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SECURITIES AND EXCHANGE ACT
SECURITIES AND EXCHANGE ACT
INTRODUCTION
Details of Enactment and Amendment
- Enactment: This Act was enacted on January 15, 1962 as Act No. 972, in order to contribute to development of the national economy
by attaining wide and orderly circulation of securities and by protecting investors through establishing fairness in the issuance,
trade, and other transactions of securities.
- Amendment: This Act was wholly amended on December 22, 1976 and then has arrived at its present form as the result of being amended
twenty-one times. The latest amendment was on July 29, 2005.
Main Contents
- Any person who intends to carry on the securities business shall obtain permission from the Financial Supervisory Commission by
the type of business.
- Any person who intends to carry on the investment advisory business or discretionary investment business shall file a registration
with the Financial Supervisory Commission.
- A corporation that intends to issue the securities shall register itself as an issuer of securities with the Financial Supervisory
Commission, and any person who intends to solicit for subscriptions to, or make public offers of, the securities from or to fifty
or more persons shall submit a registration statement to the Financial Supervisory Commission in advance.
- Any person who intends to become a dominating stockholder of a securities company by acquiring stocks shall obtain the prior approval
of the Financial Supervisory Commission after having sufficient investment capability, etc., and with respect to the stocks acquired
without approval, the Financial Supervisory Commission shall give orders to dispose of them during a fixed period of time.
- A Korea Securities and Futures Exchange which opens and operates securities markets shall be established for a formulation of fair
prices of securities and their smooth transactions.
- Any person who has come to own not less than 5 percent of stocks of a specific company by purchasing them from persons not less
than those prescribed by the Presidential Decree at over-the-counter markets during a period of time prescribed by the Presidential
Decree, shall purchase stocks by means of tender offer.
- A stock-listed corporation listed on the securities markets and a KOSDAQ-listed corporation listed on the KOSDAQ stock market shall
file a report on the situations of their principal business activities with the Financial Supervisory Commission and the Korea Securities
and Futures Exchange, and submit an annual business report, a semiannual report, etc.
- Gaining of unjust profits by an officer or an employee of a stock-listed corporation or a KOSDAQ-listed corporation through exploitation
of insider information or undisclosed information shall be prohibited, and any person who has committed unfair transactions such
as market manipulation shall be punished by imprisonment for not more than 10 years or a fine not exceeding 20 million won. In this
case, where the amount of the profit gained or loss evaded through such unfair transactions as the exploitation of undisclosed information
or market manipulation is not less than five hundred million but less than five billion won, the punishment of imprisonment for a
limited term of not less than three years shall be imposed, and where the amount of such profit gained or such loss evaded is not
less than five billion won, the punishment of imprisonment for life or for a limited term of not less than five years shall be imposed;
and where the punishment of imprisonment is imposed for the above violation, the suspension of qualifications for not more than ten
years and the punishment of a fine equivalent to or less than three times of the profit gained or loss evaded by such violation may
be imposed concurrently.
- A stock-listed corporation and a KOSDAQ-listed corporation shall appoint not less than one quarter or one half of the total members
of the board of directors as outside directors as prescribed by the Presidential Decree and establish an audit committee.
SECURITIES AND EXCHANGE ACT
Act No. 7616, Jul. 29, 2005
CHAPTER I GENERAL PROVISIONS
Article 1 (Purpose)
The purpose of this Act is to contribute to the development of national economy by attaining wide and orderly circulation of securities,
and by protecting investors through fair issuance, purchase, sale or other transactions of securities.
Article 2 (Definitions)
(1)The term securities in this Act shall mean any of the following subparagraphs: <Amended by Act No. 4469, Dec. 31, 1991; Act
No. 5254, Jan. 13, 1997>
1.Government bonds;
2.Municipal bonds;
3.Bonds issued by a corporation which is established under a special Act;
4.Corporate bonds;
5.Certificates of contribution issued by a corporation which is established under a special Act;
6.Stock certificates, or instruments which represent preemptive right;
7.Certificates or instruments issued by a foreign corporation, etc., which have the same nature as those referred to in subparagraphs
1 through 6 of this paragraph;
8.Securities depository receipts which a person designated by the Presidential Decree issues based on underlying certificates or instruments
issued by a foreign corporation, etc.; and
9.Other certificates or instruments designated by the Presidential Decree, which are similar or related to those referred to in subparagraphs
1 through 8 of this paragraph.
(2)Such right as shall be represented by the securities referred to in each subparagraph of paragraph (1) shall be regarded as such
securities, even before certificates of such securities have been issued with respect to such rights.
(3)The term public offering of new securities in this Act shall mean a solicitation of an offer to acquire securities which are
issued newly under the Presidential Decree. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997>
(4)The term public offering of outstanding securities in this Act shall mean an offer to sell outstanding securities or a solicitation
of an offer to buy those under the Presidential Decree. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997>
(5)The term issuer in this Act shall mean a person who has issued or intends to issue any securities: Provided, That in issuing
securities prescribed in paragraph (1) 8, the term issuer shall mean a person who has issued or intends to issue certificates or
instruments which are the basis of such issuance. <Amended by Act No. 5254, Jan. 13, 1997>
(6)The term underwriting in this Act shall mean an act which falls under any of the following subparagraphs:
1.To acquire from an issuer all or a part of securities with a view to distributing, in connection with issuance of the securities;
2.To make a contract to acquire the unsold portion of securities with an issuer in connection with issuance of the securities, in
a case where there is no one else to acquire it; and
3.To make arrangements on behalf of an issuer for a public offering of new or outstanding securities, or to participate directly or
indirectly in a public offering of new or outstanding securities in part, for the purpose of a commission or reward.
(7)The term underwriter in this Act shall mean any person who conducts one of the activities referred to in subparagraphs of paragraph
(6). <Amended by Act No. 5423, Dec. 13, 1997>
(8)The term securities business in this Act shall mean any business which falls under any of the following subparagraphs: <Amended
by Act No. 5254, Jan. 13, 1997; Act No. 6423, Mar. 28, 2001; Act No. 7114, Jan. 29, 2004>
1.To buy and sell securities;
2.To buy and sell securities on consignment;
3.To act as an intermediary or an agent with respect to purchase and sale of securities (excluding what falls under subparagraph 8);
4.To act as an intermediary or agent with respect to an entrustment of sale and purchase transactions to be executed on a securities
market, the KOSDAQ, or a market in foreign countries similar to those;
5.To underwrite securities;
6.To make a public offering of outstanding securities;
7.To arrange for a public offering of new or outstanding securities; and
8.To act as an intermediary or an agent with respect to the sale and purchase of securities and make other sale and purchase of securities
necessary for the relevant intermediary business according to quotations falling under each of the following items for listed stocks
or other KOSDAQ-listed stocks, making use of information communications networks and electronic data-processing equipment, on behalf
of many persons at the same time:
(a)Final quotations of the relevant stocks published by the securities market or the KOSDAQ; and
(b)The single price determined in such manner as prescribed by the Ordinance of the Ministry of Finance and Economy.
(9)The term securities company in this Act means a company which conducts securities business in accordance with this Act.
(10)and (11) Deleted. <by Act No. 6987, Oct. 4, 2003>
(12)The term securities market in this Act shall mean the securities market that is opened by the Korea Stock and Futures Exchange
(hereinafter referred to as the Exchange ) established pursuant to Article 2 (1) of the Korea Stock and Futures Exchange Act. <Amended
by Act No. 7114, Jan. 29, 2004>
(13) The terms listed corporation , unlisted corporation , stock-listed corporation and stock-unlisted corporation in this Act
shall mean: <Amended by Act No. 5736, Feb. 1, 1999>
1.Listed corporation: Issuer of securities listed on the securities market;
2.Unlisted corporation: Issuer of securities not listed on the securities market;
3.Stock-listed corporation: Corporation which has issued stocks listed on the securities market; and
4.Stock-unlisted corporation: Corporation which has issued stocks not listed on the securities market.
(14)The term KOSDAQ in this Act shall mean the KOSDAQ that is opened in accordance with Article 2 (2) of the Korea Stock and Futures
Exchange Act. <Amended by Act No. 7114, Jan. 29, 2004>
(15)The term KOSDAQ-listed corporation in this Act shall mean any corporation that gets its issued securities listed on the KOSDAQ.
<Amended by Act No. 7114, Jan. 29, 2004>
(16)The term foreign corporation, etc. in this Act shall mean a foreign government, foreign local government, foreign public institution,
foreign enterprise established under foreign Acts and subordinate statutes, international finance organization established under
a treaty, or person who is designated by the Ordinance of the Ministry of Finance and Economy. <Newly Inserted by Act No. 5254,
Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998>
(17)The term securities-related institution in this Act shall mean: <Amended by Act No. 5736, Feb. 1, 1999; Act No. 6987, Oct.
4, 2003>
1.An institution which has been established, licensed to do operations or business, or registered under this Act;
2.An asset operation company, trustee company or asset deposit company under the Act on Business of Operating Indirect Investment
and Assets; and
3.Deleted. <by Act No. 6987, Oct. 4, 2003>
(18)The term employee stock ownership association in this Act shall mean an organization created after satisfying requirements prescribed
by the Presidential Decree for the purpose of promoting the welfare of employees and enhancing their economic status through the
management of stocks acquired by such employees of any stock-listed corporation, any KOSDAQ-listed corporation, or any corporation,
registered under Article 3, which intends to list newly its stock certificates. <Newly Inserted by Act No. 5254, Jan. 13, 1997;
Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001; Act No. 7114, Jan. 29, 2004>
(19) The term outside director in this Act shall mean a director who does not engage in the regular business of the relevant company
and is selected and appointed under Article 54-5 or 191-16. <Amended by Act No. 6423, Mar. 28, 2001>
Article 2-2 Deleted.
<by Act No. 5041, Dec. 29, 1995>
CHAPTER II REGISTRATIONOFISSUER OF SECURITIES
Article 3 (Registration of Issuer of Securities)
Any issuer who falls under any of the following subparagraphs shall be registered with the Financial Supervisory Commission so as
to provide for a fair issuance of securities and public disclosure of information as to a business corporation: Provided, That the
same shall not apply to issuers of securities as prescribed in Article 2 (1) 1 through 3, 4 (limited to corporate bonds as prescribed
by the Presidential Decree), and 5, and of such other securities as determined by the Presidential Decree: <Amended by Act No.
3541, Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13,
1997; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001; Act No. 6623,
Jan. 26, 2002; Act No. 7114, Jan. 29, 2004>
1.Deleted; <by Act No. 6623, Jan. 26, 2002>
2.A corporation that is neither KOSDAQ-listed corporation nor listed corporation, which intends to make a public offering of new or
outstanding securities;
3.A corporation that is neither KOSDAQ-listed corporation nor stock-listed corporation, which intends to merge with a stock-listed
corporation or any KOSDAQ-listed corporation;
4.Deleted; <by Act No. 6623, Jan. 26, 2002>
5.A corporation under incorporation which intends to make a public offering of new securities; and
6.A corporation which intends to grant the stock option pursuant to Article 189-4.
Article 4 (Documents for Registration)
An issuer of securities who applies for the registration pursuant to the provisions of Article 3 shall file documents as determined
by the Financial Supervisory Commission such as general situations and property conditions of the company, with the Financial Supervisory
Commission. In case where any significant matters stated in the filed documents are modified, such information shall also be filed
with the Financial Supervisory Commission. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5498, Jan. 8, 1998>
Article 5 (Disclosure of Documents Filed for Registration)
The Financial Supervisory Commission may offer the documents filed pursuant to Article 4 for public inspection. <Amended by Act
No. 5498, Jan. 8, 1998>
Article 6 (Administration of Registered Corporation)
With respect to a corporation which has been registered with the Financial Supervisory Commission pursuant to the provisions of Article
3 (hereinafter referred to as a registered corporation ), the Financial Supervisory Commission may prescribe the criteria for sound
management of the registered corporation such as financing the corporate and improving financial structure, and make necessary recommendations.
<Amended by Act No. 5498, Jan. 8, 1998>
[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]
CHAPTER III REGISTRATION STATEMENT
Article 7 (Scope of Application)
No provisions of this Chapter shall apply to the securities referred to in Article 2 (1) 1 through 3 (including bonds that are deemed
bonds of subparagraph 3 in other Acts and subordinate statutes, but excluding bonds prescribed by the Presidential Decree) and 5
and to such other securities as determined by the Presidential Decree. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 6423,
Mar. 28, 2001>
Article 8 (Registration of Public Offering)
(1)Where the total value of a public offering of new or outstanding securities, which is calculated as prescribed by the Ordinance
of the Ministry of Finance and Economy, is not less than the amount prescribed by the Ordinance of the Ministry of Finance and Economy,
the public offering of such securities may not be made unless the issuer files a registration statement on such securities with the
Financial Supervisory Commission and the registration statement is accepted by the Financial Supervisory Commission: Provided, That
if the issuer determines a period in which he is to issue securities pursuant to the Ordinance of the Ministry of Finance and Economy,
and files en bloc a registration statement of securities to be offered publicly during the period (hereinafter referred to as shelf
registration statement ) with the Financial Supervisory Commission, and the shelf registration statement is accepted by the Financial
Supervisory Commission, he shall not be required to file separately the registration statement on securities to be offered publicly
in such period. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539,
May 25, 1998; Act No. 6423, Mar. 28, 2001>
(2)Matters on the predictions or prospects for the issuer s future financial status or results of operation which fall under any of
the following subparagraphs (hereinafter referred to as predicted information ) may be entered or indicated in a registration statement
under paragraph (1). In this case, the entry or indication of predicted information shall be made through the methods as prescribed
in Article 14 (2) 1, 2 and 4: <Newly Inserted by Act No. 5736, Feb. 1, 1999>
1.Matters on the issuer s results of operation such as size in sales and revenues, or other predictions or prospects for results of
operation;
2.Matters on the predictions or prospects for the issuer s financial status such as the size in capital stock and funds flows;
3.Matters on the issuer s results of operation or changes in financial status, and targeted levels at a certain point due to the occurrence
of a particular event or the establishment of a particular plan; and
4.Other matters on the predictions or prospects for the issuer s future as determined by the Presidential Decree.
(3)In filing a registration under paragraph (1), where the matters to be entered in such registration or accompanying documents are
the same as those which have already been filed, the Commission may allow the issuer to substitute the documents referring to the
same information which has already been filed for the above documents. <Amended by Act No. 5423, Dec. 13, 1997; Act No. 5539,
May 25, 1998; Act No. 6176, Jan. 21, 2000>
(4) In filing a registration under paragraph (1), the representative director of the relevant issuer and any director in charge of
filing the registration (in the case of the absence of the director in charge of filing the registration, referring to any person
who executes the duties of the relevant director; hereafter the same in this Article shall apply) shall put each signature to the
registration statement after confirming and examining matters prescribed by the Presidential Decree, including the fact that the
entries of matters that may affect investment judgment or the value of securities and the entries of other important matters prescribed
by the Presidential Decree and indications in the registration statement are not omitted or falsified from among the entries of the
relevant registration statement. <Newly Inserted by Act No. 7025, Dec. 31, 2003>
(5)Matters necessary for the matters to be entered in the registration statement or accompanying documents referred to in paragraphs
(1) through (3) shall be determined by the Presidential Decree. <Newly Inserted by Act No. 5423, Dec. 13, 1997; Act No. 5539,
May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000>
Article 9 (Effective Date of Registration Statement, etc.)
(1)A statement pursuant to the provisions of Article 8 (1) (hereinafter referred to as a registration statement ) shall come into
force on such date as the time period prescribed by the Ordinance of the Ministry of Finance and Economy elapses after the receipt
thereof by the Financial Supervisory Commission. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No.
5539, May 25, 1998>
(2)The effect taken pursuant to the provisions of paragraph (1) shall not be construed as assuring that the truth or the accuracy
of such matters stated in the registration statement has been recognized on its face value or that the Government has guaranteed
or approved the value of the securities specified in the registration statement. <Amended by Act No. 5498, Jan. 8, 1998>
(3)In case where an issuer of securities intends to withdraw a registration statement of securities, he shall file a registration
statement on withdrawal with the Financial Supervisory Commission before such registration statement takes effect. <Newly Inserted
by Act No. 4469, Dec. 31, 1991; Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 6176,
Jan. 21, 2000>
[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]
Article 10 (Restrictions on Transactions)
(1)In case where there is an offer to acquire or purchase securities, unless a registration statement has taken effect pursuant to
the provisions of Article 9, no issuer or seller of securities specified therein nor his agent shall accept such offer. <Amended
by Act No. 3541, Mar. 29, 1982>
(2)No issuer who filed a shelf registration statement pursuant to the proviso of Article 8 (1), shall accept any offer for acquisition
or purchase of securities, unless he files additional documents of shelf registration statement determined by the Presidential Decree
at each time he makes a public offering of new or outstanding securities. <Newly Inserted by Act No. 4469, Dec. 31, 1991; Act
No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>
Article 11 (Amendment Statement)
(1)If it appears to the Financial Supervisory Commission that a registration statement is incomplete in its form or inadequate in
any material information required to be stated therein, the Financial Supervisory Commission may, with presenting the reasons thereof,
issue an order to file an amendment statement. <Amended by Act No. 5498, Jan. 8, 1998>
(2)In case where an order is issued pursuant to the provisions of paragraph (1), the registration statement concerned shall be construed
not to be received by the Commission after the date on which the order is issued.
(3)A person who has filed a registration statement may file an amendment statement, if there occurs any modification in matters entered
in the registration statement before the day of subscription as determined by the statement commences. In this case, if important
matters as determined by the Ordinance of the Ministry of Finance and Economy are modified, the amendment statement thereof shall
be filed without fail. <Amended by Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 5423, Dec. 13, 1997; Act
No. 5539, May 25, 1998>
(4)A person who filed a shelf registration statement as prescribed in the proviso of Article 8 (1), notwithstanding the provisions
of paragraph (3), may file an amendment statement before the predetermined issue period is terminated. In this case, the predetermined
issue amount and period may not be revised. <Newly Inserted by Act No. 4469, Dec. 31, 1991>
(5)If an amendment statement is filed pursuant to the provisions of paragraph (1), (3) or (4), a registration statement on securities
shall be regarded as filed and received on the day of receipt of the amendment statement. <Amended by Act No. 4469, Dec. 31, 1991>
Article 12 (Preparation and Disclosure of Prospectus)
(1)When an issuer of securities makes a public offering of new or outstanding securities pursuant to Article 8, such issuer shall
prepare a prospectus under the conditions as determined by the Presidential Decree, and make it available for public inspection at
a place determined by the Ordinance of the Ministry of Finance and Economy. <Amended by Act No. 3541, Mar. 29, 1982; Act No. 3945,
Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998;
Act No. 6176, Jan. 21, 2000>
(2)In the prospectus as prescribed in paragraph (1), particulars different from the contents mentioned in the registration statement
(including additional documents of shelf registration statement as prescribed in Article 10 (2); hereafter the same shall apply in
this Chapter) shall not be mentioned, or matters to be entered in the registration statement shall not be omitted: Provided, That
the same shall not apply to the matters as prescribed by the Presidential Decree from among matters which are not appropriate for
being offered for public inspection, considering balance between interests of keeping secret in management of business and protection
of investors. <Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997>
Article 13 (Justifiable Use of Prospectus)
(1)No one shall be permitted to allow any other person to acquire securities the registration of which has taken effect or shall sell
such securities to such other person before a prospectus prepared in accordance with the provisions of Article 12 is, upon a request
by the other person, given to him. In this case, when the prospectus is given in the form of digitally recorded document in accordance
with the provisions of Article 194-2, such prospectus shall be deemed to be given when requirements falling under each of the following
subparagraphs are satisfied:
1.It is required that a person to receive or be transmitted with a digitally recorded document (hereinafter referred to as the recipient
of digitally recorded document ) agrees to the receipt or the transmission of a prospectus in the form of the digitally recorded
document;
2.It is required that the recipient of digitally recorded document designates the kind of an electronically transferable media through
and a place at which he receives or is transmitted with the digitally recorded document;
3.It is required to confirm that the recipient of digitally recorded document has received or has been transmitted with a digitally
recorded document; and
4.The digitally recorded document is required to be identical in content with the prospectus paper.
(2) Where any person intends to induce subscriptions for new or outstanding securities subject to the registration under the provisions
of Article 8 for the purpose of executing a public offering or other transactions thereof, he shall induce such subscriptions in
a manner falling under any of the following subparagraphs:
1.A manner in which the prospectus under the provisions of Article 12 is used after the registration of securities comes into force
under the provisions of Article 9 (1);
2.A manner in which an issuer uses a preliminary prospectus (referring to the prospectus additionally indicating the fact that the
registration has yet to come into force) prepared on the conditions as prescribed by the Presidential Decree before the registration
of securities comes into force after such registration has been accepted under the provisions of Article 9 (1); and
3.A manner in which an issuer uses a simple prospectus (referring to a document, a digitally recorded document and other devices or
indications similar to them that omit part of matters or include extracted matters from among the matters to be entered in the prospectus
statement) prepared on the conditions as prescribed by the Presidential Decree through advertisements making use of newspapers, broadcasts
and magazines, etc., handbooks, publicity leaflets, or electronically transferable media after his registration of securities is
accepted under the provisions of Article 9 (1).
[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]
Article 14 (Liabilities for Compensation Due to False Statements)
(1)If a purchaser of securities sustains damage because a registration statement or a prospectus (including a preliminary prospectus
and a simple prospectus; hereafter in this Article the same shall apply) of securities as prescribed in Article 12 includes false
statements or indications or fails to state or indicate important matters, the following persons shall be liable to compensate for
the damage: Provided, That the same shall not apply where a person who may be liable for compensation proves that he could not know
such false facts or omissions of that prospectus in spite of his exercise of due diligence, or where the purchaser of such securities
has known the fact at the time of his offering to acquire them: <Amended by Act No. 6176, Jan. 21, 2000; Act No. 7025, Dec. 31,
2003>
1.A registrant under the registration statement concerned and directors of the corporation concerned at the time of registration (if
the registration statement is filed before the corporation is incorporated, its promoter);
1-2.A person who falls under each subparagraph of Article 401-2 (1) of the Commercial Act and is in charge of instructing the compilation
of the written report on securities or compiling the written report;
2.A certified public accountant, an appraiser and a credit-rating specialist, etc. who are each prescribed by the Presidential Decree
(including any organization to which each of them belongs) and authenticate and sign the truth and correctness of the entries or
accompanied documents of the relevant written report on securities;
2-2.A person who agrees to enter his opinion on the assessment, analysis and confirmation of the entries of the written report on
securities or the accompanied documents in the relevant written report and confirms details of the entries;
3.A person who has made a contract to underwrite the securities with the issuer;
4.A person who has prepared or delivered the prospectus; and
5.A holder of outstanding securities offered for sale at the time of registration for public offering of outstanding securities.
(2)Where predicted information is entered or indicated through the following methods, any person falling under any subparagraph of
paragraph (1), notwithstanding the provisions of paragraph (1), shall not be liable to compensate for the damage concerned: Provided,
That this shall not apply where the purchaser of securities does not know the fact that there are false entries or indications in
predicted information or that material matters are not entered or indicated at the time of his offering to acquire them, and where
he proves that any person falling under any subparagraph of paragraph (1) was by intention or by gross negligence responsible for
the entry or indication:
1.The entry or indication concerned shall specify that it is predicted information;
2.The basis for the assumption or judgement for predictions or prospects shall be specified;
3.The entry or indication concerned shall be faithfully made on the basis of rational foundations or assumptions; and
4.A warning phrase that predicted values may differ from actual results shall be specified in the entry or indication concerned.
(3)The provisions of paragraph (2) shall not apply where a corporation other than stock-listed corporations and KOSDAQ-listed corporations
submits a registration statement of securities for the first time for the public offering of new or outstanding securities. <Amended
by Act No. 7114, Jan. 29, 2004>
[This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]
Article 15 (Amount of Liability to be Compensated)
(1)The amount to be compensated for damage pursuant to the provisions of Article 14 shall be the difference between the amount actually
paid by the claimant for the acquisition of securities and the amount which falls under any of the following subparagraphs:
1.The market price of securities at the time of the closing of oral proceedings, if a lawsuit is entered against the securities concerned
(in case where no market price is available, an estimated price at which the securities would be disposed of); and
2.The price at which the securities were disposed of, in case where such disposition of securities has been made prior to the time
of the closing of oral proceedings referred to in subparagraph 1 of this paragraph.
(2)Notwithstanding the provisions of paragraph (1), where a person liable for compensation for damage pursuant to the provisions of
Article 14 proves that a claimant has sustained all or part of the damage without regard to any false statement or indication or
any omission of the entry or indication of material matters, he is not bound to compensate for damage of such part. <Newly Inserted
by Act No. 5254, Jan. 13, 1997>
Article 16 (Extinction of Claims)
The compensation liabilities for damage pursuant to the provisions of Article 14 shall be extinguished, unless the claimant exercises
such right within one year from the date on which he discovers the fact or within three years from the time when a registration statement
has taken effect.
Article 17 (After-Report)
An issuer of securities specified in a registration statement then in effect shall file with the Financial Supervisory Commission
a report on results of public offering of new or outstanding securities under the conditions as determined by the Financial Supervisory
Commission. <Amended by Act No. 3541, Mar. 29, 1982; Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May
25, 1998; Act No. 6176, Jan. 21, 2000>
Article 18 (Disclosure of Registration Statement and After-Report)
A registration statement of securities and an after-report pursuant to Article 17 (hereinafter referred to as an after-report ) shall
be kept in the Financial Supervisory Commission and made available for public inspection under the conditions as prescribed by the
Presidential Decree: Provided, That the same shall not apply to the matters as prescribed by the Presidential Decree from among matters
which are not appropriate for being offered for public inspection, considering balance between interests of keeping secret in management
of business and protection of investors. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>
Article 18-2 (Public Offering without Filing Registration Statement)
Any issuer who makes a public offering of new or outstanding securities without filing a registration statement in accordance with
the provisions of Article 9 (1) shall disclose matters concerning his financial standing and take measures prescribed by the Presidential
Decree to protect investors.
[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]
Article 19 (Report and Investigation)
(1)The Financial Supervisory Commission may, if necessary in the public interest or for protection of investors, order a registrant
under the registration statement, an issuer of securities, an underwriter thereof, and any other related persons to file a report
or materials for reference, or have the Governor of the Financial Supervisory Service established under the Act on the Establishment,
etc. of Financial Supervisory Organization (hereinafter referred to as the Financial Supervisory Service ) investigate account books,
documents and any other related materials of such registrant, issuer, underwriter and other related persons. <Amended by Act No.
5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>
(2)A person who investigates pursuant to the provisions of paragraph (1) shall carry along a certificate which proves his authority
to investigate and shall present such certificate to persons concerned. <Amended by Act No. 5254, Jan. 13, 1997>
Article 20 (Disposition Right of Financial Supervisory Commission)
In the case falling under any of the following subparagraphs, the Financial Supervisory Commission may, after showing reason therefor,
make a public notice of such fact, and order the issuer of securities concerned to make an amendment. If necessary, the Financial
Supervisory Commission may suspend or prohibit the issuance of such securities, public offering of new or outstanding securities
or other transactions with respect thereto or may take measures as prescribed by the Presidential Decree. In this case, the Financial
Supervisory Commission may determine procedures and criteria necessary for taking measures against the issuer of securities: <Amended
by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001>
1.In case that a registration statement or an after-report is not submitted or such statement or such report contains false statements
or omits important matters;
2.In case that a prospectus does not comply with the provisions of Article 12 or 13;
3. In case that a violation of the provisions of Article 13 (2) is committed with respect to the public offering of new or outstanding
securities and other transactions of securities through a preliminary prospectus or a simple prospectus; and
4. In case that a violation of the provisions of Article 18-2 is committed.
CHAPTER IV TENDEROFFERFORSECURITIES
Article 21 (Applicable Object of Tender Offer)
(1)A person who intends to acquire voting stocks or any other securities as prescribed by the Presidential Decree (hereinafter referred
to as stocks, etc. ) through purchase, exchange, bid or any other acquisition by transfer (hereafter referred to as purchase, etc.
in this Chapter) from persons of not less than the number as prescribed by the Presidential Decree outside the securities market
or the KOSDAQ during the period as prescribed by the Presidential Decree shall acquire the stocks, etc. through tender offer, in
case where the total number of the stocks, etc. held (including the cases prescribed by the Presidential Decree as owning or its
equivalent; hereafter the same shall apply in this Chapter and Article 200-2) by the person himself and specially related persons
(this means the specially related person as prescribed by the Presidential Decree; hereinafter the same shall apply) after the purchase,
etc. is 5/100 or more of the total number of the stocks, etc. (including the case where the person himself and specially related
persons who have acquired 5/100 or more of the total number of the stocks, etc. make purchase, etc. of the stocks, etc.): Provided,
That the same shall not apply with respect to purchase, etc. as prescribed by the Presidential Decree, considering the type thereof
and other circumstances. <Amended by Act No. 7114, Jan. 29, 2004>
(2)Deleted. <by Act No. 5521, Feb. 24, 1998>
(3)In this Chapter, the term tender offer means making an offer to buy stocks, etc. (including exchange with other securities; hereafter
the same shall apply in this Chapter) or a solicitation of an offer to sell stocks, etc. (including exchange with other securities;
hereafter the same shall apply in this Chapter) against many and unspecified persons, and buying them outside the securities market
and the KOSDAQ. <Amended by Act No. 7114, Jan. 29, 2004>
(4)Number of stocks, etc. and total number of stocks, etc. pursuant to the provisions of paragraph (1) shall be the number calculated
by the method as prescribed by the Ordinance of the Ministry of Finance and Economy. <Amended by Act No. 5521, Feb. 24, 1998;
Act No. 5539, May 25, 1998>
(5) The term person handling tender offer affairs means a person in charge of keeping in custody stocks, etc. to be purchased, paying
funds necessary for making tender offer or offering securities subject to a swap and handling administrative affairs related to tender
offer on behalf of any person who intends to make tender offer. In this case, any person qualified to act as such agent shall be
limited to a securities company. <Newly Inserted by Act No. 6423, Mar. 28, 2001>
[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]
Article 21-2 (Publication of Tender Offer and Submission of Tender Offer Statement)
(1) Any person who intends to make tender offer shall publish matters falling under each of the following subparagraphs (hereinafter
referred to as publication of tender offer ) under the conditions as prescribed by the Presidential Decree:
1.A person who intends to make tender offer;
2.A person who issues stocks, etc. subject to tender offer;
3.The objective of tender offer;
4.Kinds and numbers of stocks, etc. subject to tender offer;
5.The period of tender offer and tender offer conditions such as prices, settlement date, etc.; and
6.Details of purchase funds and other matters prescribed by the Presidential Decree.
(2) Any person who has published his tender offer (hereinafter referred to as a tender offerer ) shall file a statement containing
matters falling under each of the following subparagraphs with the Financial Supervisory Commission (hereinafter referred to as a
tender offer statement ) on the date on which his tender offer is published (hereinafter referred to as the publication date of
tender offer ) under the conditions as prescribed by the Presidential Decree: Provided, That in the event that the publication date
of tender offer falls under any holiday or any other day prescribed by the Financial Supervisory Commission, the tender offer statement
may be submitted on the day next thereto:
1.Matters concerning tender offerer and specially related persons;
2.Issuers of stocks, etc. subject to tender offer;
3.Objective of tender offer;
4.Kinds and numbers of stocks, etc. subject to tender offer;
5.Period of tender offer and tender offer conditions such as prices and settlement date, etc.;
6.In the event a contract exists that aims for the purchase of stocks, etc. without depending on tender offer after the publication
date of tender offer, details of such contract; and
7.Details of purchase funds and other matters prescribed by the Presidential decree.
(3) The period of tender offer referred to in paragraphs (1) and (2) shall be set within the scope of the period prescribed by the
Presidential Decree.
(4) The provisions of Article 8 (2) shall apply mutatis mutandis to the tender offer statement.
[This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]
Article 21-3 (Restrictions on Voting Rights, etc.)
In case where a person has made purchase, etc. of stocks, etc. in violation of the provisions of Article 21 (1) or 21-2 (1) and (2),
he may not exercise the voting rights on the stocks concerned (including stocks which are acquired through exercise of rights related
to the stocks, etc. concerned) during the period as prescribed by the Presidential Decree, and the Financial Supervisory Commission
may order to dispose of the stocks, etc. concerned (including stocks which are acquired through exercise of rights related to the
stocks, etc. concerned). <Amended by Act No. 5498, Jan. 8, 1988; Act No. 5521, Feb. 24, 1998; Act No. 6423, Mar. 28, 2001>
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
Article 22 (Submission of Copy of Tender Offer Statement)
Any tender offerer shall, when he files a tender offer statement, promptly send a copy thereof to each of issuers of stocks, etc.
subject to his tender offer (referring to persons prescribed by the Presidential Decree in case of stocks, etc. prescribed by the
Presidential Decree; hereafter in this Chapter the same shall apply) and also submit such copy to the Exchange. <Amended by Act
No. 7114, Jan. 29, 2004>
[This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]
Article 23 (Restrictions on Purchases by Tender Offerer)
(1) Deleted. <by Act No. 7339, Jan. 17, 2005>
(2)Except for the case as prescribed by the Presidential Decree, no tender offerer (including any specially related person and any
person handling tender offer affairs) shall, during the period from the date on which the tender offer statement is submitted to
the Financial Supervisory Commission pursuant to Article 21-2 (2) to the date on which period of tender offer expires, make any purchase
of securities specified in the said statement by other means than a tender offer. <Amended by Act No. 7339, Jan. 17, 2005>
(3)and (4) Deleted. <by Act No. 7339, Jan. 17, 2005>
[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]
Article 23-2 (Amendment Statement and Publication, etc.)
(1)Any tender offerer shall, in case where he intends to modify the terms for purchase, file an amendment statement by the date on
which period of tender offer expires: Provided, That reduction of purchase price, decrease of number of stocks, etc. which are intended
to be purchased, extension of payment period of purchase amount and other purchase conditions as prescribed by the Presidential Decree
shall not be modified. <Amended by Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>
(2) Any tender offerer shall, when he files an amendment statement under paragraph (1), promptly publish the fact and details of what
is amended (limited to matters contained in the publication of tender offer). In this case, the method of making such publication
shall be governed by the provisions of Article 21-2 (1). <Newly Inserted by Act No. 6423, Mar. 28, 2001>
(3) In case where any tender offerer files a tender offer amendment statement referred to in paragraph (1) and files an amendment
statement with the Financial Supervisory Commission on orders of the Financial Supervisory Commission, the date on which the period
of tender offer expires shall be as follows: <Newly Inserted by Act No. 7339, Jan. 17, 2005>
1.In case where the date on which the relevant amendment statement is filed is within 10 days prior to the date on which the period
of tender offer that is reported pursuant to Article 21-2 (1) 5 expires, the date on which 10 days lapse from the date on which the
amendment statement is filed; and
2.In case where the date on which the relevant amendment statement is filed is not within 10 days prior to the date on which the period
of tender offer that is reported pursuant to Article 21-2 (1) 5 expires, the date on which the period of tender offer expires.
(4)The provisions of Articles 11 (1) and (2) and 22 shall apply mutatis mutandis to any tender offer statement and any amendment statement.
<Amended by Act No. 6423, Mar. 28, 2001; Act No. 7339, Jan. 17, 2005>
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
Article 24 (Preparation and Use of Prospectus for Tender Offer)
(1)Every tender offerer (including every person handling tender offer affairs) shall, when he intends to purchase securities through
tender offer, prepare a prospectus for such tender offer (hereinafter referred to as prospectus for tender offer ) under the conditions
as prescribed by the Ordinance of the Ministry of Finance and Economy, and keep it at the place as prescribed by the Ordinance of
the Ministry of Finance and Economy in order to make it available for public inspection. <Amended by Act No. 5254, Jan. 13, 1997;
Act No. 5539, May 25, 1998; Act No. 7339, Jan. 17, 2005>
(2)The provisions of Article 13 shall apply mutatis mutandis to the use of a prospectus for tender offer.
Article 24-2 (Withdrawal of Tender Offer)
(1)A tender offerer may not withdraw a tender offer after the date on which he files a tender offer statement pursuant to Article
21-2 (2): Provided, That in such case as prescribed by the Presidential Decree, he may withdraw a tender offer by the last day of
the tender offer period. <Amended by Act No. 7339, Jan. 17, 2005>
(2)In case where a tender offerer intends to withdraw a tender offer pursuant to paragraph (1), a withdrawal statement shall be filed
with the Financial Supervisory Commission and the Exchange, and the contents thereof shall be announced publicly. <Amended by
Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000; Act No. 7114, Jan.
29, 2004>
(3)A person who accepts an offer to buy stocks, etc. subject to tender offer or gives his offer (hereinafter referred to as tender
) to sell them (hereinafter referred to as a tendering stockholder ), may cancel such tender at any time during tender offer period.
In this case, a tender offerer may claim damages or penalty due to cancellation of tender by a tendering stockholder.
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
Article 25 (Presentation of Opinion on Tender Offer)
An issuer of stocks, etc. for which a tender offer statement has been filed, may present his opinion on the tender offer concerned
under the conditions as prescribed by the Presidential Decree. In this case, the issuer shall file a written statement describing
the contents of such opinion without delay with the Financial Supervisory Commission and the Exchange as the case may be. <Amended
by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 7114, Jan. 29, 2004>
Article 25-2 (Conditions and Manners of Tender Offer)
(1)A tender offerer shall purchase without delay all the stocks, etc. tendered according to the purchase conditions and manners stated
in the tender offer statement on and after the day following the expiration date of tender offer period: Provided, That in case where
the Presidential Decree prescribes, the same shall not apply.
(2)Price of tender offer shall be uniform. <Amended by Act No. 5521, Feb. 24, 1998>
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
Article 25-3 (Liability for Damages of Tender Offerer)
(1)The provisions of Article 14 (1) shall apply mutatis mutandis to damages which a person falling under any of the following subparagraphs
causes to tendering stockholder in connection with a tender offer statement and public notice thereof, an amendment statement and
public notice thereof pursuant to Article 23-2, and a prospectus for tender offer: <Amended by Act No. 5736, Feb. 1, 1999>
1.A registrant stated in a tender offer statement and an amendment statement thereof (including specially related persons of the registrant,
and in case where the registrant is a juristic person, including directors of the juristic person) and his agent; and
2.A person who prepares a prospectus for tender offer and his agent.
(2)The provisions of Article 16 shall apply mutatis mutandis to liability for damages pursuant to the provisions of paragraph (1).
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
Article 26 (Public Notice of Statements, etc.)
The Financial Supervisory Commission and the Exchange shall keep the tender offer statement, amendment statement pursuant to Article
23-2, withdrawal statement pursuant to Article 24-2 (2), and written statement pursuant to Article 25 for 3 years from the date on
which such statements have been received and shall make them available for public inspection. <Amended by Act No. 5498, Jan. 8,
1998; Act No. 6423, Mar. 28, 2001; Act No. 7114, Jan. 29, 2004>
[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]
Article 27 (Request for Materials to Tender Offerer)
The Financial Supervisory Commission may, if necessary in the public interest or for the protection of investors, order any tender
offerer, any person related to the tender offerer, and any issuer of the securities concerned to file a report or material for reference.
<Amended by Act No. 5498, Jan. 8, 1998>
Article 27-2 (Provisions to be Applied Mutatis Mutandis)
The provisions of Articles 17, 19 and 20 shall apply mutatis mutandis to the tender offer. In this case, the Financial Supervisory
Commission as referred to in Article 17 shall be deemed to be the Financial Supervisory Commission and the Exchange . <Amended
by Act No. 5736, Feb. 1, 1999; Act No. 7114, Jan. 29, 2004>
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
CHAPTER V SECURITIES BUSINESS
SECTION 1 License
Article 28 (License)
(1)A person who may be engaged in the securities business shall be a stock company which has obtained a license from the Financial
Supervisory Commission by the type of business. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5982,
May 24, 1999>
(2)The type of business referred to in paragraph (1) shall be as follows: <Amended by Act No. 6423, Mar. 28, 2001>
1.The business referred to in Article 2 (8) 1;
2.The business referred to in Article 2 (8) 2 through 4;
3.The business referred to in Article 2 (8) 5 through 7; and
4. The business referred to in Article 2 (8) 8.
(3)The capital of a securities company shall not be less than one billion won and an amount prescribed by the Presidential Decree
according to the scope of its business. <Amended by Act No. 6176, Jan. 21, 2000>
(4)Deleted. <by Act No. 5254, Jan. 13, 1997>
(5)The Financial Supervisory Commission may set conditions to a license referred to in paragraph (1). <Newly Inserted by Act No.
5736, Feb. 1, 1999; Act No. 5982, May 24, 1999>
(6)Deleted. <by Act No. 5254, Jan. 13, 1997>
(7)Deleted. <by Act No. 5736, Feb. 1, 1999>
Article 28-2 (Securities Business by Foreign Securities Company)
(1)If a foreign securities company (this refers to a person engaged in securities business in a foreign country pursuant to the relevant
Acts and subordinate statutes of such country; hereinafter the same shall apply) intends to establish a branch office or any other
business office in order to operate the securities business in the Republic of Korea, it shall obtain a license from the Financial
Supervisory Commission by the type of business in accordance with the provisions of each subparagraph of Article 28 (2). <Amended
by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999; Act No. 6176, Jan. 21, 2000>
(2) The business fund for any branch office or any other business office under the provisions of paragraph (1) shall not be less than
one billion won and an amount prescribed by the Presidential Decree according to the scope of its business. <Newly Inserted by
Act No. 6176, Jan. 21, 2000>
(3)A foreign securities company which has not obtained the license for establishment of branch office, etc. pursuant to paragraph
(1) shall not conduct the securities business with domestic residents. <Newly Inserted by Act No. 5254, Jan. 13, 1997>
(4)The branch office or any other business office licensed pursuant to paragraph (1) shall be regarded as a securities company organized
under this Act, except for the provisions of Article 28 (3). <Amended by Act No. 5254, Jan. 13, 1997>
(5)If a domestic branch office or other business office of a foreign securities company goes into liquidation or becomes bankrupt,
its domestic holding assets shall be appropriated preferentially for a performance of obligation to a person who is the other party
of securities transaction and has a domicile or residence in Korea at the time of the transaction. In this case, the scope of its
domestic holding assets shall be determined by the Presidential Decree. <Newly Inserted by Act No. 4469, Dec. 31, 1991; Act No.
5254, Jan. 13, 1997>
(6)If it is deemed difficult to conduct the securities business because a domestic branch office or other business office of a foreign
securities company has violated this Act, an order or disposition made under this Act, or foreign Acts and subordinate statutes,
the Financial Supervisory Commission may revoke the business license, suspend business, or take other necessary measures for the
purpose of protecting the public interest or investors. The same shall apply in case where it is deemed difficult to conduct securities
business of a domestic branch office or other business office of the foreign securities company by reason that the foreign securities
company has violated foreign Acts and subordinate statutes, etc. <Newly Inserted by Act No. 4469, Dec. 31, 1991; Act No. 5254,
Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999>
(7)The Financial Supervisory Commission may set conditions to the license referred to in paragraph (1). <Newly Inserted by Act
No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999>
(8)Necessary matters relating to the operation of the securities company by a foreign securities company shall be prescribed by the
Presidential Decree.
[This Article Newly Inserted by Act No. 3541, Mar. 29, 1982]
Article 29 (Provisions Applicable to Persons Who Operate Securities Business as Side Business)
(1)Deleted. <by Act No. 5736, Feb. 1, 1999>
(2)This Chapter shall apply within the scope of licensed business to a person who, upon license of securities business pursuant to
this Chapter, operates securities business as a side business: Provided, That the provisions of Articles 28 (3), 33, 47, and 62 shall
not apply. <Amended by Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997; Act No. 5736, Feb. 1, 1999>
Article 30 (Application for License)
(1) Any person who intends to obtain a license pursuant to the provisions of Articles 28 (1) and 28-2 (1) shall file an application
with the Financial Supervisory Commission under the conditions as prescribed by the Presidential Decree.
(2) The Financial Supervisory Commission may, where such application it receives under the provisions of paragraph (1) is found to
be insufficient, ask the applicant to supplement such application. In this case, the period required to supplement such application
shall not be added to the period under the provisions of Article 31 (1).
[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]
Article 31 (Procedure of License)
(1)When the Financial Supervisory Commission has received the written application pursuant to the provisions of Article 30, it shall
make a decision either granting or denying a license and shall notify the applicant of the decision in writing without delay. <Amended
by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999>
(2)Deleted. <by Act No. 3945, Nov. 28, 1987>
Article 32 (Requirements for License)
(1)Any person who intends to obtain a license for his securities business in accordance with the provisions of Article 28 (1) shall
satisfy requirements falling under each of the following subparagraphs:
1.He is required to satisfy requirements under the provisions of Article 28 (3);
2.He is required to be able to protect investors and have manpower, computer installations and other physical facilities enough to
carry out securities business he intends to run;
3.He is required to have a proper and sound business plan; and
4.Any such major investor as prescribed by the Presidential Decree (in case that an investor is a corporation, this includes any person
who virtually exercises his influence over important matters concerning the management of such corporation and is prescribed by the
Presidential Decree shall be included) is required to have a sufficient investment capability, a sound financial standing and social
credit.
(2) Any foreign stockbroker who intends to obtain a license for the establishment of his branch office or other business office pursuant
to the provisions of Article 28-2 (1) shall meet requirements falling under each of the following subparagraphs:
1.He has to satisfy requirements under the provisions of Article 28-2 (2);
2.He has to have property, financial standing, and business capability enough to carry out securities business in the country and
has to have a full and high international credit rating; and
3.He has to meet requirements under paragraph (1) 2 and 3.
(3) Necessary matters concerning detailed requirements for a license under paragraphs (1) and (2) shall be prescribed by the Presidential
Decree.
[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]
Article 32-2 (Public Notice of License)
The Financial Supervisory Commission shall, when it grants a license in accordance with the provisions of Articles 28 (1) and 28-2
(1), promptly publish the grant of such license in the Official Gazette and make the grant of such license known to the public through
computer communications, etc.
[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]
Article 32-3 (Approval etc. of Alteration of Major Stockholders)
(1) A person who intends to become a major stockholder by acquiring the stocks of the securities company shall equip himself with
the requirements prescribed by the Presidential Decree for a sound management, and obtain in advance an approval of the Financial
Supervisory Commission.
(2) The Financial Supervisory Commission may order a disposal of the stocks acquired without obtaining an approval under the provisions
of paragraph (1) by setting a period within six months.
(3) A person who has obtained the stocks without obtaining an approval under the provisions of paragraph (1) shall not exercise the
voting right on the acquired portions of stocks obtained without any approval.
(4) Matters necessary for the detailed requirements for approvals and orders under the provisions of paragraphs (1) and (2) shall
be prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 7616, Jul. 29, 2005]
SECTION 2 Maintenance of Sound Business Order
Article 33 (Eligibility of Officers)
(1)Deleted. <by Act No. 5736, Feb. 1, 1999>
(2)Any person who falls under any of the following subparagraphs shall not be an officer of a securities company, and any officer
of a securities company who falls under any of the following subparagraphs shall lose his office: <Amended by Act No. 5254, Jan.
13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Act No. 7428, Mar. 31, 2005>
1.A minor, an incompetent, or a quasi-incompetent;
2.A bankrupt who has not been reinstated yet;
2.A person who has yet to be reinstated after having been declared bankrupt;
Enforcement Date: Apr. 1, 2006
3.A person who has been sentenced to imprisonment without prison labor or a heavier punishment or to a fine or a heavier punishment
under this Act, foreign Acts and subordinate statutes corresponding to this Act (hereinafter referred to as foreign securities Acts
and subordinate statutes ) and other Acts and subordinate statutes which are related to finance as prescribed by the Presidential
Decree, and for whom 5 years have not elapsed since the execution of such punishment was terminated (including the cases where the
execution is deemed to have been terminated) or exempted;
3-2.A person who has been sentenced to the suspension of execution of imprisonment without prison labor or a heavier punishment and
is still in the suspended period of execution;
4.Any person who was an officer or an employee of a corporation or a company whose business license or authorization, etc. was cancelled
pursuant to this Act, foreign securities Acts and subordinate statutes, or finance-related Acts and subordinate statutes prescribed
by the Presidential Decree (limited to any person who is directly or correspondingly responsible for the occurrence of the cause
of cancellation and prescribed by the Presidential Decree), and for whom 5 years have yet to elapse from the date on which such license
or authorization was canceled against the corporation or the company; and
5.A person who was discharged or dismissed from a securities company under this Act, foreign securities Acts and subordinate statutes,
or other Acts and subordinate statutes which are related to finance as prescribed by the Presidential Decree, and for whom 5 years
have not elapsed since the date of such discharge or dismissal.
[This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]
Articles 33-2 and 34 Deleted.
<by Act No. 3945, Nov. 28, 1987>
Article 35 (Matters to be Authorized)
(1) When a securities company intends to merge with another company, transfer its whole business, or take over the whole business
of another company (including equivalent cases), such securities company shall obtain authorization from the Financial Supervisory
Commission with respect thereto. In this case, the provisions of Article 32 shall apply mutatis mutandis. <Amended by Act No.
5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999>
(2)The Financial Supervisory Commission shall, in determining whether to grant such authorization under the provisions of paragraph
(1), take into account matters prescribed by the Presidential Decree. <Newly Inserted by Act No. 6176, Jan. 21, 2000>
Article 36 (Matters to be Reported)
In case where a securities company falls under any of the following subparagraphs, it shall promptly report the fact to the Financial
Supervisory Commission: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No.
6176, Jan. 21, 2000>
1.When a securities company appoints or discharges its officer;
2.When a securities company establishes newly a branch office or other business office, or when it changes the location of its principal
office, branch office or other business office, or when it suspends, resumes or discontinues the business of its principal office,
branch office or other business office;
3.When a person and such relatives of him and other specially related persons of him as designated by the Presidential Decree (hereinafter
referred to as the specially related persons ), who possess the largest number of stocks of a securities company, are changed;
4.When a trade name of a securities company is changed;
4-2.When a cause to dissolve a securities company occurs; and
5.Cases as prescribed by the Presidential Decree, other than those under subparagraphs 1 through 4-2.
Article 37 (Public Notice of Discontinuance of Securities Business)
When a securities company intends to discontinue its securities business or the business of its branch office or any other business
office, the securities company shall print a public notice to that effect in 2 or more daily newspapers 3 or more times not later
than 30 days before the date of discontinuance, and shall notify directly the creditors who are known to the securities company at
the same time. <Amended by Act No. 3541, Mar. 29, 1982>
Article 38 Deleted.
<by Act No. 4469, Dec. 31, 1991>
Article 39 Deleted.
<by Act No. 5423, Dec. 13, 1997>
Article 40 Deleted.
<by Act No. 6623, Jan. 26, 2002>
Article 41 (Liabilities for Branch Office or Other Business Office)
If a branch office or other business office of any securities company causes any damage to other persons in connection with the purchase
and sale of securities or other securities transaction, such securities company shall be liable to compensate the damage to the person
who suffers the damage.
Article 42 (Restrictions on Officers Securities Transaction)
No officer or employee of any securities company shall make or entrust sale and purchase transactions of securities for his own account
in whatsoever name except for securities savings through payroll deduction plans and for other cases as prescribed by the Presidential
Decree.
Article 43 (Manifestation of Type of Transaction)
When any securities company receives an order from any customer for a securities transaction, such securities company shall make clear
in advance to such customer as to whether it will act as the other party, or as an intermediary, an agent, or a factor in effectuating
such transaction.
Article 44 (Prohibition of Representation of Other Party)
No securities company may act as a principal and concurrently as a factor, an intermediary or an agent for other party with respect
to the same securities transaction.
Article 44-2 Deleted.
<by Act No. 6423, Mar. 28, 2001>
Article 44-3 (Separate Deposit of Customer Deposit Money)
(1)Any securities company shall deposit (including trust; hereinafter the same shall apply) any money deposited by customers (referring
to the money deposited by customers in connection with sale and purchase and any other transactions of securities; hereinafter the
same shall apply) separately from his property at a securities finance company (hereinafter referred to as a depository institution
) under Article 145. <Amended by Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26, 2002>
(2)Where a securities company deposits customer deposit money in a depository institution pursuant to paragraph (1), it shall specify
that the money is the customers property.
(3)A securities company which has received customer deposit money (hereinafter referred to as a depositing securities company ) pursuant
to paragraph (1) shall not transfer or offer as security customer deposit money deposited in a depository institution except as otherwise
determined by the Presidential Decree, and no person shall set off or seize it (including provisional seizure).
(4)A depositing securities company shall, where it falls under any of the following subparagraphs, withdraw customer deposit money
deposited in a depository institution and preferentially pay it to customers. In this case, the securities company concerned shall
publicly announce payment time and place of customer deposit money and other matters relating to the payment of customer deposit
money in two daily newspapers or more within the period as determined by the Presidential Decree:
1.Where it resolves to discontinue its business;
2.Where it receives an order for suspension of business;
3.Where it has its license revoked;
4.Where it resolves to dissolve itself;
5.Where it has been declared bankrupt; and
6.Where any cause equivalent to those listed in subparagraphs 1 through 5 occurs.
(5)A depository institution shall, where it falls under any subparagraph of paragraph (4), preferentially pay customer deposit money
deposited to the depositing securities company.
(6)A depository institution shall manage customer deposit money by the following methods:
1.Purchase of Government bonds and municipal bonds;
2.Purchase of bonds whose payment is guaranteed by the Government, local governments or financial institutions; and
3.Other methods recognized as being capable of safely managing customer deposit money, as determined by the Presidential Decree.
(7)The scope of customer deposit money to be deposited by a securities company in a depository institution pursuant to paragraph (1),
the ratio to be deposited, matters relating to withdrawal of customer deposit money, matters on the management of customer deposit
money by a depository institution or other matters necessary for the depositing of customer deposit money shall be determined by
the Presidential decree. In this case, the ratio to be deposited may be otherwise determined by securities company taking into account
the securities company s financial status, etc.
[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]
Article 44-4 (Depositing of Securities, etc. Deposited by Customers)
(1)A securities company shall promptly deposit securities which come to be held by customers due to buying and selling consignment
or other transactions and bonds or deeds as determined by the Presidential Decree in the Korea Securities Depository established
under Article 173 (hereafter in this Article, referred to as the Korea Securities Depository ). <Amended by Act No. 7114, Jan.
29, 2004>
(2)A securities company shall promptly deposit securities, bonds, and deeds to be held by managing assets on hand as determined by
the Presidential Decree in the Korea Securities Depository.
[This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]
Article 45 Deleted.
<by Act No. 5736, Feb. 1, 1999>
Article 46 (Notification of Sale and Purchase Transactions, etc.)
A securities company shall notify the customer concerned of the purchase and sale by a customer s order and other contents of transactions,
etc. under the conditions as prescribed by the Presidential Decree.
[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]
Article 46-2 (Exceptional Acquisition of Treasury Stocks)
A securities company may, in case where the securities company has been entrusted by a customer, acquire treasury stocks less than
the minimum trading unit of the securities market or the KOSDAQ outside those markets. In this case, the acquired treasury stocks
shall be disposed of within the period as prescribed by the Presidential Decree. <Amended by Act No. 7114, Jan. 29, 2004>
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
Article 47 (Business Report)
(1) Any securities company shall compile each business report stating its business achievements, financial standing, and other matters
prescribed by the Presidential Decree for 3 months, 6 months, 9 months and 12 months, respectively, from the date of the commencement
of every business year and file such business report with the Financial Supervisory Commission within forty-five days from the date
of the elapse of such months. <Amended by Act No. 6623, Jan. 26, 2002>
(2) Any securities company shall keep the business report referred to in paragraph (1) or its computerized materials at its head office,
branch office, or other business office and make them accessible to the public for one year from the date on which the business report
is filed with the Financial Supervisory Commission. <Amended by Act No. 6623, Jan. 26, 2002>
(3) Detailed matters concerning the compilation of the business report under the provisions of paragraph (1) and other necessary matters
shall be determined by the Financial Supervisory Commission.
[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]
Article 48 (Officers Engaging in Other Business)
Where the Presidential Decree determines that the interests of a full-time officer of a securities company are in conflict with those
of customers or threaten to impair the sound management of the securities company, the officer shall not be engaged in the regular
business of another corporation or in other businesses. <Amended by Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001>
[This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]
Article 49 (Credit Extension)
(1)Any securities company may extend credit in connection with securities as lending money or securities to a customer.
(2)The method and contents of the credit extension referred to in paragraph (1) shall be prescribed by the Presidential Decree. <Amended
by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>
(3)The Financial Supervisory Commission shall provide for regulations on the maximum amount of credit, the ratio of security and method
of receiving security, etc. <Amended by Act No. 3541, Mar. 29, 1982; Act No. 5498, Jan. 8, 1998>
(4)In case where a securities company sells such securities as under-written thereby, the securities company shall not lend funds
or extend any other credit with respect to the purchase of such securities, until 3 months have elapsed from the date of underwriting
such securities.
Article 50 (Business of Securities Savings)
(1)A securities company may be engaged in the business of securities savings according to the regulations as prescribed by the Financial
Supervisory Commission. <Amended by Act No. 3541, Mar. 29, 1982; Act No. 5498, Jan. 8, 1998>
(2)The method and the contents of the securities savings business referred to in paragraph (1) shall be prescribed by the Presidential
Decree. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>
Article 51 (Restrictions on Engaging Concurrently in Other Business)
(1)Any securities company shall be prohibited from engaging in any other business than the securities business falling under each
of the following subparagraphs:
1.The financial business (referring to the business prescribed by this Act or finance-related Acts and subordinate statutes; hereafter
the same in this Article shall apply) that is prescribed by relevant Acts and subordinate statutes as the business for securities
companies to run;
2.The financial business prescribed by the Presidential Decree, which is authorized by the Financial Supervisory Commission as the
business for securities company to run; and
3.The business falling under any of the following items, which is prescribed by the Presidential Decree as a collateral business:
(a)The business related to the securities business;
(b)The business of utilizing manpower, assets, or facilities and equipment, etc. owned by a securities company; and
(c)The business that does not require any license, authorization, approval or registration, etc. under other Acts and subordinate
statutes.
(2) Any financial business under the provisions of paragraph (1) 2 for which a securities company has obtained a license or authorization
from the Financial Supervisory Commission or filed a registration with the Financial Supervisory Commission in accordance with this
Act or other Acts and subordinate statutes shall be deemed to have been granted authorization by the Financial Supervisory Commission
in accordance with the provisions of paragraph (1) 2.
[This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]
Article 52 (Prohibition of Unfair Solicitation, etc.)
A securities company, or officers and employees thereof shall not commit such acts as described in the following subparagraphs: <Amended
by Act No. 3541, Mar. 29, 1982; Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000>
1.To solicit sale and purchase transaction of securities by promising a customer to assume all or a part of the loss incurred as a
result of the transaction concerned;
2.To provide, directly or indirectly, any benefit which has a property value with a customer in relation to the underwriting business
of securities for the purpose of excluding competitors and inducing the customers, or to restrict business activities of customers
by making improper use of its superior position in transactions; and
3.To do such acts relating to issuance, purchase and sale or other transaction of securities other than those referred to in subparagraphs
1 and 2 as prescribed by the Presidential Decree as those detrimental to the protection of investors or the fair transactions, or
undermining the credibility of the securities industry.
Article 52-2 (Business Method of Securities Company Making Use of Electronic Data-Processing Equipment, etc., and Restrictions Thereon)
(1) Any securities company that runs the securities business prescribed in Article 2 (8) 8 shall make business matters falling under
each of the following subparagraphs conform to the standards prescribed by the Presidential Decree:
1.Matters concerning securities subject to the brokering of sale and purchase transactions;
2.Matters concerning the suspension of sale and purchase of securities subject to the brokering of sale and purchase transactions
and the removal of such suspension;
3.Matters concerning the conclusion of a sale and purchase transaction contract and other matters concerning settlement method and
settlement responsibility, etc.;
4.Matters concerning sale and purchase transactions of securities on consignment, including the consignment guarantee money, etc.
of a securities company participating in such transactions;
5.Matters concerning the publication of issuers of securities subject to the brokering of sale and purchase transactions;
6.Matters concerning the publication and report of the results of sale and purchase transactions;
7.Matters concerning the opening, closing, suspension, or interruption of the brokering of sale and purchase transactions; and
8.Other necessary matters in connection with the brokering of sale and purchase transactions.
(2) Any securities company that only runs the securities business as prescribed n Article 2 (8) 8 shall be prohibited from running
the business prescribed in Articles 49 and 50 and any subparagraph of 51 (1).
(3) Any securities company that runs the securities business as prescribed in Article 2 (8) 8 shall, if such securities subject to
the brokering of sale and purchase transactions are listed stocks or KOSDAQ-listed stocks, be a member of the Exchange. <Amended
by Act No. 7114, Jan. 29, 2004>
(4) The provisions of Article 117 shall apply mutatis mutandis to any securities company that runs the securities business as prescribed
in Article 2 (8) 8.
(5) The provisions of Articles 43, 44, and 46 shall not apply to a case where any securities company runs the securities business
as prescribed in Article 2 (8) 8. <Amended by Act No. 6623, Jan. 26, 2002>
[This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]
Article 52-3 (Prohibition of Arbitrary Purchase and Sale)
Officers and employees of a securities company shall not, unless they have received entrustment with respect to purchase and sale
transactions of securities from a customer or his agent, make purchase and sale transactions of securities with property deposited
by customers.
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
Article 52-4 (Prohibition of Unfair Demand to Securities Company, etc.) No person shall unfairly receive money, service and other
financial interests from a securities company or officers and employees thereof in return for the payment of a commission relating
to the business which a securities company operates, or may request a securities company or officers and employees thereof to furnish
the person himself or third party with money, service and other financial interests.
[This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]
Article 53 (Inspection)
(1)A securities company shall be subject to inspection by the Governor of the Financial Supervisory Service (hereinafter referred
to as the FSS Governor ) with respect to its business condition and property. <Amended by Act No. 5498, Jan. 8, 1998>
(2)The FSS Governor may, if necessary for the inspection, request any securities company to report on its business conditions or property,
to file data, to make witness available, or to present any evidence or opinion thereon. <Amended by Act No. 5498, Jan. 8, 1998>
(3)Any person who conducts inspection pursuant to the provisions of paragraph (1) shall show the persons concerned a certificate which
represents his authority to inspect.
(4)The FSS Governor shall, after the inspection referred to in paragraph (1), file a report on the results of the inspection with
the Financial Supervisory Commission. In this case, if the FSS Governor finds that any securities company has violated the provisions
of this Act, other Acts and subordinate statutes relating to securities, any disposition taken under this Act, or the regulations
of the Financial Supervisory Commission, the Securities Futures Commission under the Act on the Establishment, etc. of Financial
Supervisory Organizations (hereinafter referred to as the Securities Futures Commission ), and the Exchange, the FSS Governor shall
add the written opinion as to how to take actions against such violations. <Amended by Act No. 5498, Jan. 8, 1998; Act No. 7114,
Jan. 29, 2004>
(5)The Financial Supervisory Commission shall, reviewing the reports and the written opinion referred to in paragraph (4), take such
measures as prescribed in the following subparagraphs: <Amended by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act
No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999; Act No. 6176, Jan. 21, 2000>
1.Where any securities company falls under any subparagraph of Article 55 (1), the cancellation of the securities business license
of the securities company concerned; and
2.Where any securities company has, in the course of its business, committed unlawful or unfair acts other than those referred to
in subparagraph 1, the order to suspend the business in whole or in part, request for the discharge of officers concerned, or other
measures as prescribed by the Presidential Decree.
(6) The FSS Governor may, if necessary, entrust part of the inspection authority as referred to in paragraph (1) to the Korea Securities
Dealers Association (hereinafter referred to as the Association ) established in accordance with Article 162 under the conditions
as prescribed by the Presidential Decree. <Newly Inserted by Act No. 6623, Jan. 26, 2002; Act No. 7114, Jan. 29, 2004>
(7)The Financial Supervisory Commission may determine the method and procedure of inspection, the criteria for measures against results
of inspection, and other necessary matters relating to inspection. <Newly Inserted by Act No. 5254, Jan. 13, 1997; Act No. 5498,
Jan. 8, 1998>
Article 54 (Authority of Financial Supervisory Commission to Issue Order)
The Financial Supervisory Commission may issue such orders necessary for preventing excessively speculative securities transactions
or for the protection of public interest or investors to a securities company under the conditions as prescribed by the Presidential
Decree. <Amended by Act No. 5498, Jan. 8, 1998>
Article 54-2 (Maintenance of Equity Capital Regulation Rate)
(1) Any securities company shall maintain the rate (hereinafter referred to as the equity capital regulation rate ) higher than the
rate prescribed by the Presidential Decree, which derives from the division of the amount calculated by deducting the amount of the
following subparagraph 3 from the added amount of the following subparagraphs 1 and 2 by total risk amount (referring to the amount
added up with the risks calculated in terms of money, which is involved in the business or is immanent in assets and debts of such
securities company):
1.The amount obtained by deducting total amount of debts from total value of assets;
2.The allowance account for bad debts established in the floating asset, the posterity borrowings, and the amount prescribed by the
Presidential Decree; and
3.The appraised value of fixed assets, the amount of prepayment, and the amount prescribed by the Presidential Decree.
(2) Any securities company shall calculate its equity capital regulation rate as of the last day of every quarter (hereafter in this
Article referred to as the base day ) and file a report thereof with the Financial Supervisory Commission within forty-five days
from the base day and keep such report or its computerized materials at its head office, branch office and other business office
to make it accessible to the public for three months from the date forty-five days have passed since the base day. <Amended by
Act No. 6623, Jan. 26, 2002>
(3) Specific standards for calculating the equity capital regulation rate shall be determined by the Financial Supervisory Commission.
[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]
Article 54-3 (Soundness of Asset Operation)
(1) Any securities company shall be prohibited from performing the act falling under each of the following subparagraphs except as
otherwise provided for by the Presidential Decree: <Amended by Act No. 6423, Mar. 28, 2001>
1.The act of owning securities issued by the biggest stockholder (referring to the biggest stockholder under the provisions of Article
54-5 (4) 2; hereafter in this paragraph the same shall apply) or the major stockholder (referring to the major stockholder under
the provisions of Article 188 (1); hereafter in this paragraph the same shall apply) of a relevant securities company;
2.The act of loaning money or extending credit to the person falling under each of the following items:
(a)The biggest stockholder of the relevant company (including persons prescribed by the Presidential Decree from persons specially
related to him; hereafter in this paragraph the same shall apply);
(b)The major stockholder of the relevant company; and
(c) The officers of the relevant company and specially related persons who are prescribed by the Presidential Decree;
3.The act of directly or indirectly guaranteeing the repayment of debts for other persons;
4.The act of owning stocks, bonds or commercial papers (referring to bills issued by the business for the purpose of raising funds)
issued by the largest shareholder or the major shareholder of a relevant securities company with the rate exceeding the rate prescribed
by the Presidential Decree; and
5.Any act that may harm the sound management of assets of a securities company as prescribed by the Presidential Decree other than
acts in subparagraphs 1 through 4.
(2)The Financial Supervisory Commission may set detailed standards necessary to execute the matters under paragraph (1).
[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]
Article 54-4 (Internal Control Standards)
(1) Any securities company shall make basic procedures and standards (hereafter in this Article referred to as the internal control
standards ) to be followed by its officers and employees when they perform their duties in order to observe Acts and subordinate
statutes, operate its assets in a sound manner and protect customers.
(2) Any securities company shall have not less than one person assigned to check whether the internal control standards are observed
and to inspect any violation of the internal control standards and report the results to the auditor or the inspection committee
(hereinafter referred to as the compliance officer ).
(3) Any securities company shall, if it intends to appoint or dismiss a compliance officer, go through a resolution thereon of the
board of directors: Provided, That the same shall not apply to any branch office of a foreign securities business operator. <Newly
Inserted by Act No. 6423, Mar. 28, 2001>
(4) Any compliance officer shall satisfy requirements falling under each of the following subparagraphs: <Newly Inserted by Act
No. 6423, Mar. 28, 2001>
1.He is required to be the person with the experience falling under any of the following items:
(a)A person who has served not less than 10 years in the Bank of Korea or an institution subject to inspection (including any foreign
financial institution corresponding thereto) under Article 38 of the Act on the Establishment, etc. of Financial Supervisory Organizations;
(b) A person with a master s degree or higher in the finance-related area who has served not less than 5 years in a university as
a full-time lecturer or higher or in a research institute as a researcher or higher;
(c) A person with the qualification of an attorney-at-law or a certified public accountant who has served not less than 5 years in
the service area related to such qualification; and
(d) A person who has served not less than 5 years in the Ministry of Finance and Economy, the Financial Supervisory Commission, the
Securities Futures Commission, or the Financial Supervisory Service and for whom 5 years have elapsed from the date on which he resigned
or retired from each of such institutions;
2.He is required not to fall under each subparagraph of Article 33 (2); and
3.He is required not to have been subject to measures such as demand for caution or warning, etc. for violating finance-related Acts
and subordinate statutes from the Financial Supervisory Commission or the Governor of the Financial Supervisory Service in the past
5 years.
(5) Necessary matters concerning the internal control standards and compliance officers shall be prescribed by the Presidential Decree.
<Amended by Act No. 6423, Mar. 28, 2001>
[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]
Article 54-5 (Appointments of Outside Directors)
(1) Any securities company (limited to any securities company prescribed by the Presidential Decree in the light of the size of its
asset, etc.) shall have the board of directors in which the number of outside directors is not less than half of total number of
directors of the company. In this case, not less than three outside directors shall be seated in the board of directors.
(2) Any securities company under the provisions of paragraph (1) shall establish a committee in accordance with the provisions of
Article 393-2 of the Commercial Act to recommend candidates for outside directors (hereafter in this Article referred to as the
outside director candidate recommendation committee ). In this case, outside directors shall make up not less than half of the total
members of the outside director candidate recommendation committee.
(3) In case of the securities company under the provisions of paragraph (1), a general meeting of stockholders of the securities company
shall, when it intends to appoint its outside directors, appoint them from among candidates recommended by the outside director candidate
recommendation committee. In this case, when the outside director candidate recommendation committee of a securities company, which
is a stock-listed corporation or a KOSDAQ-listed corporation, recommends candidates for outside directors, it shall include therein
candidates for outside directors recommended by the stockholders who satisfy the requirements for exercising rights under Article
191-14. <Amended by Act No. 6423, Mar. 28, 2001; Act No. 7114, Jan. 29, 2004>
(4) Any person falling under any of the following subparagraphs shall be prohibited from becoming an outside director of a securities
company under the provisions of paragraph (1) and shall be dismissed from the office of an outside director when he is found to fall
under any of the following subparagraphs after appointed as the outside director:
1.A person who falls under Article 191-12 (3) 1 through 4;
2.In case that a person who is a stockholder of a relevant securities company and another person in a special relationship with him
hold the largest number of stocks on the basis of total number of issued voting stocks of the company, the former (hereinafter referred
to as the biggest stockholder );
3.A person in a special relationship with the biggest stockholder;
4.The major stockholder of a relevant securities company (referring to the major stockholder under the provisions of Article 188 (1))
and his spouse and lineal ascendants and descendants;
5.A person who is an officer or employee (referring to a person who is engaged in a regular business; hereafter the same in this paragraph
shall apply) of a relevant securities company or its affiliate (referring to the affiliate under the Monopoly Regulation and Fair
Trade Act) or worked as an officer or employee for such relevant securities company or its affiliate within the preceding two years;
6.The spouse or lineal ascendants or descendants of an officer of a relevant securities company;
7.The officer or employee of a corporation that is in an important business relationship prescribed by the Presidential Decree with
a relevant securities company, a competitive relationship or a cooperative relationship with such securities company or the person
who worked as the officer or employee for such corporation within the preceding two years;
8.The officer or employee of a company in which the officer or employee of a relevant securities company works as a non-standing director;
and
9.A person who has difficulty in faithfully performing his duties as an outside director or may affect adversely the management of
his company and is prescribed by the Presidential Decree.
(5) The securities company under the provisions of paragraph (1) shall, when the number of its outside directors does not meet the
requirements for the composition of the board of directors under paragraph (1) owing to any resignation or death, etc. of the outside
directors, make sure that it satisfies the requirements of paragraph (1) at a general meeting of stockholder called for the first
time after the occurrence of such cause.
[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]
Article 54-6 (Inspection Committee)
(1) Any securities company (limited to the securities company prescribed by the Presidential Decree taking into account the size of
its asset) shall establish an inspection committee (hereinafter referred to the inspection committee ) pursuant to the provisions
of Article 415-2 of the Commercial Act.
(2) The inspection committee shall meet the requirements falling under each of the following subparagraphs: <Amended by Act No.
7025, Dec. 31, 2003; Act No. 7114, Jan. 29, 2004>
1.Not less than 2/3 of the total members are required to be outside directors;
2.Not less than one member from among the members are required to be accounting or financial specialists prescribed by the Presidential
Decree; or
3.The representative of the inspection committee of any securities company that is either a stock-listed corporation or a KOSDAQ-listed
corporation is required to be an outside director.
(3) Any members of the inspection committee who are not outside directors shall not fall under any subparagraph of Article 191-12
(3): Provided, That any person who holds office not as a full-time auditor or an outside director of the inspection committee under
the provisions of Article 191-12 (3) but as a member of the inspection committee may become a non-outside-director member of the
inspection committee notwithstanding the provisions of Article 191-12 (3) 6.
(4) Where the securities company referred to in paragraph (1) is unable to fill the fixed number of outside directors of the inspection
committee under paragraph (2) due to such causes as the resignation and death, etc. of outside directors, a general meeting of stockholders
called for the first time after the occurrence of such causes shall have the requirement of paragraph (2) satisfied.
(5) The proviso of Article 415-2 (2) of the Commercial Act shall not apply to the composition of the inspection committee under the
provisions of paragraph (1).
(6) The provisions of Article 409 (2) and (3) of the Commercial Act shall apply mutatis mutandis to the selection and appointment
of any outside director who becomes a member of the inspection committee. <Newly Inserted by Act No. 6423, Mar. 28, 2001>
[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]
Article 55 (Cancellation of License)
(1) In case that any securities company falls under any of the following subparagraphs, the Financial Supervisory Commission may show
reason therefor and cancel the license of such securities company: <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May
25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999; Act No. 6176, Jan. 21, 2000; Act No. 7114, Jan. 29, 2004>
1.Where a securities company obtains the license of securities business by fraud or unfair means;
2.Where a securities company commits a violation of licensed contents or licensed terms or fails to commence the business within 6
months from the date on which a license was granted;
3.Where a securities company has received money or securities from other person in connection with its business by unfair means, or
when it has acquired money or securities which shall be delivered to other persons;
4.Where a securities company having received the order to suspend its business pursuant to the provisions of Article 57 has not corrected
the reason therefor within 1 month (where a period to correct exceeding one month is determined in ordering to suspend its business,
within the period) from the date on which such securities company has received such order;
5.Where a securities company violates any contract in connection with purchase and sale or other transactions effected on the securities
market or the KOSDAQ, or when it does not conduct delivery with respect to such purchase and sale or other transactions;
6.Where a securities company commits a violation of the provisions of Article 35 (1), 54-2 (1), 54-3, 54-5, 54-6 or 63;
7.Where a securities company violates the order issued pursuant to the provisions of Article 54; and
8.Where a securities company violates this Act, order or disposition given under this Act other than subparagraphs 1 through 7, and
therefore it is deemed difficult for it to do business as a securities company.
(2) Any securities company shall, when its securities business license is canceled, dissolve itself. <Newly Inserted by Act No.
6176, Jan. 21, 2000>
(3) The provisions of Article 32-2 shall apply mutatis mutandis to the cancellation of license under the provisions of paragraph (1).
<Newly Inserted by Act No. 6176, Jan. 21, 2000>
Article 56 (Consummation of Unsettled Business)
When a securities company is cancelled its license (including the cancellation of a license under Article 14 of the Act on the Structural
Improvement of the Financial Industry) pursuant to Article 55 or closes its business by itself, it shall consummate the purchase
and sale of securities and other transactions which it has left unsettled. In this case, the securities company or the successor
of such securities company shall be regarded as a securities company to the extent consistent with the purpose of consummating such
unsettled purchase and sale of securities or other transactions. <Amended by Act No. 5736, Feb. 1, 1999>
Article 57 (Suspension of Business)
(1)In case where any securities company falls under any of the following subparagraphs, the Financial Supervisory Commission may order
the suspension of the whole or part of the business: <Amended by Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No.
6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26, 2002; Act No. 7025, Dec. 31, 2003>
1.Where it violates the provisions of Article 42, 44, 44-3, 44-4, 47, 49 through 52, 52-2, or 54-4;
2.Where it violates an order under Article 54;
3.Where it is involved in the act of unfair trade in violations of the provisions of Article 188 (1), 188-2 (1) or 188-4;
4.Where it fails to comply with a request to discharge an officer referred to in paragraph (3) or Article 53 (5) 2 without any justifiable
cause; and
5.Where it resolves to discontinue its business or dissolve itself in order to protect public interests and investors.
(2)The provisions of Article 56 shall apply mutatis mutandis to the suspension of business referred to in paragraph (1).
(3)In case where any securities company violates the provisions of Article 36, 43, 44, 46 or 48, or any of officers violates the provisions
of Article 52, the Financial Supervisory Commission may request such securities company to discharge the officer concerned after
showing the reason therefor to such officer. <Amended by Act No. 3541, Mar. 29, 1982; Act No. 5498, Jan. 8, 1998; Act No. 5736,
Feb. 1, 1999>
Article 58 (Liabilities of Officers)
(1)In case where any director or auditor (referring to the members of the inspection committee if such committee is established; hereafter
the same in this Article shall apply) of a securities company neglects to perform his duties on purpose or by negligence, or causes
any damage to third person in the course of performing his duties for such securities company, such director or auditor and the biggest
stockholder shall be jointly and severally made liable to compensate for the damage: Provided, That the same shall not apply to the
biggest stockholder who proves that the act causing such damage to third person is not committed upon his request or with his consent.
<Amended by Act No. 3541, Mar. 29, 1982; Act No. 6176, Jan. 21, 2000>
(2)The provisions of paragraph (1) shall not affect the liabilities of the securities company concerned.
(3)In case of paragraph (1), the provisions of Articles 399 (2) and (3) and 414 (3) of the Commercial Act shall apply mutatis mutandis.
Article 59 (Prohibition of Offer or Divulgence of Information)
(1)Unless any officer or employee of a securities company receives a written request or a written consent from the customer who makes
or intends to make purchase and sale of securities through the securities company (including any person who participates in the securities
savings referred to in Article 50; hereinafter the same shall apply), the officer or the employee of such securities company shall
not offer or divulge the information with respect to the customer, such as purchase and sale of securities and other securities transaction,
and the money or securities deposited by such customer, to another person: Provided, That the same shall not apply to case where
the securities company is inspected by a supervisory institution with respect to its duties or where it is requested pursuant to
the provisions of Article 60.
(2)Any person who acquires the information in the ordinary course of inspection by a supervisory institution shall not offer or divulge
such information to any other person, or make use of the information for any other purpose other than that of the inspection.
Article 60 (Prohibition of Request for Information)
(1)No person shall request any officer or employee of a securities company to offer the information referred to in Article 59 (1),
except when a court issues an order to submit such information or a judge of a court issues a warrant therefor, or other cases as
prescribed by the Presidential Decree.
(2)Even when the offer of such information is requested pursuant to the provisions of paragraph (1), the inquiry or investigation
shall be limited within the necessary scope of the purpose.
Article 61 (Refusal of Illegal Investigation)
Any officer or employee of a securities company shall, by and after showing the reason therefor, refuse the request, inquiry or investigation
which is in contravention of the provisions of Article 60.
Article 62 (Trade Name)
(1) Any securities company shall use the letters of securities, securities brokerage, or bonds brokerage in its trade name under the
conditions as prescribed by the Presidential Decree. <Amended by Act No. 6423, Mar. 28, 2001>
(2)No person who is not a securities company shall include any word which represents a securities business in its trade name.
Article 63 (Prohibition of Lending Trade Name)
No securities company shall allow other persons to operate the securities business by lending its trade name.
Article 64 (Exercise of Minority Stockholder s Right, etc. of Securities Company)
(1) The provisons of Article 191-13 (1) through (6) shall apply mutatis mutandis to the requirements, etc. for the exercise of the
minority stockholder s right of a securities company (limited to any securities company prescribed by the Presidential Decree taking
into account the size, etc. of its asset; hereafter the same in this Article shall apply). In this case, 1/10,000 or more in Article
191-13 (1) shall be deemed 5/100,000 or more ; 50/100,000 or more (25/100,000 or more in case of a corporation prescribed by the
Presidential Decree) in paragraph (2) of the same Article, 250/100,000 or more (125/1,000,000 or more in case of a corporation
prescribed by the Presidential Decree) ; 10/10,000 or more (5/10,000 or more in case of a corporation prescribed by the Presidential
Decree) in paragraph (3) of the same Article, 50/100,000 or more (25/100,000 or more in case of a corporation prescribed by the
Presidential Decree) ; 50/10,000 or more (25/10,000 or more in case of a corporation prescribed by the Presidential Decree) in
paragraph (4) of the same Article, 250/100,000 or more (125/100,000 or more in case of a corporation prescribed by the Presidential
Decree) ; and 30/1,000 or more (15/1,000 or more in case of a corporation prescribed by the Presidential Decree) in paragraph (5)
of the same Article, 150/10,000 or more (75/10,000 or more in case of a corporation prescribed by the Presidential Decree) , respectively.
<Amended by Act No. 6423, Mar. 28, 2001>
(2)The provisions of Article 191-14 (1) and (2) shall apply mutatis mutandis to the requirement, etc. for the exercise of the right
by stockholders of a securities company to make proposals. In this case, 10/1,000 or more (5/1,000 or more in case of a corporation
prescribed by the Presidential Decree) in Article 191-14 (1) shall be deemed 50/10,000 or more (25/10,000 or more in case of a
corporation prescribed by the Presidential Decree) .
[This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]
Articles 65 through 69 Deleted.
SECTION 3 Deleted.
Articles 69-2 through 70 Deleted.
CHAPTER V-2 Deleted.
Articles 70-2 through 70-11 Deleted.
CHAPTER VI KOREA STOCK AND FUTURES EXCHANGE
SECTION 1 Deleted.
Articles 71 through 83-2 Deleted.
SECTION 2 Sale and Purchase Transactions on Securities Market and KOSDAQ
Article 84 Deleted.
<by Act No. 3945, Nov. 28, 1987>
Article 85 (Restrictions on Sale and Purchase Traders on Securities Market)
(1) Any person who is not a member of the Exchange shall be prohibited from executing any sale and purchase transaction on the securities
market (including the KOSDAQ; hereafter the same in this Chapter shall apply): Provided, That in the event that the membership management
regulations provided for in Article 16 of the Korea Stock and Futures Exchange Act prescribe the permission of the sale and purchase
transactions of specific securities, he may execute sale and purchase transactions of such specific securities on the securities
market.
(2) Any person who is permitted to execute sale and purchase transactions on the securities market in accordance with the provisions
of the proviso of paragraph (1) shall be deemed a member of the Exchange in the application of Articles 87, 94 (2) 5, 95 through
97, 99, 100, and 206-3 (6) of this Act, and subparagraph 6 of Article 6, Articles 16 and 19 of the Korea Stock and Futures Exchange
Act.
[This Article Wholly Amended by Act No. 7114, Jan. 29, 2004]
Article 86 Deleted.
<by Act No. 5736, Feb. 1, 1999>
Article 87 (Completion of Transactions)
(1)When a member is suspended from transactions or loses his qualification, the Exchange shall have the member or any other member
complete the sale and purchase transactions which have been initiated on the securities market by the member. In this case, the member
who loses his qualification shall be regarded as having the qualification of a member within the objective of completion of those
transactions. <Amended by Act No. 3945, Nov. 28, 1987; Act No. 7114, Jan. 29, 2004>
(2)In case where the Exchange has any other member complete the sale and purchase transactions pursuant to paragraph (1), it shall
be regarded that a trust contract is in existence between the member concerned and such other member. <Amended by Act No. 3945,
Nov. 28, 1987; Act No. 7114, Jan. 29, 2004>
Article 88 (Listing Regulations)
(1)Deleted. <by Act No. 5254, Jan. 13, 1997>
(2)The Exchange shall adopt the Securities Listing Regulations (hereinafter referred to as the Listing Regulations ) in order to
examine securities which are to be listed on the securities market or administer the securities which have been listed on the securities
market (hereinafter referred to as listed securities ). In this case, separate listing regulations governing the KOSDAQ shall be
prescribed. <Amended by Act No. 5736, Feb. 1, 1999; Act No. 7114, Jan. 29, 2004>
(3)The Listing Regulations referred to in paragraph (2) shall provide for the following matters: <Amended by Act No. 5736, Feb.
1, 1999>
1.Matters relating to the listing standards for, listing examination of and delisting of securities;
2.Matters relating to suspension from and release of suspension from the sale and purchase transactions of securities; and
3.Matters necessary for the administration of listed securities other than those prescribed in subparagraphs 1 and 2.
Article 89 (Disclosure Regulations)
(1)The Exchange shall make disclosure regulations governing stock-listed corporations and KOSDAQ-listed corporations (hereinafter
referred to as disclosure regulations ) in order to make their corporate governance and management known to the public. <Amended
by Act No. 7114, Jan. 29, 2004>
(2) The disclosure regulations under paragraph (1) shall include the following matters. In this case, the matters provided in subparagraphs
1 and 2 shall meet the provisions of Article 186: <Amended by Act No. 7114, Jan. 29, 2004>
1.Matters relating to the information on which a stock-listed corporation (including KOSDAQ-listed corporations; hereafter the same
in this Article shall apply) is to make a report or a disclosure;
2.Matters relating to the methods and procedures which a stock-listed corporation is to follow in making a report or disclosure;
3.Matters relating to the standards for deciding upon whether or not a stock-listed corporation follows the provisions of subparagraphs
1 and 2 and to the measures for a securities company against such provisions;
4.Matters relating to the supervision of stock-listed corporations, such as the suspension of their sale and purchase transactions;
and
5.Other necessary matters relating to a report or disclosure which stock-listed corporations are to make.
[This Article Newly Inserted by Act No. 6623, Jan. 26, 2002]
Articles 90 through 93 Deleted.
<by Act No. 5254, Jan. 13, 1997>
Article 94 (Business Regulations)
(1) Matters concerning sale and purchase transactions on the securities market shall be prescribed by the Exchange in its business
regulations. In this case, business regulations governing the KOSDAQ shall be prescribed separately. <Amended by Act No. 7114,
Jan. 29, 2004>
(2)The business regulations as referred to in paragraph (1) shall provide for the following matters: <Amended by Act No. 5736,
Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26, 2002; Act No. 7114, Jan. 29, 2004>
1.Types of sale and purchase transactions and matters on consignment;
2.Matters relating to the opening, closing, suspending, or temporary closing of the securities market;
3.Methods of the conclusion of sale and purchase transaction contract and the settlement;
4.Matters relating to the regulation of sale and purchase transactions, such as payment of deposit money;
5.and 5-2. Deleted; <by Act No. 7114, Jan. 29, 2004>
6.Deleted; and <by Act No. 6623, Jan. 26, 2002>
7.Matters necessary for the sale and purchase transactions in addition to those as referred to in subparagraphs 1 through 4.
[This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]
Article 95 (Joint Compensation Fund for Damage Incurred from Contravention of Contracts)
(1)Members shall set aside a joint compensation fund for damage incurred from contraventions of contracts (hereinafter referred to
as the compensation fund ) in the Exchange in order to compensate for the damage incurred from any contravention of trading contracts
on the securities market: Provided, That the same shall not apply to any member, etc. prescribed by the Exchange, who does not bear
the responsibility for executing the settlement of sale and purchase transactions. <Amended by Act No. 3945, Nov. 28, 1987; Act
No. 6423, Mar. 28, 2001; Act No. 7114, Jan. 29, 2004>
(2)Any member (excluding the member referred to in the proviso of paragraph (1)) shall, within the extent of the compensation fund
referred to in paragraph (1), be liable jointly and severally for the damage incurred from any contravention of trading contract
on the securities market. <Amended by Act No. 3945, Nov. 28, 1987; Act No. 6423, Mar. 28, 2001>
(3)The rate and limit of reserve, use, management, repayment of the compensation fund referred to in paragraph (1), and other necessary
matters relating to the operation of the compensation fund shall be prescribed by the Presidential Decree.
Article 96 (Appropriation of Member s Deposit and Guarantee Fund for Obligation)
If a member has not fulfilled his obligation based on sale and purchase transactions on the securities market for the Exchange or
other members, the Exchange may appropriate the member s deposit and guarantee fund for the payment of that obligation. <Amended
by Act No. 3945, Nov. 28, 1987; Act No. 7114, Jan. 29, 2004>
Article 97 (Compensation Liabilities of Exchange)
(1)The Exchange shall be liable to compensate for the damage incurred from contravention of trading contract by any member. <Amended
by Act No. 3945, Nov. 28, 1987; Act No. 7114, Jan. 29, 2004>
(2)In case where the Exchange compensates for the damage under paragraph (1), the compensation fund set aside under the provisions
of Article 95 shall be appropriated in preference. <Amended by Act No. 7114, Jan. 29, 2004>
(3)In case where the Exchange compensates for the damage under paragraphs (1) and (2), the Exchange shall be entitled to the right
to indemnification for the compensated amount and all expenses required to do so against the member who contravened the trading contract.
<Amended by Act No. 3945, Nov. 28, 1987; Act No. 7114, Jan. 29, 2004>
(4)The amount of money collected in accordance with paragraph (3) shall be, in preference, appropriated for such amount as the Exchange
has compensated with its own money and all expenses required to do so, and the remainder shall be reserved in the compensation fund.
<Amended by Act No. 7114, Jan. 29, 2004>
(5)Matters with respect to the exercise of the right to indemnification referred to in paragraph (3) shall be prescribed by the Presidential
Decree.
Article 98 Deleted.
<by Act No. 3945, Nov. 28, 1987>
Article 99 (Preferential Right of Exchange over Other Creditor)
(1)The Exchange shall have a right to be paid in preference to any other creditors with respect to the deposit, member s guarantee
fund and money or securities paid for the delivery and settlement. <Amended by Act No. 7114, Jan. 29, 2004>
(2)When a member, in case where the Exchange delivers securities to the member prior to the settlement, causes any damage to the Exchange
due to the unfulfillment of delivery or settlement by such member, the Exchange shall have a right to be paid in preference to any
other creditors with respect to property of such member: Provided, That the right shall not be in preference to obligations hypothecated
by chonsegwon (right of registered lease on deposit basis), pledges or mortgage created prior to the arrival of settlement date.
<Amended by Act No. 3945, Nov. 28, 1987; Act No. 7114, Jan. 29, 2004>
Article 100 (Preferential Right of Entruster Due to Contravention of Contract by Entrustee and Right of Exchange in Preference to
Entruster)
(1)Any person who entrusts the sale and purchase transactions on the securities market to a member shall, in case where the member
entrusted with the transactions contravenes the entrustment contract, have a right to satisfy the claim based upon such contravention
in preference to any other creditors with respect to the deposit and member s guarantee fund. <Amended by Act No. 3945, Nov. 28,
1987>
(2)The preferential right referred to in Article 99 shall be in preference to such preferential right as prescribed by the provisions
of paragraph (1).
Article 101 (Prohibition of Sale and Purchase in Contravention of Contract)
Any securities company which has been entrusted with the sale and purchase transactions on the securities market, shall have such
transactions made only through the securities market without fail. In this case, the provisions of Article 44 shall not apply. <Amended
by Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991>
Article 102 Deleted.
<by Act No. 5254, Jan. 13, 1997>
Article 103 (Publication of Quotations)
The Exchange shall, under the conditions as prescribed by the Presidential Decree, make public the quotations showing the daily trading
volume, daily settled price, and the highest, lowest and closing prices of the securities on the securities market. <Amended by
Act No. 3541, Mar. 29, 1982; Act No. 7114, Jan. 29, 2004>
Article 104 Deleted.
<by Act No. 5736, Feb. 1, 1999>
Articles 105 and 106 Deleted.
<by Act No. 5254, Jan. 13, 1997>
Article 107 (Restrictions on Discretionary Sale and Purchase Transactions)
(1)If a securities company is entrusted by a customer to make a sale and purchase transaction of securities, the securities company
may carry out such transaction under a discretionary decision only on the quantity, price and time of the transaction. In this case,
the types and items of securities, the categories and methods of the transaction shall be determined only according to a decision
of the customer. <Amended by Act No. 4469, Dec. 31, 1991>
(2) In the event any securities company executes the sale and purchase of securities after being entrusted by customers (hereinafter
referred to as discretionary sale and purchase ) in accordance with paragraph (1), it shall execute such sale and purchase of securities
with full attention as a good manager and it shall be prohibited from performing the act falling under each of the following subparagraphs:
<Newly Inserted by Act No. 7114, Jan. 29, 2004>
1.The act of soliciting the entrustment of sale and purchase of securities or being entrusted with the sale and purchase of securities
against investment principles based on the self-judgment and self-responsibility of any customer;
2.The act of executing the sale and purchase of securities with excessive frequency in the light of the size of entrusted objective,
amount and securities; and
3.The act of executing the discretionary sale and purchase of securities in the interests of itself and any third party.
(3)If a securities company carries out a sale and purchase transaction of securities pursuant to paragraph (1), it shall observe the
conditions as prescribed by the Ordinance of the Ministry of Finance and Economy. <Amended by Act No. 4469, Dec. 31, 1991; Act
No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998>
[This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]
Article 108 Deleted.
<by Act No. 5423, Dec. 13, 1997>
SECTION 3 EntrustmentwithSaleandPurchase TransactionsonSecuritiesMarket
Article 109 (Restrictions on Places of Entrustment)
(1)Deleted. <by Act No. 5736, Feb. 1, 1999>
(2)A securities company may be entrusted with the sale and purchase transactions of securities by means of electronic communication
and other manners as prescribed by the Presidential Decree.
[This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]
Articles 110 and 111 Deleted.
<by Act No. 5736, Feb. 1, 1999>
SECTION 4 Accounting and Supervision
Article 112 (Report and Inspection)
(1)The Financial Supervisory Commission may, if deemed necessary in the public interest or for the protection of investors, order
the Exchange to file reports or materials for reference with respect to its business and property, and have the FSS Governor inspect
its business, status of property, accounting books, records, and other related materials. <Amended by Act No. 5254, Jan. 13, 1997;
Act No. 5498, Jan. 8, 1998; Act No. 7114, Jan. 29, 2004>
(2)The provisions of Article 53 (3) shall apply mutatis mutandis to the inspection referred to in paragraph (1).
(3)In case where the FSS Governor inspects according to the provisions of paragraph (1), the FSS Governor shall report the result
of the inspection to the Financial Supervisory Commission. <Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998>
Article 113 Deleted.
<by Act No. 3945, Nov. 28, 1987>
Article 114 Deleted.
<by Act No. 6176, Jan. 21, 2000>
Article 115 (Approval of Regulations)
(1)Where the Exchange intends to adopt the Business Regulations, Listing Regulations, Disclosure Regulations and other regulations
(including rules; hereinafter the same shall apply) relating to business which are necessary for the administration of the securities
market, the Exchange shall obtain the approval of the Financial Supervisory Commission. The same shall also apply in case of the
amendment or repeal thereof. <Amended by Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998;
Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999; Act No. 7114, Jan. 29, 2004>
(2)Where the Financial Supervisory Commission intends to grant approval referred to in paragraph (1), it shall consult in advance
with the Minister of Finance and Economy. <Newly Inserted by Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5982,
May 24, 1999>
Article 116 Deleted.
<by Act No. 5254, Jan. 13, 1997>
Article 117 (Disposition in Emergency)
(1)Deleted. <by Act No. 5736, Feb. 1, 1999>
(2)When the Minister of Finance and Economy deems that the sale and purchase tr