certificates under paragraph (1), file a report with
the Financial Services
Commission along with the accompanying documents specified by
Presidential Decree.
(5) Each beneficiary certificate shall contain the following descriptions
and shall bear the printed name, and an affixed seal,
or it shall be signed
by the representative of the trust business entity:
1. Trade name of the trust business entity;
2. Name or designation of beneficiary if it is in registered form;
3. Par value;
4. Details of the management method agreed upon, if any;
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
5. Details of compensation or guarantee, if there is a condition to
compensate for losses or guarantee of returns in accordance with
Article
103 (3) in the contract;
6. Trust contract term;
7. Time period and place for repayment of principal of the trust and
distribution of earnings;
8. Calculation method of remuneration for trust; and
9. Other matters prescribed by Presidential Decree.
(6) In cases where beneficiary certificates have been issued, the beneficial
interest under the relevant trust contract shall be transferred or exercised
along with the beneficiary certificates: Provided,
That the beneficial interest
may be transferred or exercised without the beneficiary certificates if they
are registered beneficiary
certificates.
Article 111 (Repurchasing Beneficiary Certificates)
A trust business entity may repurchase beneficiary certificates for its
proprietary
property in accordance with the manner prescribed by
Presidential Decree. In such cases, Article 29 of the Trust Business Act
shall
not apply.
Article 112 (Voting Rights, etc.)
(1) The rights for stocks acquired for the trust property shall be exercised
by the trust business entity.
(2) In exercising voting rights for stocks that are part of the trust property,
a trust business entity shall exercise the voting
rights so as not to produce
an impact on a resolution made by the number of stocks calculated by
subtracting the number of the
stocks that are part of the trust property
from the stocks held by shareholders who were present at the general
meeting of shareholders
of the corporation that issued the stocks that
are part of the trust property, notwithstanding paragraph (1), in any of
the following
cases: Provided, That the same shall not apply in cases where
the corporation that issued the stocks that are part of the trust
property
is merged, its business is transferred, it acquires any business transferred,
an executive is appointed or dismissed,
or there is any other cause or
event similar to the aforesaid, and if it is obviously foreseeable that such
event or cause will
result in any loss to the trust property:
1. When any of the following persons attempts to include the corporation
that issued the stocks that are part of the trust property,
in a group
of its affiliated companies:
(a) The trust business entity or any person who has an interest in
the business entity as specified by Presidential Decree; and
(b) A person who has de facto control over the trust business entity,
as specified by Presidential Decree;
2. When the corporation that issued the stocks that are part of the trust
property has any of the following relationships with the
trust business
entity:
(a) When it is an affiliated company; and
(b) When it has a relationship under which it exercises de facto control
over the trust business entity, as prescribed further by
Presidential
Decree; and
3. When there is a possibility of undermining the protection of beneficiaries
or appropriate management of the trust property, as
prescribed by
Presidential Decree.
(3) No trust business entity may exercise the voting rights for the stocks
that belong to the trust property, if they fall under
any of the following
subparagraphs:
1. Excess stocks, in cases where such stocks have been acquired in excess
of 15/100 of the total number of the stocks issued by an
identical
corporation; and
2. Stocks of a corporation that issued stocks that belong to the trust
property, if the corporation engages the trust property to
acquire them
under the trust contract with an intention to secure treasury stocks.
(4) No trust business entity shall commit any
act to avoid the application
of the provisons of paragraphs (2) through (3) by exercising the voting
rights one with another interactively
under an agreement with a third
party.
(5) The proviso to other portion than the subparagraphs of paragraph
(2) shall not apply to any trust business entity that belongs
to an enterprise
group subject to a restriction on mutual investment.
(6) The Financial Services Commission may, when any trust
business entity
exercises the voting rights for stocks that belong to the trust property
in violation of paragraphs (2) through
(5), issue an order to dispose of
such stocks within a given period of time not exceeding six months.
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(7) A trust business entity shall, when it exercises voting rights in accordance
with paragraph (2) in relation to a matter concerning a change in business
control, such as merger, transfer of business, or appointment
of an executive,
make a public disclosure of the details of the exercised voting rights in
accordance with the manner prescribed
by Presidential Decree through
its Internet homepage, etc.
Article 113 (Inspection, Public Disclosure, etc. of Account Books and
Documents)
(1) A beneficiary may request a trust business entity, in writing with
the reasons contained therein, to allow him/her to inspect
account books
and documents related to the trust property, in which he/she has an interest,
during business hours, or to issue
a certified copy or abstract of such account
books and documents. In such cases, the trust business entity shall not
reject such
request, unless a justifiable ground exists as prescribed by
Presidential Decree.
(2) Matters pertaining to the extent of the account books and documents
subject to the request for inspection or issuance of a certified
copy or abstract
thereof under paragraph (1) shall be prescribed by Presidential Decree.
Article 114 (Accounting of Trust Property,
etc.)
(1) In accounting the trust property, a trust business entity shall follow
the general accounting principles that the Financial
Services Commission
prescribes and publicly notifies after going through deliberation of the
Securities and Futures Commission.
by Presidential Decree.
(4) A trust business entity shall, when it appoints or replaces the accounting
auditor for the trust property, report such to the
Financial Services
Commission within one week after such appointment or replacement.
(5) The accounting auditor shall conduct on audit as to whether related
Acts and subordinate statutes have been complied with in
auditing the
work related to calculation of the base price of beneficiary certificates
made by the trust business entity and accounting
of the trust property,
and shall notify the auditor of the trust business entity (referring to the
audit committee, if an audit
committee is established therein) of the results
thereof.
(6) The accounting auditor shall comply with the guidelines for accounting
audit under Article 5 of the Act on External Audit of
Stock Companies
in conducting an accounting audit.
(7) The accounting auditor may request the trust business entity to allow
him/her to inspect and copy relevant materials, including
account books
of the trust property, or demand that it submit materials as may be necessary
for the accounting audit. In such cases,
the trust business entity shall
comply with the request or demand without delay.
(8) Article 9 of the Act on External Audit of Stock Companies shall apply
mutatis mutandis to the accounting audit of the trust
property under
paragraph (3).
(9) Matters pertaining to the guidelines for appointment of an accounting
auditor, the guidelines for audit, the authority of the
accounting auditor,
the accounting methods, the submission, publication, etc. of the accounting
audit report shall be prescribed
by Presidential Decree.
Article 115 (Accounting Auditor's Liability for Damages)
(1) An accounting auditor shall be liable for
damages sustained by
beneficiaries, if he/she has caused such damages to beneficiaries who have
relied on any false statement or
indication concerning an important matter
or any omission of an important matter, in the accounting audit report
prepared by him/her
as a result of the accounting audit under Article
114 (3). If the accounting auditor was in the form of an audit team under
Article
3 (1) 3 of the Act on External Audit of Stock Companies, the persons
who participated in the audit of the trust property shall be
jointly liable
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
for such damages.
(2) When an accounting auditor is liable for damages sustained by
beneficiaries and a director or an auditor of the trust business
entity
(referring to a member of the audit committee, if an audit committee is
established therein; hereafter the same shall apply
in this paragraph)
is culpable for such damages, the accounting auditor and the director or
auditor of the trust business entity
shall be jointly liable for such damages.
(3) Article 17 (5) through (7) of the Act on External Audit of Stock Companies
shall
apply mutatis mutandis to the cases under paragraphs (1) and (2).
Article 116 (Merger, etc.)
(1) In cases where trust business entities are merged, the trust business
entity surviving the merger or thereby newly established
shall succeed
to the rights and obligations related to the trust of the extinguished trust
business entity.
(2) In cases where any beneficiary raises an objection to a merger of trust
business entities, Articles 11 and 17 (1) and (3) of
the Trust Act shall
apply to the termination of the mission of the trust business entity, the
appointment of a new trust business
entity, etc.
(3) In cases where a trust business entity continues its business after
changing its purpose of business to engage in another business,
the Financial
Services Commission may order the entity to place its property in deposit
until its obligations related to the trust
are fully performed, or issue any
other order as may be necessary. The same shall apply in cases where
any company other than a
trust business entity carries out business affairs
necessary for termination of the mission of a trust business entity in the
course
of its merger.
Article 95 shall apply mutatis mutandis to the liquidation of a financial
investment business entity that engages in a trust business.
PART ISSUANCE AND CIRCULATION OF
SECURITIES
CHAPTER REGISTRATION STATEMENT
Article 118 (Scope of Application)
No provision of this Chapter shall apply to national bonds, local government
bonds, bonds issued by a corporation established directly pursuant to an
Act specified by Presidential Decree, or other securities
deemed to be those
in which investors are properly protected through sufficient public disclosure
in compliance with other Acts
or in any other way, as specified by Presidential
Decree.
Article 119 (Registration of Public Offering and Sale)
(1) No securities shall be publicly offered or sold, unless and until a
registration statement filed by the issuer in connection with the public
offering or sale of the securities with the Financial Services
Commission
is accepted by the Commission (limited to cases where the total amount
of securities publicly offered or sold, as calculated
in accordance with a
formula prescribed by Presidential Decree, reaches or exceeds the amount
prescribed by Presidential Decree).
(3) An issuer may make a statement or representation of the following
matters (hereinafter referred to as "forecast information")
concerning the
forecast or prospects for the financial status of the issuer (referring to
an investment trust or an undisclosed
investment association, in cases
where the beneficiary certificates of an investment trust or the equity
securities of an undisclosed
investment association are involved; hereafter
the same shall apply in this paragraph), its business performance in the
CAPITAL
MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
future, etc. in the registration statement under paragraph (1) and the
universal shelf
registration statement under paragraph (2) (hereinafter
referred to as "registration statement"). In such cases, such forecast
information shall be stated or indicated in accordance with the method
set forth in Article 125 (2) 1, 2, and 4:
1. Matters concerning forecast and prospects for the issuer's sales
performance, including sales volume, size of income, and other
business
performance;
2. Matters concerning forecast and prospects for the issuer's financial
status, including size of capital and cash flow;
3. Matters concerning the issuer's business performance in connection
with the occurrence of a specific event or the establishment
of a specific
plan, or the targeted level at a certain point in time; and
4. Other matters prescribed by Presidential Decree as those concerning
forecast and prospects for the issuer's future.
(4) If any part of the descriptions required in a registration statement
or in any supplement attached thereto is the same as the
part in the
one already submitted, when filing a registration statement, such
description may be replaced by a written statement
that indicates and
makes reference to the part.
(5) In filing a registration statement, the representative director of the
issuer and the director responsible for filing the registration
(referring
to a person in a similar position, if there is no representative director
or director responsible for filing the registration)
shall review and confirm
the matters prescribed by Presidential Decree, such as the fact that there
is no false statement or representation
of a material fact, nor omission
of a material fact in the descriptions of the registration statement, and
each of them shall sign
the statement.
(6) Matters pertaining to the mandatory descriptions of a registration
statement and its accompanying documents under paragraphs
(1) through
(4) shall be prescribed by Presidential Decree.
Article 120 (Effective Date of Registration Statement, etc.)
(1) The registration of securities under Article 119 (1) and (2) (hereinafter
referred to as "securities registration") shall be effective on the day after
the expiration of the time period prescribed by Ordinance
of the Prime
Minister, considering the type of securities or the characteristics of the
transaction, etc., which shall begin on the day on which the registration
statement is submitted and accepted by the Financial Services
Commission.
(2) The Financial Services Commission shall not refuse to approve a
registration statement, unless it is not prepared in conformity
with the
prescribed form of the registration statement, there is any false description
or representation in the registration statement
concerning a material fact,
or any description or representation of a material fact is omitted.
(3) The effectiveness under paragraph (1) shall not include any effect
of acknowledging that the descriptions of the relevant registration
statement
are true or correct, or the Government's assurance or approval of the
value of the securities.
(4) An issuer of securities shall, when it intends to withdraw its securities
registration, file a withdrawal statement with the
Financial Services
Commission no later than the day before the date set for offering to acquire
or purchase the securities stated
in the relevant registration statement.
Article 121 (Restrictions on Trading)
(1) If there is an offer to acquire or purchase securities before the registration
under Article 120 becomes effective, the issuer,
seller, or its agent of the
securities shall not accept such offer.
(2) If it is required to submit supplements to a universal shelf registration
statement in accordance with Article 119 (2), the
issuer, seller, or its
agent shall not accept an offer to acquire or purchase the securities, unless
and until such supplements
to the universal shelf registration statement
are submitted.
Article 122 (Corrective Registration Statement)
(1) If a registration statement submitted has not been prepared in conformity
with the prescribed form for the statement, there
is any false description
or representation of a material fact in the registration statement, or there
is any omission of a material
fact, the Financial Services Commission may
demand that the person present the reasons therefor and submit a corrective
registration
statement (hereafter referred to as "corrective registration
statement" in this Chapter) with correct contents of the registration
statement no later than the day before the date set for offering to acquire
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
or purchase the securities stated in the registration statement.
(2) If there is a demand under paragraph (1), it shall be deemed, from
the day on which such demand is made, that the relevant registration
statement is not accepted.
(3) A person who filed a registration statement may, if it intends to correct
any description of the registration statement, file
a corrective registration
statement no later than the day before the date set for offering to acquire
or purchase the securities
stated in the registration statement. In such
cases, if the person intends to correct any material fact, as specified by
Presidential
Decree, or if it is necessary to correct any description of the
registration statement for protecting investors, as prescribed by
Presidential Decree, the person is obligated to file a corrective registration
statement.
(4) Notwithstanding paragraph (3), a person who filed a universal shelf
registration statement may file a corrective registration
statement before
the expiration of the scheduled issue period. In such cases, the
predetermined issue amount and the scheduled
issue period for collective
investment securities shall not be corrected, except as provided for in
Presidential Decree.
(5) In cases where a corrective registration statement has been filed in
accordance with paragraph (1), (3), or (4), it shall be
deemed that the
relevant registration statement has been accepted.
Article 123 (Preparation and Disclosure of Investment Prospectus)
(1) When an issuer publicly offers or sells securities in accordance with
Article 119, the issuer shall file an investment prospectus
(hereinafter
referred to as "investment prospectus"), prepared in accordance with the
manner prescribed by Presidential Decree,
with the Financial Services
Commission on the day on which the relevant registration statement becomes
effective (or the day on
which the supplements to a universal shelf
registration statement are filed, in cases where the supplements to the
universal shelf
registration statement shall be filed in accordance with
Article 119 (2)) and keep it at a place specified by Ordinance of the Prime
Minister to make it available to the public for inspection.
(2) No investment prospectus shall contain any description different from
the one described in the relevant registration statement (including any
supplements to a universal shelf registration statement
under Article 119
(2); hereafter the same shall apply in this Chapter) or omit any description
stated therein: Provided, That a
description may be omitted, if it is
necessary to omit the description in consideration of the balance between
confidentiality
in corporate management, etc. and protection of investors,
etc., as prescribed further by Presidential Decree.
(3) An issuer of
the collective investment securities specified by Presidential
Decree shall file an additional investment prospectus separately
from the
one under paragraph (1) in accordance with the following subparagraphs,
with the Financial Services Commission, and shall
keep it at a place specified
by Ordinance of the Prime Minister to make it available to the public
for inspection: Provided, That
such filing, keeping, and disclosure may
be omitted, if offering or selling such collective investment securities is
discontinued:
1. A revised investment prospectus shall be filed at least once after the
investment prospectus under paragraph (1) is filed within
an interval
prescribed by Ordinance of the Prime Minister; and
2. In cases where an amendment to registration is filed in accordance
with Article 182 (8), an investment prospectus in which such
amendment
is reflected shall be filed within five days after a notice of amended
registration is delivered.
Article 124 (Fair Use of Investment Prospectus)
(1) No one shall allow any other person to acquire securities or sell securities
to any other person, unless an investment prospectus
prepared in conformity
with Article 123 is delivered to the person (excluding professional investors
and those specified by Presidential
Decree) who intends to acquire the securities
after the relevant registration statement becomes effective. In such cases,
it shall
be deemed that the investment prospectus is delivered at the time
the following requirements are fully satisfied, if the investment
prospectus
is delivered by means of an electronic document under Article 436:
1. The person to whom the electronic document is addressed (hereinafter
referred to as "addressee of the electronic document") shall
consent to
the delivery of the investment prospectus by means of an electronic
document;
2. The addressee of the electronic document shall designate the kind of an
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
electronic transmission medium and place for receiving the electronic
document;
3. The addressee of the electronic document shall confirm his/her receipt
of the electronic document; and
4. The contents of the electronic document shall be identical with those of
the investment prospectus in writing.
(2) A person who intends to solicit, etc. an offer for public offering or sale
of securities subject to securities registration
or any other transaction thereof
shall do so in any of the following manners:
1. Using the investment prospectus after the registration statement becomes
effective in accordance with Article 120 (1);
2. Using the preliminary investment prospectus (referring to an investment
prospectus with an additional statement that the relevant
registration
statement has not become effective yet; hereinafter the same shall apply)
prepared by the issuer in a manner prescribed
by Presidential Decree,
after the registration statement was accepted pursuant to Article 120
(1), but before the registration
statement has not become effective yet;
and
3. Using a short-form investment prospectus (referring to a document, an
electronic document, or any other similar description or
representation,
by omitting a part of the mandatory descriptions of the investment
prospectus or making an abstract of important
descriptions thereof;
hereinafter the same shall apply) prepared by the issuer in a manner
prescribed by Presidential Decree, through
an advertisement, a notice,
or a leaflet via newspapers, broadcasting, magazines, or an electronic
transmission medium, after the
relevant registration statement is accepted
pursuant to Article 120 (1).
Article 125 (Liabilities for Damages Caused by False Statements, etc.)
(1) The following persons shall be liable for damages inflicted
upon any
person as a result of acquiring securities by including a false description
or representation of any material fact in
a registration statement (including
a corrective registration statement and supplements thereto; hereafter
the same shall apply
in this Article) and an investment prospectus
(including a preliminary investment prospectus and a short-form
investment prospectus;
hereafter the same shall apply in this Article)
or omitting a material fact therefrom: Provided, That such person shall
not be liable if he/she proves that he/she was unable to discover such
inclusion or omission even if he/she exercised reasonable
care or that
the person who acquired the securities knew the fact at the time when
he/she made an offer to acquire them:
1. The registrant of the relevant registration statement and directors
of the issuer at the time of filing the registration (referring
to persons
in a similar position if there is no director, or promoters if the registration
statement was filed before the corporation
was incorporated);
2. A person who falls under any of subparagraphs of Article 401-2 (1)
of the Commercial Act and who instructed or executed the preparation
of the registration statement;
3. A certified public accountant, a certified appraiser, or a specialist
in credit rating, who certified with his/her signature that
the
descriptions of the registration statement or the supplements thereto
are true and correct (including an organization to which
each of them
belongs), as specified further by Presidential Decree;
4. A person who consented to include his/her statement of evaluation,
analysis, or verification in the descriptions of the registration
statement
or the supplements thereto and confirmed such statement therein;
5. A person who executed a contract for underwriting the securities
(referring to a person specified by Presidential Decree, if there
are
two or more persons who signed such underwriting contract);
6. A person who prepared the investment prospectus; and
7. The holder of the securities for sale at the time the registration
statement for sale was filed, if the case involved a sale of
securities.
(2) If the forecast information is described or indicated in accordance
with the following subparagraphs, the persons
listed in the subparagraphs
of paragraph (1) shall not be liable for any damage incurred therefrom:
Provided, That such persons
shall be liable, if the person who acquired
the securities involved proves that he/she did not know that there was
any false description
or representation of a material fact in the forecast
information or any omission of description or representation of a material
fact therein and that there was an intentional or grossly negligent act
on the part of the persons listed in the subparagraphs
of paragraph (1)
in connection with such description or representation:
1. It was clearly stated that the description or representation at issue
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
was
a forecast information;
2. The grounds for supposition or judgement related to the forecast or
prospect were clearly stated;
3. The description or representation at issue was made in good faith
on the basis of a reasonable ground or supposition; and
4. It included a warning clause that the description or representation
at issue may differ from other estimates or actual outcomes.
(3) Paragraph (2) shall not apply in cases where a registration statement
is filed in order for an unlisted corporation to make
an initial public offering
or sale of stocks.
Article 126 (Amount of Damages)
(1) The amount of damages for which a person shall be held liable in accordance
with Article 125 shall be the amount estimated by
subtracting an amount
under any of the following subparagraphs from the amount actually paid by
the claimant for acquiring the
securities at issue:
1. The market price of the securities at the time of closing the proceedings
of the lawsuit filed for the claim of damages in accordance
with Article
125 (referring to an estimate disposal price if there is no market price
available); and
2. The disposal price if the securities are disposed of before the closing of
the proceedings under subparagraph 1.
(2) Notwithstanding paragraph (1), a person who shall be otherwise liable
in accordance with Article 125 shall not be held liable
for partial damages,
if he/she proves that all or part of the damages sustained by the claimant
were not caused by a false description
or representation of any material
fact, or by an omission of a description or representation of such material
fact.
Article 127 (Extinguishment of Claims)
The liability for damages under Article 125 shall be extinguished, if the
claimant fails to exercise the right to make a claim within
one year from
the day on which he/she knew of the fact, or within three years after
the registration statement related to the relevant
securities became
effective.
Article 128 (Post-issuance Report)
An issuer of securities issued under an effective registration statement
shall file a report on the results of issuance of such
securities (hereinafter
referred to as "post-issuance report") with the Financial Services
Commission in accordance with the manner determined by the Financial
Services Commission, and provided by public notice.
Article 129 (Disclosure of Registration Statement and Post-issuance
Report)
The Financial Services Commission shall make the following documents
available to the public for inspection at a certain place for
three years,
and shall disclose them to the public through its Internet homepage, etc.
In such cases, the descriptions specified
by Presidential Decree may be
excluded from such availableness and public disclosure in consideration
of the balance between confidentiality
in corporate management, etc. and
protection of investors, etc.: 1. The registration statement and the corrective registration statement;
2. The investment prospectus; and
3. The post-issuance report.
Article 130 (Public Offering or Sale without Filing Registration Statement)
An issuer who makes a public
offering or sale of securities without filing
a registration statement in accordance with Article 119 (1) shall disclose
the matters
concerning its financial status and take measures prescribed
by Presidential Decree for protecting investors.
Article 131 (Reporting and Inspection)
(1) The Financial Services Commission may, if necessary for protection of
investors, order the registrant of a registration statement,
an issuer, a
seller, an underwriter, or any other related person of securities to submit
a report or materials for reference, or
may engage the Governor of the
Financial Supervisory Service to inspect its account books, documents,
and other materials.
Article 132 (Measures by Financial Services Commission)
The Financial Services Commission may, in any of the following cases,
order
the registrant of a registration statement, an issuer, a seller, or
an underwriter of securities, to disclose to the public relevant
facts, along
with the reasons therefor and make a correction therefor, or suspend or
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS
ACT
prohibit the issuance, public offering or sale, or any other transaction
of such securities, or take any of measures prescribed
by Presidential Decree,
if necessary. In this regard, the Financial Services Commission may
determine and provide public notice
of the procedures and guidelines for
disposition as may be necessary for taking such measures:
1. When the registration statement, the corrective registration statement,
or the post-issuance report has not been filed;
2. When there exists a false description or representation of a material
fact or an omission of a description or representation of
a material
fact in the registration statement, the corrective registration statement,
or the post-issuance report;
3. When the acceptance of an offer to acquire or purchase securities violates
Article 121;
4. When there is a violation of Article 123 or 124 in relation to the investment
prospectus;
5. When there is a violation of Article 124 (2) in connection with the
public offering or sale or any other transaction of securities
under a
preliminary investment prospectus or a short-form investment
prospectus; and
6. When the measures under Article 130 have not been taken.
CHAPTER SYSTEMS RELATED TO
CORPORATE ACQUISITIONS
AND MERGERS
SECTION 1 Public Tender Offer
Article 133 (Subject Matters of Public Tender Offer)
(1) The term "public tender offer" in this Section means to make an offer
to a multiple number of unspecified people to purchase (including an
exchange with other securities; hereafter the same shall apply
in this
Section) voting stocks or any other securities specified by Presidential
Decree (hereinafter referred to as "stocks, etc.")
or to invite them to sell
(including an exchange with other securities; hereafter the same shall
apply in this Section) such stocks,
etc. and purchase them outside the
securities exchange (including a market in a foreign country similar to
it; hereafter the same shall apply in this Section).
(2)
The term "tender offer agent" means a person who handles the affairs
related to safekeeping of stocks, etc. subject to purchasing,
exchanging,
bidding, or otherwise acquiring for consideration (hereafter referred to
as "purchase, etc." in this Section) payment
or delivery of the fund necessary
for public tender offer or the securities for exchanging, and other affairs
related to public
tender offer on behalf of the person who intends to make
a public tender offer.
(3) A person who intends to make a purchase, etc. of stocks, etc. from
a number of persons, equivalent to or more than the number
of those
prescribed by Presidential Decree, outside the securities exchange shall
make a public tender offer, if the aggregate
of the number of stocks, etc.
held (including those owned and similarly possessed, as prescribed further
by Presidential Decree;
hereafter the same shall apply in this Section
and Section 2) by him/herself and his/her specially related persons
(referring to
those who have a special relationship as determined by
Presidential Decree; hereinafter the same shall apply) reaches or exceeds
5/100 of the total number of the stocks, etc. (including cases in which
a person whose aggregate of the number of stocks, etc.
held by the person
and his/her specially related persons reaches or exceeds 5/100 of the total
number of stocks, etc. makes a public
tender offer for purchase, etc. of such
stocks, etc.): Provided, That stocks, etc. may be purchased by any means
other than public
tender offer, in the case of purchasing, etc. prescribed
by Presidential Decree, considering the purpose and form of purchasing,
etc., and the possibility of causing a detriment to other shareholder's
interests.
(4) In applying paragraph (3), purchasing of stocks, etc., by any means
other than competitive trading in the securities exchange,
as prescribed
by Presidential Decree, shall be deemed to have been made outside the
securities exchange.
(5) The number and total number of stocks, etc. under paragraph (3)
shall be the numbers calculated by a formula prescribed by Ordinance
of the Prime Minister.
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(1) A person who intends to make a tender offer shall provide public notice
of the following matters (hereinafter referred to as "public notice of tender
offer") in a manner prescribed by Presidential Decree:
1. The person who intends to make a tender offer;
2. The issuer (referring to the person specified by Presidential Decree,
in the case of securities depositary receipts related to
such stocks,
etc. or any other stocks, etc. specified by Presidential Decree) of the
stocks, etc. subject to the tender offer;
3. The purpose of the tender offer;
4. The class and number of stocks, etc. subject to the tender offer;
5. The terms and conditions of the tender offer, including the period,
price, and payment date of the tender offer; and
6. The details of the purchasing fund and other matters prescribed by
Presidential Decree as necessary for the protection of investors.
(2) A person who has provided public notice of tender offer (hereinafter
referred to as "tender offeror") shall file a statement
with descriptions
of the following matters (hereinafter referred to as "public tender
statement") with the Financial Services Commission
and the Korea
Exchange on the day on which such public notice of tender offer is provided
(hereinafter referred to as "public notice
date of tender offer") in a manner
prescribed by Presidential Decree: Provided, That if the public notice date
of the tender offer
falls on a holiday (including the Workers' Day under
the Designation of Workers' Day Act and Saturdays) or any other day
specified
by the Financial Services Commission and provided by public
notice, it may be filed on the day immediately following such holiday:
1. Matters concerning the tender offeror and his/her specially related
persons;
2. The issuer of the stocks, etc. subject to the tender offer;
3. The purpose of the tender offer;
4. The class and number of the stocks, etc. subject to the tender offer;
5. The terms and conditions of the tender offer, including the period,
price, and payment date of the tender offer;
6. The contents of a contract for purchase, etc. of stocks, etc. without
tender offer after the public notice date of tender offer,
if there is such
contract; and
7. The details of the purchasing fund and other matters prescribed by
Presidential Decree as necessary for the protection of investors.
(3) The tender offer period under paragraphs (1) and (2) shall not exceed
the period set by Presidential Decree.
(4) A tender offeror may describe or indicate the issuer's forecast information
about the stocks, etc. involved in the tender offer
statement. In this regard,
such description or representation of forecast information shall be made
in a manner set forth in Article
125 (2) 1, 2, and 4.
(5) Supplements to the tender offer statement and other matters pertaining
to the tender offer statement shall
be prescribed by Presidential Decree.
Article 135 (Submission of Copied Tender Offer Statement)
A tender offeror shall, upon filing
a tender offer statement, send a copy
thereof to each of the issuers of stocks, etc. subject to the tender offer
without delay.
Article 136 (Corrective Statement and Public Notice thereof, etc.)
(1) The Financial Services Commission may demand the filing of
a corrective
statement with the reasons therefor and the corrected contents of the
relevant tender offer statement therein (hereafter
referred to as "corrective
statement" in this Section) no later than the end of the tender offer period,
if the tender offer statement
filed has not been prepared in conformity
with the prescribed form, or if there is any false description or representation
of a
material fact, or any omitted description or representation of a material
fact, in the tender offer statement.
(3) A tender offeror shall file a corrective statement with the Financial
Services Commission and the Korea Exchange no later than
the expiry
of the tender offer period, if he/she intends to correct terms and conditions
of the tender offer, or any other description
of the tender offer statement,
or if it is necessary to correct the contents of the tender offer statement
for the purpose of protecting
investors, as prescribed by Ordinance of the
Prime Minister: Provided, That a decrease in purchasing price, a reduction
of the
proposed number of stocks, etc. for the tender offer, an extension
of the payment term of the purchasing price (excluding cases
under
paragraph (4) 1), and other terms and conditions specified by Presidential
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS
ACT
Decree may not be modified. 1. The date on which ten days has elapsed since the filing of such corrective
statement, in cases where the day on which the corrective
statement
was filed falls within ten days prior to the expiration of the tender
offer period provided by public notice in accordance
with Article 134
(1) 5; or
2. The date on which the tender offer period expires, in cases where the
day on which the corrective statement was filed does not
fall within
ten days prior to the expiration of the tender offer period provided
by public notice in accordance with Article 134
(1) 5.
(5) A tender offeror shall, upon filing a corrective statement in accordance
with paragraph (1) or (3), disclose the fact
and the corrected contents
(limited to the contents included in the relevant public notice of tender
offer) without delay. In this
regard, the public notice shall be made in
a manner set forth in Article 134 (1).
(6) A tender offeror shall, upon filing a corrective statement concerning
a tender offer statement, forward a copy thereof to the
issuer of the stocks,
etc. subject to the tender offer without delay.
Article 137 (Preparation and Use of Prospectus for Tender Offer)
(1) A tender offeror (including a tender offer agent; hereafter
the same
shall apply in this Article) shall, when he/she intends to purchase securities
through tender offer, prepare a prospectus
for such tender offer (hereinafter
referred to as "prospectus for tender offer") in a manner prescribed by
Presidential Decree,
submit it to the Financial Services Commission and
the Korea Exchange on the public notice date of tender offer, and keep
it at
a place designated by Ordinance of the Prime Minister in order to
make it available to the public for inspection. In this regard,
the proviso
to other portion than the subparagraphs of Article 134 (2) shall apply mutatis
mutandis.
(3) No tender offeror shall purchase stocks, etc., before and unless he/she
delivers a prospectus for tender offer in conformity with paragraph (1)
to a person who intends to sell such stocks, etc. subject
to tender offer.
In this regard, the prospectus for tender offer shall be deemed delivered
when it satisfies all the following
requirements, if it is to be delivered
by means of electronic document under Article 436:
1. The addressee of the electronic document shall consent to receive the
prospectus for tender offer by means of electronic document;
2. The addressee of the electronic document shall designate the kind of
electronic transmission medium and the place for receiving
the electronic
document;
3. The addressee of the electronic document shall confirm his/her receipt
of the electronic document; and
4. The contents of the electronic document shall be identical with those
of the relevant prospectus for tender offer.
Article 138 (Manifestation of Opinion on Tender Offer)
(1) An issuer of stocks, etc. for which a tender offer statement has been
filed may manifest its opinion on the tender offer in a manner prescribed
by Presidential Decree.
(2) An issuer shall, upon manifesting its opinion in accordance with
paragraph (1), submit a document with the opinion contained
therein to
the Financial Services Commission and the Korea Exchange without delay.
Article 139 (Revocation, etc. of Tender Offer)
(1) No tender offeror may revoke his/her tender offer after the tender
offer is publicly notified: Provided, That it may be revoked
on or before
the end of the tender offer period, if there is a counter tender offer (referring
to another tender offer made against
the tender offer during the tender
offer period), if the tender offeror is dead, dissolved, or bankrupt, or if
there is no possibility
of undermining the protection of investors, as
prescribed further by Presidential Decree.
(2) A tender offeror shall, when he/she intends to revoke his/her tender
offer in accordance with paragraph (1), file a revocation
statement with
the Financial Services Commission and the Korea Exchange, and shall
provide a public notice thereof. In this regard,
such public notice shall
be provided in accordance with Article 134 (1).
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(3) A tender offeror shall, upon filing a revocation statement concerning
a tender offer, forward a copy thereof without delay to the issuer of the
stocks, etc. for which the tender offer is to be revoked.
(4) A person who accepted an offer to purchase or made an offer to sell
(hereinafter referred to as "tender") the stocks, etc.
subject to a tender
offer (hereinafter referred to as "tendering shareholder") may revoke his/her
tender at any time during the
tender offer period. In this regard, the tender
offeror may not claim against the tendering shareholder for compensation
for damages
incurred by the revocation of the tender or to pay a penalty.
Article 140 (Prohibition of Purchasing, etc. in Deviation from Tender
Offer)
No tender offeror (including his/her specially related persons and tender
offer agent) shall purchase the relevant stocks,
etc. in deviation from the
tender offer from the public notice date of tender offer until the end of
the tender offer period: Provided,
That such purchase, etc. may be allowed,
if there is no possibility of undermining other shareholder's interests,
as prescribed
by Presidential Decree, even if the relevant stocks, etc. are
purchased in deviation from the tender offer.
Article 141 (Terms, Conditions and Manner of Tender Offer)
(1) A tender offeror shall purchase without delay all the stocks, etc.
tendered according to the purchasing terms, conditions and manners stated
in the tender offer statement on and after the day following
the expiry
date of the tender offer period: Provided, That if any of the following conditions
included in the public notice of
tender offer and the tender offer registration
exist, he/she may decline to purchase all or part of the stocks, etc. tendered
in
accordance with the said conditions:
1. A condition that he/she will not purchase all tendered stocks, etc.,
if the total number of tendered stocks, etc. does not reach
the
contemplated purchasing number of stocks, etc.; and
2. A condition that if the total number of tendered stocks, etc. exceeds
the proposed number of stocks, etc. for the tender offer,
he/she will
buy the stocks pro rata within the limit of the proposed number of
stocks, etc. for tender offer and will not purchase
all or part of the
excess stocks, etc.
(2) The purchasing prices at the time when a tender offeror purchases
stocks, etc. under a tender offer in accordance with paragraph
(1) shall
be uniform.
Article 142 (Tender Offeror's Liability for Damages)
(1) The following persons shall be liable for damages sustained by tendering
shareholders resulting from the inclusion of a false description or
representation of a material fact in a tender offer statement
(including
supplements thereto; hereafter the same shall apply in this Article) and
the public notice thereof, a corrective statement
(including supplements
thereto; hereafter the same shall apply in this Article) and the public
notice thereof, or a prospectus
for tender offer, or omitting a description
or representation of a material fact: Provided, That a person who shall
otherwise be
held liable for damages shall not be liable if he/she proves
that he was unable to know such fact though he/she exercised reasonable
care, or that the tendering shareholder knew the fact at the time when
he/she made the tender:
1. The registrant of the tender offer statement and its corrective statement
(including the registrant's specially related persons,
and directors if
the registrant is a corporation) and his/her agent; and
2. The person who prepared the prospectus for tender offer and his/her
agent.
(2) If forecast information is described or indicated pursuant to the following
subparagraphs, the persons under subparagraphs of
paragraph (1) shall
not be liable for damages caused by such information, notwithstanding
paragraph (1): Provided, That the persons
under subparagraphs of
paragraph (1) shall be liable for such damages, if the tendering shareholders
did not know that there was
a false description or representation of a
material fact in the forecast information, or an omission of a description
or representation
of a material fact at the time they tendered their stocks,
etc., and if they prove that there was an intentional or grossly negligent
act on the part of the persons under the subparagraphs of paragraph (1)
in connection with such description or representation:
1. It was clearly stated that the description or representation at issue
was a forecast information;
2. The grounds for supposition or judgement related to the forecast or
prospect were clearly stated;
3. The description or representation at issue was made in good faith
on the basis of a reasonable ground or supposition; and
4. The forecast information included a warning clause that the description
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
or representation at issue may differ from an estimated or actual
outcome.
(3) The amount of damages for which a person shall be held liable in
accordance with paragraphs (1) and (2) shall be the amount
estimated
by subtracting an amount actually received as the price for the tender
from the market price (referring to an estimated
disposal price if there
is no market price available) of the stocks, etc. at the time of closing
the proceedings of the lawsuit
filed for the claim of such damages.
(4) Notwithstanding paragraph (3), a person who shall be liable in
accordance with Article
paragraphs (1) and (2) shall not be held liable
for partial damages, if he/she proves that all or part of the damages sustained
by the tendering shareholders were not caused by a false description or
representation of any material fact, or by an omission
of a description
or representation of such material fact.
(5) The liability for damages under paragraphs (1) and (2) shall be
extinguished, if a tendering shareholder fails to exercise his/her
right to
claim within one year from the day on which he/she knew of the fact,
or within three years after the public notice of
the relevant tender offer
was provided.
Article 143 (Post Tender Offer Report)
A tender offeror shall file a report on the results of the tender offer
(hereinafter referred to as "post tender offer report")
with the Financial
Services Commission and the Korea Exchange in a manner determined
by the Financial Services Commission, and
provided by public notice.
Article 144 (Disclosure of Statements, etc.)
The Financial Services Commission and the Korea Exchange shall make
the following documents available to the public for inspection
for three
years from the receipt date, and shall also disclose them to the public
through its Internet homepage, etc.: 1. The tender offer statement and the corrective statement thereof;
2. The prospectus for tender offer;
3. Documents under Article 138;
4. The revocation statement under Article 139 (2); and
5. The post tender offer report.
Article 145 (Limitations on Voting Rights, etc.)
A person who violates Article 133 (3) or 134 (1) or (2) in purchasing
stocks, etc., may not exercise voting rights for the stocks
(including the
stocks acquired by exercising any right related to the stocks, etc.) from
the day of such violation, and the Financial
Services Commission may
issue an order to dispose of such stocks, etc. (including the stocks, etc.
acquired by exercising any right
related to the stocks, etc.) within a given
period of time, not exceeding six months.
Article 146 (Inspection and Disposition)
(1) The Financial Services Commission may, if necessary for the protection
of investors, order a tender offeror, his/her specially
related persons or
tender offer agent, and other related persons, to submit a report or materials
for reference, or may engage
the Governor of the Financial Supervisory
Service to inspect their account books, documents, and other materials.
In this regard,
Article 131 (2) shall apply mutatis mutandis.
(2) The Financial Services Commission may, in any of the following cases,
order a tender offeror, his/her specially related person
or tender offer agent
to disclose relevant facts, along with the reasons therefor, to the public
and make a correction therefor,
and may suspend or prohibit purchasing
through the tender offer, or take any of the measures prescribed by
Presidential Decree,
if necessary. In this regard, the Financial Services
Commission may determine, and provide public notice of the procedures
and
guidelines for disposition as may be necessary for taking such measures:
1. When the public notice of tender offer or the public notice under Article
136 (5) has not been provided;
2. When the tender offer statement, corrective statement, or post tender
offer report has not been filed;
3. When there exists a false description or representation of a material
fact, or an omission of a description or representation
of a material
fact in the public notice of tender offer, the public tender statement,
the corrective statement, the public notice
under Article 136 (5), or
the post tender offer report;
4. When a copy of the tender offer statement, the corrective statement,
or the revocation statement has not been forwarded to the
issuer in
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
violation of Article 135, 136 (6) or 139 (3);
5. When the contents differ from the contents of a statement or an omission
of contents in the copy of the statement forwarded in
accordance with
Article 135, 136 (6) or 139 (3);
6. When there is a violation of Article 137 in connection with the prospectus
for tender offer;
7. When the tender offer has been revoked in violation of Article 139
(1) or (2);
8. When purchasing, etc. has been done in deviation from the tender offer
in violation of Article 140;
9. When there is a violation of Article 141 in purchasing through the
tender offer; and
10. When there is a violation of Article 145 in exercising voting rights
or a violation of a dispositive order under the same Act.
SECTION 2 Report on Stocks, etc. Held in Bulk
Article 147 (Report on Stocks, etc. Held in Bulk)
(1) A person who holds stocks, etc. of any stock-listed corporation in bulk
(referring
to a case where the aggregate of the number of stocks, etc.
held by a person and his/her specially related persons reaches or exceeds
5/100 of the total number of stocks, etc.) shall report the status of stocks
in hand, the purpose of holding (referring to whether
he/she has any
intention to exercise an influence on the issuer's business control), the
essential details of the contract related
to the stocks, etc. in hand, and
other matters prescribed by Presidential Decree, to the Financial Services
Commission and the
Korea Exchange in a manner prescribed by Presidential
Decree within five days from the date on which the person becomes a
holder
of the stocks in such a quantity (excluding the days specified by
Presidential Decree; hereafter the same shall apply in this Section),
and
shall also report the details of a change, when there is a change in the
aggregate of the number of stocks, etc. in hand to
the extent of 1/100
of the total number of stocks, etc. or more (excluding cases where there
is no change in the number of stocks,
etc. in hand or other case prescribed
by Presidential Decree), to the Financial Services Commission and the
Korea Exchange within
five days from the date on which such change occurs
in a manner prescribed by Presidential Decree. In this regard, the details,
timing, etc. of the report may be varied by Presidential
Decree, in cases
where the purpose of holding the stocks is not to exercise an influence
over the issuer's business control (referring
to appointment and dismissal
of executives, or suspension of their duties, amendment of the articles
of incorporation in connection
with the organs of the company such as
the board of directors, as prescribed further by Presidential Decree) and
in cases where
a professional investor specified by Presidential Decree
is involved.
The Financial Services Commission and the Korea Exchange shall keep
the reports filed in accordance with 147 (1) and (4) for three
years, and
shall also disclose them through their Internet homepages, etc.
Article 150 (Restrictions, etc. on Exercise of Voting Rights for Stocks,
etc. Held in Violation)
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
(1) A person who fails to make a report (including a corrective report)
in
accordance with Article 147 (1), (3), or (4), or any person who files
a false report of a material fact specified by Presidential
Decree or who
omits a description of a material fact specified by Presidential Decree shall
not exercise voting rights for the
stocks held in violation among the stocks
held in excess of 5/100 of the total number of outstanding voting stocks
during the time
period prescribed by Presidential Decree, and the Financial
Services Commission may issue an order to dispose of the portion held
in violation within a given period of time, not exceeding six months.
(2) A person who has filed a report in accordance with Article 147 (1),
(3), or (4), stating that his/her purpose of holding stocks,
etc. is to exercise
an influence on the issuer's business control, shall not acquire the issuer's
stocks, etc. additionally nor
exercise voting rights for the stocks, etc. held
in hand for the period of time from the date on which there occurred an
event
that triggered the duty to file such report to five days after the
date on which such report was filed.
(3) A person who acquired stocks, etc. additionally in violation of paragraph
(2) shall not exercise voting rights for the portion
additionally acquired,
and the Financial Services Commission may issue an order to dispose of
the portion acquired additionally
with a given period of time, not exceeding
six months.
(2) The Financial Services Commission may, if a report filed in accordance
with Article 147 (1) or (4) has not been prepared in
conformity with the
prescribed report form, or if there is a false description or representation
of a material fact or an ommission
of a description or representation of
a material fact in the report, order a correction of the report showing
the reasons therefor,
and suspend or prohibit transactions or take any
of the measures prescribed by Presidential Decree, if necessary.
SECTION 3 Restriction on Solicitation to Exercise Voting
Right by Proxy
Article 152 (Solicitation to Exercise Voting Rights by Proxy)
(1) A person who intends to solicit a person to exercise voting rights
by
proxy (hereinafter referred to as "proxy solicitor") for listed stocks (including
securities depositary receipts related to
the listed stocks; hereafter the
same shall apply in this Section) shall deliver the proxy form and reference
documents to the
other person (hereinafter referred to as "solicited voting
right holder") for such solicitation in accordance with the manner prescribed
by Presidential Decree.
(2) The term "solicitation to exercise voting rights by proxy" in paragraph
(1) means any of the following acts performed by the
proxy solicitor:
Provided, That such acts shall not be deemed an act of solicitation to
exercise voting rights by proxy in any
case prescribed by Presidential Decree,
considering the number of solicited voting right holders, etc.:
1. Soliciting for the authorization of him/herself or a third party to exercise
voting right by proxy;
2. Demanding the exercise or non-exercise of voting rights, or demanding
the revocation of delegation of voting rights; and
3. Sending a proxy form to a shareholder for the purpose of securing a
voting right, persuading to revoke delegation of a voting
right, etc.
or presenting an opinion in any other way.
(3) In cases where a listed corporation specified by Presidential Decree
among corporations that engage in an industry essential
to the national
economy, such as a national key industry (hereinafter referred to as "public
purpose corporation"), is involved,
only the public purpose corporation
may solicit for the exercise of voting rights by proxy of its stocks.
(4) The proxy form under
paragraph (1) shall be prepared in such a manner
as to allow each solicited voting right holder to express whether he/she
approves
or disapproves each item on the agenda to be raised at the general
meeting of shareholders.
(5) No proxy solicitor may exercise a voting right in contravention of the
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
solicited voting right holder's intention expressed on the proxy form.
(6) Matters pertaining to the descriptions included in the
proxy form,
reference documents, etc. shall be prescribed by Presidential Decree.
Article 153 (Keeping and Inspection of Proxy
Form and Reference
Documents)
A proxy solicitor shall file a proxy form and reference documents with
the Financial Services Commission and the Korea Exchange
at least five
days (excluding any days specified by Presidential Decree) before the day
on which such form and documents are provided
to solicited voting right
holders under Article 152, and shall keep them at a place designated by
Ordinance of the Prime Minister
to make them available to the general
public for inspection.
No proxy solicitor shall include a false description or representation in
relation to a matter that may produce a significant impact
on solicited
voting right holders' judgment regarding delegation of voting rights
(hereafter referred to as "material fact related
to the delegation of voting
rights" in this Section) in the proxy form and reference documents or omit
a description or indication
of a material fact related to the delegation of
voting rights therein.
Article 155 (Manifestation of Opinion)
An issuer of listed stocks subjected to a solicitation to exercise voting
rights by proxy shall, when it manifests its opinion concerning
the
solicitation to exercise voting rights by proxy, submit without delay a written
statement with such contents therein to the
Financial Services Commission
and the Korea Exchange.
(1) If the proxy form or its reference documents have not been prepared
in conformity with the prescribed form, or if there is any
false description
or representation concerning a material fact related to the delegation of
voting rights in the proxy form or
its reference documents, or any omission
of a description or indication of a material fact related to the delegation
of voting
rights therein, the Financial Services Commission may demand
a correction of the proxy form and its reference documents, showing
the
reasons therefor.
the proxy form and its reference documents originally submitted have not
been submitted.
(3) A proxy solicitor may, if he/she intends to correct any description
in the proxy form or reference documents, correct and submit
it no later
than seven days (excluding any days specified by Presidential Decree)
before the opening date of the general meeting
of shareholders to be held
in relation to the solicitation. In this regard, if he/she intends to correct
a material fact specified
by Presidential Decree, or if it is necessary to
correct any description on the proxy form or reference documents, as
prescribed
further by Presidential Decree, he/she is obligated to make
such corrections before submission.
Article 157 (Disclosure of Proxy Forms, etc.)
The Financial Services Commission and the Korea Exchange shall keep
the proxy forms and reference documents under Article 152, the
written
statement under Article 155, and the corrected contents under Article
156 for three years from the filing date, and shall
disclose them to the
general public through their Internet homepages, etc.
Article 158 (Inspection and Disposition)
(1) If necessary for the protection of investors, the Financial Services
Commission may order a proxy solicitor or his/her related
person to submit
a report or materials for reference, or may get the Governor of the Financial
Supervisory Service to inspect account
books, documents, and other
materials. In this regard, Article 131 (2) shall apply mutatis mutandis.
(2) The Financial Services Commission may, in any of the following cases,
provide a public notice of the relevant facts and order
a proxy solicitor
to take corrective measures, after showing the reasons therefor, and may
also suspend or prohibit solicitation
to exercise voting rights by proxy
or take measures prescribed by Presidential Decree, if necessary. In this
regard, the Financial
Services Commission may establish and provide public
notice of the procedures and guidelines for disposition necessary in taking
such measures: 1. When the proxy form and reference documents have not been delivered
to the solicited voting right holder in violation of Article
152 (1);
2. When any person other than a public purpose corporation solicits to
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
exercise
voting rights by proxy in violation of Article 152 (3);
3. When there is a violation of Article 153 or 154 in relation to the proxy
form or reference documents;
4. When there exists a false description or representation of a material
fact related to the delegation of voting rights in the proxy
form or
reference documents submitted in accordance with Article 153 or 156
(1) or (3), or there has been an omission of a description
or representation
of a material fact related to the delegation of voting rights therein;
and
5. When a corrected document has not been submitted in violation of
the latter part of Article 156 (3).
CHAPTER LISTED CORPORATION'S
BUSINESS REPORT, ETC.
Article 159 (Submission of Business Report, etc.)
(1) A stock-listed corporation and other corporations specified by
Presidential
Decree (hereinafter referred to as "corporations obligated to
submit a business report") shall submit their business reports to
the
Financial Services Commission and the Korea Exchange within ninety days
of the closing of the business year: Provided, That
the duty to submit
a business report may be excused if it is impossible in fact or impractical
to submit the report, due to bankruptcy
or any other reason prescribed
by Presidential Decree.
(3) A corporation obligated to submit a business report for the first time
in accordance with paragraph (1) shall submit a business
report for the
immediately preceding business year to the Financial Services Commission
and the Korea Exchange within five days
of the closing of the business
year for which it is obligated to submit a business report under paragraph
(1) (or within the time period for submission of the
business report under
paragraph (1), if the corporation becomes obligated to submit a business
report during the time period):
Provided, That the corporation shall not
be obligated to submit a business report for the immediately preceding
business year,
if it has already disclosed a business report for the immediately
preceding year through its registration statement, etc.
(4) A corporation obligated to submit a business report shall, in preparing
the business report under paragraph (1), follow the
description method
and form determined by the Financial Services Commission, and provided
by public notice, separately for each
type and section of business.
(5) A corporation obligated to submit a business report shall, if it belongs
to an enterprise group obligated to prepare combined
financial statements
for the enterprise group in accordance with Article 1-3 of the Act on External
Audit of Stock Companies, submit
such combined financial statements
for the enterprise group under subparagraph 3 of Article 1-2 of the said
Act to the Financial
Services Commission and the Korea Exchange within
six months of the closing of each business year.
(6) A corporation obligated to submit a business report may describe or
indicate forecast information about the corporation in the
business report.
In this regard, such forecast information shall be described or indicated
in a manner set forth in Article 125
(2) 1, 2, and 4.
(7) In submitting a business report, the representative director of the
corporation and the director responsible
for the affairs related to such
submission shall verify and examine the matters prescribed by Presidential
Decree, including whether
there exists any false description or
representation concerning a material fact in the descriptions of the business
report or any
ommission of a description or representation of a material
fact therein, and shall sign it respectively.
Article 160 (Submission of Half-yearly and Quarterly Reports)
A corporation obligated to submit a business report shall submit a
business
report for six months beginning on the commencement date of the pertinent
business year (hereinafter referred to as "half-yearly
report") and business
CAPITAL MARKET AND FINANCIAL INVESTMENT BUSINESS ACT
reports for three months and nine months beginning on
the commencement
date of the pertinent business year respectively (hereinafter referred to
as "quarterly report") to the Financial
Services Commission and the Korea
Exchange within 45 days of the closing of each term. In this regard, Article
159 (2), (4), (6),
and (7) shall apply mutatis mutandis.
Article 161 (Submission of Report on Material Facts)
(1) A corporation obligated to submit a business report shall, when any
of
the following events occur, submit a report on the details of such event
(hereinafter referred to as "material fact report") to
the Financial Services
Commission by the day immediately following the day on which such event
occurs. In this regard, Article
159 (6) and (7) shall apply mutatis mutandis: