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TRUST BUSINESS ACT

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TRUST BUSINESS ACT

Act No. 945, Dec. 31, 1961

Amended by Act No. 2064, Dec. 31, 1968

Act No. 5502, Jan. 13, 1998

Act No. 5700, Jan. 29, 1999

Act No. 5982, May 24, 1999

Act No. 6180, Jan. 21, 2000

Act No. 7337, Jan. 17, 2005

Act No. 7428, Mar. 31, 2005

Act No. 7615, Jul. 29, 2005

Act No. 8863, Feb. 29, 2008

Act No. 8908, Mar. 14, 2008

CHAPTER GENERAL PROVISIONS

Article 1 (Purpose)

The purpose of this Act is to serve to develop the national economy through the sound management of trust companies and the protection of bene- ficiaries.

[This Article Wholly Amended by Act No. 6180, Jan. 21, 2000] Article 1-2 (Definition)

The term "trust business" in this Act means performing the business of trust in accordance with the provisions of Article 1 (2) of the Trust Act. [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 2 (Operation of Trust Company)

The companies that are engaged in the trust business (hereinafter re- ferred to as the "trust company") in Korea shall be operated in accor- dance with this Act and orders issued thereunder. Article 2-2 (Relation with Other Acts)

This Act shall not apply to the trust management business of copyright provided for in subparagraph 18 of Article 2 of the Copyright Act or the commission and management business of program copyright provided for in Article 20 (1) of the Computer Programs Protection Act. [This Article Newly Inserted by Act No. 7337, Jan. 17, 2005] Article 3 (Business Authorization)

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(1) The trust business shall not be conducted without obtaining authoriza- tion from the Financial Services Commission.

(2) A person who intends to receive authorization under paragraph (1) shall secure the capital according to the classification of the following sub- paragraphs:

1. In case where the business of accepting the trust of money or the trust of properties that include any money (hereinafter referred to as the "trust of aggregate properties") provided for in Article 10 (2) is per- formed, not less than 25 billion won; and

2. In case where the business of accepting the trust of properties with the exception of any money or the trust of aggregate properties that do not include any money is performed, not less than 10 billion won. (3) Any person who intends to obtain authorization under paragraph (1) shall file an application with the Financial Services Commission under the conditions as prescribed by the Presidential Decree. (4) The Financial Services Commission may, in granting authorization pursuant to the provisions of paragraph (1), attach necessary conditions such as limitation to the loan business, in consideration of the business characteristics of the financial institution that intends to operate the trust business. Article 3-2 (Public Announcement of Authorization, etc.) The Financial Services Commission shall, when it grants authorization under the provisions of Article 3 (1) or 29-4 (1) or revokes authorization under the provisions of Article 29-2 or 29-6 (1), announce publicly without delay its content in the Official Gazette, and make it known to the public by making use of computer communications, etc.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 3-3 (Requirements for Authorization)

(1) Any person who intends to obtain authorization under the provisions of Article 3 (1) shall meet the requirements of the following subpara- graphs:

1. He/she shall be able to protect beneficiaries, and is equipped with man- TRUST BUSINESS ACT

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power and physical facilities such as computer equipments, that are enough to perform the intended trust business;

2. His/her business plan shall be proper and sound;

3. Plans for a separate management between the trust division and the inherent division and for a separate management among the trust com- modities shall be appropriate; and

4. Major investors as prescribed by Presidential Decree shall possess the ample ability to make investments, the sound financial standings and the social credits.

(2) Anyone who intends to run the business of receiving the trust pro- vided for in Article 10 (4) shall meet requirements for the financial state, the management state and the management and operational system of trust properties, etc., that are fit to run the business.

(3) Necessary matters concerning detailed requirements for authorization under paragraph (1) and the requirements referred to in paragraph (2) shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 4 Deleted. Article 5 Deleted. Article 6 (Invalidation of Authorization)

(1) Where a trust company fails to commence its business within six months from the date of authorization granted under Article 3, the authori- zation thereof shall become invalidated.

(2) The Financial Services Commission may, in case where deemed that there exist justifiable reasons, extend, upon application, the period under paragraph (1). Article 7 (Corporate Name)

(1) A trust company shall use the letter of "trust" in its corporate name. (2) No person other than a trust company shall use in its corporate name any letters indicating that the person is engaged in the trust business: Provided, That this shall not apply to persons engaged in the trust business concerning secured debentures. TRUST BUSINESS ACT

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Article 8 (Matters for Authorization)

(1) Where a trust company intends to merge or dissolve, or suspend its trust business, it shall obtain authorization from the Financial Services Commission under the conditions as prescribed by Presidential Decree.

(2) Where a trust company has modified the articles of incorporation or the type or method of business, it shall file a report thereof with the Financial Services Commission. In this case, the Financial Services Com- mission may, in case where it deems that the reported contents are in contravention of the Acts and subordinate statutes on trust business and the sound order of transactions in the trust business, demand the relevant trust company to change the contents. (3) The Financial Services Commission may determine the standards and procedures for the establishment or closure of branch offices, agencies and other business places or offices of a trust company, and the relocation of the head office, branch offices, agencies and other business places or offices, under the conditions as prescribed by Presidential Decree.

[This Article Wholly Amended by Act No. 5502. Jan. 13, 1998] Article 8-2 (Qualifications for Officers)

Any person falling under any of the following subparagraphs shall not become an officer of a trust company, and when he becomes to fall there- under after he has become one, he shall lose the relevant office:

1. A minor, a person of incompetency or of quasi-incompetency;

2. A person who has yet to be reinstated after having been declared bankrupt;

3. A person who has been sentenced to imprisonment without prison labor or heavier one, and for whom 5 years have yet elapsed from the date when the execution of such sentence was terminated (including the case where the said execution is deemed to be terminated) or the said execution is exempted;

4. A person who has been sentenced to a fine or heavier one for commit- ting a violation of the finance-related Acts and subordinate statutes prescribed by this Act, the finance-related Acts and subordinate stat- TRUST BUSINESS ACT

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ues prescribed by Presidential Decree (hereinafter referred to as the "finance-related Acts and subordinate statues") or foreign finance- related Acts and subordinate statutes (this means foreign Acts and subordinate statutes equivalent to this Act or the finance-related Acts and subordinate statutes; hereinafter the same shall apply), and for whom 5 years have yet elapsed from the date on which the execution of such sentence is terminated (including the case where the said ex- ecution is deemed to be terminated) or the said execution is exempted;

5. A person who is in the period of stay of execution after having been sentenced to a stay of imprisonment without labor or heavier one;

6. A person who has been dismissed or removed by a disciplinary action under this Act, the finance-related Acts and subordinate statutes or foreign finance-related Acts and subordinate statues, and for whom 5 years have yet elapsed after he was dismissed or removed by a dis- ciplinary action;

7. A person who was an officer or employee of a corporation or a com- pany whose license and authorization of business have been cancelled under this Act, the finance-related Acts and subordinate statutes or foreign finance-related Acts and subordinate statutes (limited to any person prescribed by Presidential Decree, who has been directly and correspondingly responsible for the occurrence of the relevant causes for such cancellation), and for whom five years have yet elapsed from the date on which the revocation for the relevant corporation or company was made; and

8. A person who was notified as a retired executive or resigned staff that he/she would have received measures of recommendation of dismissal (including request for dismissal) or request for removal if he/she had held office or had been in office under this Act or the finance-related Acts and subordinate statutes, in whose case five years have not elapsed from the date of such notification (In case where five years from the date of notification exceeds seven years from the date of retirement or resignation, seven years from the date of retirement or resignation shall apply).

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] TRUST BUSINESS ACT

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CHAPTER BUSINESS

Article 9 (Scope of Business)

(1) A trust company may conduct, within the scope of this Act and other related Acts, the business concerning the acceptance of trust and the man- agement, operation and disposition of trust properties. (2) Deleted.

Article 10 (Limitation on Trusted Properties)

(1) Every trust company shall be prohibited from accepting the trust of any property other than properties falling under each of the following sub- paragraphs:

1. Money;

2. Securities;

3. Monetary claims;

4. Movables;

5. Land, and fixtures thereto;

6. Surface rights, chonsegwon (registered lease on a deposit basis), and lease of land; and

7. Incorporeal property rights (including intellectual property rights). (2) Every trust company may accept the trust of not less than two prop- erties at the same time from among the properties referred to in each subparagraph of paragraph (1) from any truster according to one trust contract. (3) The Financial Services Commission may set forth the standards neces- sary for the types of trust, the replenishment of principal or interests, and other conditions for trust transactions, with respect to accepting the trust of properties and the trust of aggregate properties falling under each subparagraph of paragraph (1), under the conditions as prescribed by Presidential Decree. (4) In case where any trust company enters into a trust contract by which the trust company undertakes a project to develop the trusted land into a housing site or a factory site or to construct buildings or install facilities and equipment on the trusted land (hereinafter referred to as the "land development project"), such trust company may accept the trust of the TRUST BUSINESS ACT

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property referred to in paragraph (1) 1 within the scope of not more than 15/100 of the project cost by the land development project under the trust contract. Article 11 Deleted. Article 12 (Distinction between Trust Property and Trustee's Own Prop- erty)

(1) The provisions of the proviso of Article 31 (1) of the Trust Act shall not apply to trust companies. (2) If, in the case of money trusts, the property acquired by its manage- ment is subject to quotations at the securities market, association broker- age market or markets in foreign country similar to those under the Securities and Exchange Act, the trust company may convert it into its own property in compliance with what is prescribed by the act of trust, only in cases where it is necessary for performing its obligations which it owes to the beneficiary by virtue of the act of trust.

Article 12-2 (Accounting Audit of Trust Property) (1) Any trust company shall undergo an accounting audit of each trust property by an auditor under Article 3 (1) of the Act on External Audit of Stock Companies (hereinafter referred to as the "auditor"): Provided, That the same shall not apply to the case prescribed by Presidential Decree.

(2) The Financial Services Commission may, in case where deemed neces- sary for the protection of public interests or the investors, order the auditor to furnish the data or file a report related to an accounting audit of trust property, and take other necessary measures.

(3) The provisions of Article 9 of the Act on External Audit of Stock Com- panies shall apply mutatis mutandis to an accounting audit of the trust property under paragraph (1). (4) Matters necessary for an appointment of auditor, the standards for audit, the power of auditor, the criteria for accounting settlements, the submission of audit report and the public announcements, etc. shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 12-3 (Auditor's Liability for Compensation for Damages) TRUST BUSINESS ACT

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(1) Any auditor shall, where he fails to enter important matters as a result of the accounting audit under Article 12-2 (1) on his audit report or makes false entries, whereby causing damages to any beneficiary who has made use of such report, be held liable to compensate for such dam- ages to the relevant beneficiary. In this case, where an audit team is the auditor, any person participating in the audit of relevant trust prop- erty shall be held jointly liable to compensate for such damages. (2) Where an auditor is liable to compensate for damages to a beneficiary of trust property, if any director or auditor of the relevant trust company (referring to any member of the audit committee, if such committee is set up; hereafter the same shall apply in this paragraph) is also respon- sible, such auditor and the director or auditor of the trust company shall be held jointly liable to compensate for such damages. (3) The provisions of Article 17 (5) through (7) of the Act on External Audit of Stock Companies shall apply mutatis mutandis to the case of paragraphs (1) and (2). [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 12-4 (Development of Interest Conflict Prevention System) (1) Every trust company shall develop and implement an interest conflict prevention system falling under each of the following subparagraphs in order to prevent any interest conflict between the trust sector and the own sector or between trust commodities. In this case, specific standards for the interest conflict prevention system shall be laid down by the Financial Services Commission:

1. The organizational separation between the trust sector and the own sector and restrictions on concurrent offices and positions held by officers and employees;

2. Restrictions on the exchange of information between the trust sector and the own sector or between trust commodities; and

3. Other measures necessary to prevent the interest conflict. (2) The Financial Services Commission may, when it recognizes the inter- est conflict prevention system that is developed pursuant to paragraph (2) as being inappropriate, ask the relevant trust company to correct such system, explicitly indicating the specific grounds of such inappropriate- ness and setting a reasonable period during which it is required to make the correction of the system in question. The relevant trust company shall, TRUST BUSINESS ACT

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upon receiving the request, comply with the request unless justifiable grounds exist that make it impossible for the relevant trust company to do so.

[This Article Newly Inserted by Act No. 7337, Jan. 17, 2005] Article 13 (Incidental Business)

(1) Every trust company may run the business incidental to the trust busi- ness, which falls under each of the following subparagraphs:

1. Receiving deposits for safe custody;

2. Providing guarantees for debts;

3. Acting as intermediary in the transactions of real estates;

4. Acting as intermediary in the loan of money or the lease of real estates;

5. Flotation of public bonds, corporate debentures or stocks, receiving subscription money thereof, or handling of the payment of principal and dividends thereof;

6. Executing a will with respect to properties;

7. Inspecting the accounts;

8. Acting as an agent for the following matters: (a) Acquisition, management, disposition or lease of properties; (b) Adjustment or liquidation of properties;

(c) Collection of claims;

(d) Performance of obligations; and

(e) Insurance; and

9. Other business prescribed by Presidential Decree, which is related to the trust business and does not impede the inherent business of the relevant trust company.

(2) The Financial Services Commission may prescribe necessary restric- tions on the guarantee of debts.

Article 14 Deleted. Article 15 (Restriction on Operation of Trustee's Own Fund) (1) Every trust company shall be prohibited from operating its inherent fund without resorting to the way falling under each of the following subparagraphs:

1. Subscription, underwriting or purchase of public bonds, corporate de- TRUST BUSINESS ACT

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bentures and stocks;

2. Loans secured by the securities listed in subparagraph 1;

3. Loans secured by the movables;

4. Purchases of real estates;

5. Loans secured by real estates or by a foundation established by the Acts and subordinate statutes;

6. Loans to public organizations;

7. Loans extended to anyone who is designated as a project undertaker in accordance with the Act on Private Participation in Infrastructure;

8. Deposits in financial institutions prescribed by Presidential Decree or postal savings;

9. Purchase of bills accepted by banks or trust companies; and

10. Purchase of beneficial securities accruing from the real estate invest- ment trust under the Act on Business of Operating Indirect Investment and Assets.

(2) The Financial Services Commission may, in case where deemed neces- sary, prescribe the type of corporate debentures, stocks, and movables under paragraph (1).

(3) The aggregate of a purchase price of real estates under paragraph (1) 4 shall not exceed the total sum of paid-in capital and reserves.

Article 15-2 (Restriction on Operation of Trust Fund) (1) A trust company may operate the money belonging to the trust prop- erty only by the methods falling under any of the following subparagraphs:

1. The application, underwriting and purchase of securities, including government bonds, public bonds, corporate bonds and stocks, etc. pro- vided for in Article 2 (1) and (2) of the Securities Exchange Act;

2. Loans; and

3. Other methods as prescribed by Presidential Decree. (2) The specific scope for operating methods under paragraph (1) 1 and 2 shall be prescribed by Presidential Decree.

(3) The Financial Supervisory Commission may, in case where deemed necessary for the protection of truster and the maintenance of order for sound trust transactions, set forth the standards for the objects, con- TRUST BUSINESS ACT

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ditions, scopes, etc. of operating the trust fund under paragraph (1), under the conditions as prescribed by Presidential Decree.

[This Article Wholly Amended by Act No. 5502, Jan. 13, 1998] Article 15-3 (Operation of Surplus Fund)

Any trust company shall operate any surplus fund arising from the busi- ness of real estate trust in a manner falling under any of the following subparagraphs:

1. Deposits in financial institutions prescribed by Presidential Decree;

2. Acceptance or purchase of the government or public bonds;

3. Acceptance or purchase of the securities for which the Government or financial institutions have given a payment guarantee; and

4. Other manners prescribed by Presidential Decree. [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 16 (Duty to Deposit)

(1) Every trust company shall deposit cash or government bonds equiv- alent to the amount of not less than 1/10 of its capital in order to guar- antee beneficiaries the compensation for damages incurred to them by its violation of trust obligations under the conditions as prescribed by the Financial Services Commission: Provided, That any financial institution with its nationwide business network provided for in Article 2 (1) 2 of the Banking Act that concurrently runs the trust business shall deposit cash and government bonds equivalent to the amount of not less than 25/1,000 of its capital.

(2) The amount in excess of 3/5 of the deposit funds under paragraph (1) may be substituted by the securities under Article 15 (1) 1 in lieu of the government bonds. Article 17 (Preference of Beneficiaries)

The beneficiaries shall have the rights to receive the repayment in pref- erence to other creditors with respect to the cash, government bonds and securities which are deposited by the trust company under Article

16. Article 17-2 (Issuance of Beneficiary Certificate) (1) A trust company may issue the beneficiary certificates indicating the right to benefit by the money trust contract.

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(2) Any trust company shall, if it intends to issue beneficial certificates pursuant to paragraph (1), report its intention in advance to the Financial Services Commission.

(3) Beneficiary certificates shall be bearer certificates: Provided, That this shall not apply if a beneficiary demands otherwise. (4) Beneficiary certificates in the non-bearer certificates shall be convert- ed into bearer certificates by the request of beneficiaries. [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968] Article 17-3 (Particulars to be Entered on Beneficiary Certificate) Each beneficiary certificate shall contain a mark, a serial number and a provision for trust, and the particulars falling under the followings, and shall be signed and sealed by the representative director of the trust com- pany:

1. Corporate name of the trustee;

2. Name or title of the beneficiary in a case of non-bearer certificate;

3. Face value;

4. Contents of operational manners, if they are set forth;

5. Contents of a contract for replenishment of principal or interests under Article 10 (3), if it is concluded;

6. Period of a trust contract;

7. Period and place of repayment of the principal of trust and of allo- cation of incomes;

8. Calculating method of the remuneration for trust; and

9. Other matters as prescribed by the Presidential Decree. [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968] Article 17-4 (Transfer and Exercise of Right to Benefit) In case where the beneficiary certificates have been issued, the transfer and exercise of the right to benefit under the relevant trust contract shall be performed only by such certificates: Provided, That this shall not apply to a case where the certificates are of a non-bearer form. [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968] Article 17-5 (Succession to Rights and Obligations of Truster) A person acquiring the beneficiary certificates shall succeed to the rights and obligations with respect to the relevant beneficiary certificates. [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968] Article 17-6 (Purchase of Benefit Certificates)

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A trust company may purchase the beneficiary certificates as the trustee's own property under the conditions as determined by the Financial Ser- vices Commission. In this case, the provisions of Article 29 of the Trust Act shall not be applied thereto. [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968] Article 17-7 (Exercise of Rights over Stocks Acquired from Trust Property) (1) Any rights over the stocks acquired from trust property shall be ex- ercised by the trust company concerned.

(2) Any trust company shall, where it exercises the rights over the stocks under paragraph (1), exercise them in good faith for the interest of beneficiaries.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 17-8 (Restrictions on Exercise of Voting Rights on Trust Property) (1) Any trust company shall, where it falls under any of the following subparagraphs, exercise its voting rights, notwithstanding the provisions of Article 17-7 (1), in a manner not affecting the content of a resolution made by the number of stocks arrived at by a deduction of the number of stocks forming a trust property from the number of stocks participating in a general meeting of shareholders of a corporation that has issued the stocks forming a trust property: Provided, That the same shall not apply to the case where a corporation that has issued the stocks forming a trust property is obviously expected to incur a loss to such trust property due to a merger, a transfer or takeover of business, the appointment of officers and other matters corresponding thereto:

1. Where a person falling under any of the following items aims at incorpo- rating a corporation which has issued the stocks forming the relevant trust property into an affiliated company under subparagraph 3 of Article 2 of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as an "affiliated company"):

(a) A trust company, or a person in a special relation as prescribed by Presidential Decree with it; and

(b) A person prescribed by Presidential Decree who exercises the de facto power of controlling a trust company;

2. Where a corporation that has issued the stocks forming a trust pro- perty is in a relation falling under each of the following items with TRUST BUSINESS ACT

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the relevant trust company:

(a) Where it is in a relation of an affiliate company; and (b) Where it is in a relation as prescribed by the Presidential Decree, which exercises the de facto power of controlling the trust com- pany; and

3. Where there exist some concerns about inflicting harms to the pro- tection of beneficiaries or the proper operation of trust properties, and which is prescribed by Presidential Decree.

(2) Any trust company shall, where the stocks forming a trust property come to fall under any of the following subparagraphs, not be allowed to exercise the voting rights with respect to the relevant stocks:

1. Where it has acquired the stocks in excess of 15/100 of the total sum of stocks issued by the same stock company, the relevant stocks in excess; and

2. Where a corporation which has issued the stocks forming a trust prop- erty has a trust company acquire under a trust contract in order to secure its own stocks, the stocks of a relevant corporation. (3) A trust company shall not commit an act for the purpose of being acquitted of the application of the provisions of paragraphs (1) and (2), such as a cross-exercise of voting rights under a contract, etc. with a third party.

(4) The Financial Services Commission may, where a trust company ex- ercises the voting rights with respect to the stocks forming a trust property in contravention of paragraphs (1) through (3), order a disposition of the relevant stocks. (5) The provisions of the proviso of paragraph (1) shall not apply to any trust company belonging to a business group subject to mutual invest- ment limit under Article 9 (1) of the Monopoly Regulation and Fair Trade Act. [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 17-9 (Public Announcement concerning Exercise of Voting Rights) Any trust company shall, where it exercises the voting rights under Article 17-7 (1) on the matters related to a change of the management right such as a merger, a transfer or takeover of business and the appointment of officers, make a public announcement thereof under the conditions as TRUST BUSINESS ACT

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determined by the Financial Services Commission.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 17-10 (Books and Documents concerning Trust Property, etc.) (1) A beneficiary may request a trust company for a perusal of books and documents pertaining to a trust property related with him, or for a delivery of their certified copies or abridged copies during business hours, and a trust company shall not refuse such a request without justifiable reasons. (2) Matters necessary for the scope of books and documents subject to a perusal or a delivery of the certified copies or abridged copies under paragraph (1) shall be determined by the Financial Services Commission.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] CHAPTER ACCOUNTING

Article 18 (Business Year)

The business year of trust companies shall be as determined by the ar- ticles of incorporation.

Article 19 (Obligation to Submit Reports)

Trust companies shall submit monthly and annual business reports to the Financial Services Commission: Provided, That in case where the Financial Services Commission sets forth it otherwise under the conditions as prescribed by Presidential Decree, this shall not apply. Article 20 (Public Notice of Balance Sheet and Accounting Settlement) (1) Deleted.

(2) The Financial Services Commission may set forth the standards for accounting settlements concerning the trust business of trust companies under the conditions as prescribed by Presidential Decree. Article 21 (Aggravation of Deposit Responsibility to Reserve Funds) A trust company shall deposit not less than 1/10 of its profits as a reserve fund whenever the profits are allotted, until the said funds reach to the total sum of its paid-in capital.

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CHAPTER MATTERS PROHIBITED

Article 22 (Restrictions on Holding of Concurrent Office by Officers, etc.) Any standing officer of a trust company shall, where he falls under the requirements as prescribed by Presidential Decree, not be concurrently engaged in another company or other profit-making corporations as an executive director.

[This Article Wholly Amended by Act No. 6180, Jan. 21, 2000] Article 23 Deleted. Article 24 Deleted. CHAPTER SUPERVISION

Article 24-2 (Supervision of Trust Company)

The Financial Services Commission may supervise the business of trust companies, and issue an order required therefor, in order to protect the beneficiaries and maintain a sound order in trust transactions.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 24-3 (Guidance for Sound Management)

(1) A trust company shall observe the management guidance standards set forth by the Financial Services Commission with respect to matters falling under each of the following subparagraphs in order to maintain the soundness of management, under the conditions as prescribed by the Presidential Decree:

1. Matters relating to the appropriateness of capital;

2. Matters relating to the soundness of assets;

3. Matters relating to the liquidity; and

4. Other mattes necessary to secure the soundness of management. (2) The Financial Services Commission may, where it deems that a trust company fails to observe the management guidance standards under para- graph (1) and is feared to greatly undermine the soundness of manage- ment, request such trust company to take measures necessary for the im- provement of its management such as increasing its paid-in capital and restricting the allotment of profits, etc. [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 24-4 (Internal Control Standards)

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Every trust company shall lay down basic procedures and standards with which its officers and employees comply when they perform their duties under the conditions as prescribed by the Presidential Decree in order to abide by Acts and subordinate statues, to operate its properties in a sound manner and to protect beneficiaries.

[This Article Newly Inserted by Act No. 7337, Jan. 17, 2005] Article 25 (Report and Submission of Document, etc.) The Financial Services Commission may, where it deems necessary, have a trust company report on the status of business and assets or submit documents or accounting books. Article 25-2 (Modification, etc. of Standard Contractual Terms and Condi- tions, etc.)

(1) Every trust company shall, if it intends to develop or change the con- tractual terms or the standard contract (hereinafter referred to as "contractual terms, etc.") in connection with the trust transactions, report in advance to the Financial Services Commission: Provided, That in case where the Financial Services Commission recognizes that the contractual terms, etc. do not affect disadvantageously the rights, interests and obli- gations of beneficiaries, the relevant trust company shall, if it develops or changes the contractual terms, etc., report it to the Financial Services Commission within ten days.

(2) The Financial Services Commission may, where it deems necessary for the maintenance of a sound order in trust transactions, order the trust company to modify the standard contract, etc.

(3) The Financial Services Commission may set forth the time, procedures and other necessary matters for reporting on an institution or modification of the standard contract, etc. under the conditions as prescribed by the Presidential Decree. (4) A trust company shall make a public announcement of the contract conditions, etc. for the trust transactions, under the conditions as deter- mined by the Financial Services Commission.

[This Article Newly Inserted by Act No. 5502, Jan. 13, 1998] Article 25-3 (Public Announcement of Management Status) TRUST BUSINESS ACT

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A trust company shall make a public announcement of matters which are necessary for the protection of beneficiaries and which are prescribed by Presidential Decree, under the conditions as determined by the Financial Services Commission. [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 26 (Inspection, etc.)

(1) The Governor of the Financial Supervisory Service established pur- suant to the Act on the Establishment, etc. of Financial Services Commission (hereinafter referred to as the "Governor of Financial Super- visory Service") may have the officials under his control inspect the busi- ness and assets of trust companies.

(2) The Governor of the Financial Supervisory Service may, where he deems it necessary to conduct the inspection under paragraph (1), re- quest a trust company to file a report on its business and assets, furnish the data and have an interested party attend and state his opinions. (3) A person in charge of making the inspection under paragraph (1) shall carry a certificate showing his authority and produce it to persons con- cerned.

[This Article Wholly Amended by Act No. 6180, Jan. 21, 2000] Article 26-2 (Sanction, etc. against Officers and Employees) (1) The Financial Services Commission may, where an officer of a trust company violates this Act or the regulations, orders and instructions under this Act or commits an act of greatly undermining the sound management of a trust company, order the suspension of performance of duties of the relevant officer according to a recommendation from the Governor of the Financial Supervisory Service, or advise the person entitled to appoint to dismiss him, and have the Governor of the Financial Supervisory Ser- vice take proper measures, such as a warning, etc. (2) The Governor of the Financial Supervisory Service may, where an em- ployee of a trust company violates this Act or the regulations, orders and instructions under this Act or commits an act of greatly undermining the sound management of a trust company, request the president of such trust company to take proper censure measures, such as a dismissal, a suspension of work, a cut in salary and a reprimand, etc.

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(3) The Governor of the Financial Supervisory Service may, where a trust company operates its business in the unsound manner while continually violating this Act, etc., recommend to the Financial Services Commission to order a change in types or methods of business, or a business suspension, of the relevant trust company. [This Article Newly Inserted by Act No. 5502, Jan. 13, 1998] Article 27 (Notification of Contents of Measure on retired Executive, etc) (1) Where acknowledged that the retired executive or the resigned staff of a trust company would have received the measures falling under Article 26-2 if he/she had held office or had been in office, the Financial Services Commission shall enable the Governor of the Financial Supervisory Service to notify the head of the relevant trust company of the contents of the measures acknowledged received.

(2) The head of the trust company who has been notified under para- graph (1) shall notify the relevant executive or staff of this and keep the record.

[This Article Newly Inserted by Act No. 8908, Mar. 14, 2008] Article 28 (Suspension of Business)

The Financial Services Commission may order the suspension of a trust business within the limit of not exceeding six months, in case where a trust company violates the Acts and subordinate statutes, the articles of incorporation, or the orders or instructions of the Financial Services Commission or the Governor of the Financial Supervisory Service, or com- mits an act harming the public interests.

[This Article Wholly Amended by Act No. 5982, May 24, 1999] Article 29 Deleted. Article 29-2 (Revocation of Authorization)

The Financial Services Commission may revoke the authorization of a trust business, in case where a trust company comes to fall under any of the following subparagraphs:

1. Where the company has deranged an order in trust transactions by significant illegal acts or unsound business operations; 1-2. Where it has obtained an authorization of trust business by falsity and other illegal means;

1-3. Where it has violated the contents or terms of authorization; TRUST BUSINESS ACT

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2. Where it has come to fall under the causes listed in Article 28; 2-2. Where it has operated the business during a period of business sus- pension; and

3. Where such revocation is deemed necessary in accordance with the status of readjustments with respect to the trust company which has received an order of business suspension under Article 28. [This Article Wholly Amended by Act No. 5982, May 24, 1999] Article 29-3 (Exclusion of Application)

The provisions of Articles 7 (1), 8-2, 15 and 24-4 shall not apply to a financial institution which falls under any of the following subparagraphs and operates the trust business concurrently:

1. Financial institution under the Banking Act;

2. Securities company under the Securities and Exchange Act; and

3. Insurance company under the Insurance Business Act. [This Article Wholly Amended by Act No. 7615, Jul. 29, 2005] CHAPTER DOMESTIC BRANCHES OF

FOREIGN FINANCIAL

INSTITUTIONS

Article 29-4 (Authorization for Foreign Financial Institutions) (1) Any foreign financial institution (referring to an institution which is established under the foreign Acts and subordinate statutes and runs a trust business in a foreign state; hereinafter the same shall apply) shall, when it intends to open or shut down a branch office or a business place (hereinafter referred to as the "branch, etc.") in order to operate a trust business in the Republic of Korea, obtain an authorization of the Financial Services Commission, under the conditions as prescribed by Presidential Decree. (2) The Financial Services Commission may attach conditions to the au- thorization under paragraph (1). [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 29-5 (Application of Acts to Foreign Financial Institutions) (1) Any branch, etc. of a foreign financial institution, which has been granted an authorization under Article 29-4 (1) shall be deemed a trust TRUST BUSINESS ACT

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company under this Act and the representative of any foreign financial institution in Korea shall be deemed an officer of the trust company that is incorporated under this Act: Provided, That the provisions of Article 3 (2) shall not apply thereto. (2) The business fund, etc. of the branch, etc. of a foreign financial insti- tution and other necessary matters shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 29-6 (Revocation of Authorization, etc.)

(1) The Financial Services Commission may, where the head office of a foreign financial institution comes to fall under each of the following sub- paragraphs, revoke an authorization granted to its branch, etc. of the relevant foreign financial institution:

1. Where it ceases to exist due to a merger or a transfer of business;

2. Where it is subjected to a disciplinary punishment corresponding to an administrative disposition taken by a supervisory agency under Article 29-2, for the reasons of delicts and unsound business oper- ations, etc.; and

3. Where it suspends or interrupts its business. (2) The branch, etc. of a foreign financial institution shall, where the head office of relevant financial institution comes to fall under any subparagraph of paragraph (1), file a report thereof with the Financial Services Commission within 7 days from the date on which the relevant cause occurred. (3) Where the head office of a foreign financial institution is dissolved, goes bankrupt, ceases to run the trust business or faces revocation of the authorization of trust business, the authorization granted to the branch, etc. of such foreign financial institution under Article 29-4 (1) shall be considered to have been revoked on the date on which the relevant cause occurs.

[This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] CHAPTER SUPPLEMENTARY

PROVISIONS

Article 30 (Effect of Merger)

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(1) When a trust company merges with another one, the surviving trust company or the established trust company after the merger shall succeed to the rights and obligations related to the trust contracts of the disap- pearing trust company due to the merger.

(2) In case where there exists any beneficiary raising objections to the merger of trust companies, the provisions of Articles 11 and 17 (1) and (3) of the Trust Act shall apply mutatis mutandis to the trust concerned. Article 31 (Change of Purposes)

(1) In case where a trust company changes its purposes and continues to exist as a company to engage in another business, the Financial Services Commission may order the relevant company to deposit its assets or issue other necessary orders until it completely pays off its obligations related to its trust business.

(2) The provisions of Articles 25 and 26 shall apply mutatis mutandis to the case as provided in the paragraph (1).

Article 32 (Effect of Cancelling Business License) A trust company shall be dissolved when its business license is cancelled. Article 33 (Supervision of Liquidation)

(1) The liquidation of a trust company shall be supervised by the Financial Services Commission.

(2) The Financial Services Commission may inspect the status of the liquidating business and assets, order the deposit of assets, or issue other orders necessary for the supervision of liquidation.

Article 34 (Appointment of Liquidator)

In case where a trust company is dissolved due to the cancellation of its business license, the Financial Services Commission shall appoint a liquidator thereof.

Article 35 (Special Case of Appointment of Liquidator) In case where the Court appoints, pursuant to the Commercial Act, a liqui- dator upon request by the public prosecutor or interested parties, and where there exists no liquidator, the Financial Services Commission shall appoint the liquidator upon request by interested parties or ex officio. TRUST BUSINESS ACT

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Article 36 (Remuneration for Liquidator)

In case where the Financial Services Commission has appointed a liqui- dator, it may have the trust company pay remunerations to him. Its amount shall be determined by the Financial Services Commission. Article 37 (Dismissal of Liquidator)

The Financial Services Commission may, when there exist any important reasons, dismiss the liquidator upon request by interested parties or ex officio. Article 37-2 (Entrustment of Authority)

The Financial Services Commission may entrust in part its authority under this Act to the Governor of the Financial Supervisory Service, under the conditions as prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 5502, Jan. 13, 1998] Article 37-3 (Hearings)

The Financial Services Commission shall, in case where it intends to revoke the authorization of business of the trust company under Article 29-2, hold hearings.

[This Article Newly Inserted by Act No. 5502, Jan. 13, 1998] Article 37-4 (Matters to Be Entered in Trust Contract) Matters that are prescribed by Presidential Decree as being necessary to protect beneficiaries and maintain the sound transaction order of trust shall be entered in every trust contract that is concluded between every trust company and every truster.

[This Article Newly Inserted by Act No. 7337, Jan. 17, 2005] Article 37-5 (Order Given to Transfer Trust Contract) (1) The Financial Services Commission may, if it recognizes the need to keep intact trust contracts that are concluded with any trust company for which it takes a disposition to revoke its authorization under Article 29-2 or 29-6 in order to ensure the public interest and protect beneficiaries, etc., order the relevant trust company in question to transfer its business to any other trust company that is to take over the former's business concerning the trust contracts after obtaining the consent thereof from the trusters of trust contracts, beneficiaries and the trust company that TRUST BUSINESS ACT

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is to take over the business. (2) The Financial Services Commission may, if it is impossible to obtain the consent from the trusters of trust contracts, beneficiaries or the trust company that is to take over the business referred to in paragraph (1), allow the trust company for which it takes the disposition to revoke its authorization to continue its business on the condition that it runs the business for the period of trust contracts. In this case, the relevant trust company shall be deemed that it takes no disposition to revoke the author- ization during such period. [This Article Newly Inserted by Act No. 7337, Jan. 17, 2005] Article 38 (Cases of Composition, Bankruptcy and Compulsory Composi- tion)

(1) In the case of composition, bankruptcy and compulsory composition of a trust company, the Court may request the persons engaged in the inspection or supervision of such a trust company to state their opinions, or commission them to perform the inspection or examination.

(2) In the case of paragraph (1), the persons requested or commissioned by the Court may state their opinions to the Court.

Article 38-2 (Share of Expenses)

(1) A trust company undergoing an inspection by the Financial Super- visory Service shall pay to the Financial Supervisory Service the share of expenses to be appropriated for the inspection expenses. (2) The ratio of the share of expenses under paragraph (1) and its limit and other matters necessary for the payment of shares of expenses shall be prescribed by Presidential Decree.

[This Article Newly Inserted by Act No. 5502, Jan. 13, 1998] CHAPTER PENAL PROVISIONS

Article 39 (Penal Provisions)

Any person falling under each of the following subparagraphs shall be pun- ished by imprisonment with prison labor for not more than 5 years or by a fine not exceeding 30 million won:

1. Person who has run the trust business without obtaining an authoriza- tion under Article 3 (1);

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2. Person who has obtained an authorization under Article 3 (1) by falsity and other illegal means; and

3. Person who has exercised the voting rights in contravention of the provisions of Article 17-8 (1) through (3).

[This Article Wholly Amended by Act No. 6180, Jan. 21, 2000] Article 40 (Penal Provisions)

Any person falling under each of the following subparagraphs shall be pun- ished by imprisonment with prison labor for not more than three years or by a fine not exceeding 20 million won:

1. Person who has violated the provisions of Article 12 (2);

2. Person who has failed to undergo an accounting audit under Article 12-2 (1) without any justifiable reasons;

3. Person who has divulged secrets related to an accounting audit of trust property in contravention of Article 12-2 (3);

4. Person who has failed to make depositions in contravention of Ar- ticle 16 (1); and

5. Person who has failed to accumulate the reserve fund in contravention of Article 21.

[This Article Wholly Amended by Act No. 6180, Jan. 21, 2000] Article 41 (Penal Provisions)

Any person falling under each of the following subparagraphs shall be pun- ished by imprisonment with prison labor for not more than one year or by a fine not exceeding ten million won:

1. Person who has violated the provisions of Article 7 (2);

2. Person who has violated the provisions of Article 10;

3. Person who has refused, obstructed or evaded the orders by the Finan- cial Services Commission under Article 12-2 (2), such as to furnish the data or file reports, or has submitted false data;

4. Person who has violated the provisions of Article 13;

5. Person who has violated the provisions of Article 15;

6. Person who has violated the provisions of Article 15-2;

7. Deleted;

8. Person who has failed to make a public announcement in contravention of the provisions of Article 17-9; and

9. Person who has violated the orders under the provisions of Articles 24-2, 31 (1) and 33 (2).

[This Article Wholly Amended by Act No. 6180, Jan. 21, 2000] TRUST BUSINESS ACT

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Article 42 (Joint Penal Provisions)

Where the representative of a corporation or the agent, servant and other employees of a corporation or an individual commits the act of violating Articles 39 through 41 in relation to the business of such corporation or individual, the corporation or the individual shall be each fined according to relevant Articles in addition to the punishment of the actor. [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000] Article 43 (Fine for Negligence)

(1) Any person falling under each of the following subparagraphs shall be punished by a fine for negligence not exceeding ten million won:

1. Person who has violated the provisions of Article 8 (1) or (2);

2. Person who has violated the provisions of Article 17-10;

3. Person who has failed to submit a report or the data under Article 19 or 25, or submitted by falsity;

4. Person who has made an accounting settlement in contravention of Article 20 (2);

5. Person who has failed to make a public announcement under Article 25-2 (4) or 25-3, or made by falsity; and

6. Person who has refused, obstructed or evaded the inspection under Article 26 (1) (including the case of application mutatis mutandis by Article 31 (2)) or 33 (2).

(2) The fine for negligence under paragraph (1) shall be imposed and collected by the Financial Services Commission under the conditions as prescribed by Presidential Decree. (3) Persons who have objections against the disposition of a fine for negli- gence under paragraph (2) may file an objection with the Financial Services Commission within thirty days since accepting the notification of relevant disposition.

(4) Where the person who has been subjected to the disposition of a fine for negligence under paragraph (2) has filed an objection under para- graph (3), the Financial Services Commission shall notify without delay the competent court of the relevant fact, and the court so notified shall hold a trial on the fine for negligence as prescribed by the Non-Contentious TRUST BUSINESS ACT

27

Case Litigation Procedure Act. (5) Where an objection is not filed within the period under paragraph (3), nor the fine for negligence is paid, the fine for negligence shall be col- lected following the procedures for the recovery of national taxes in arrears.

Article 44 Deleted. ADDENDA

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.

(2) (Repealing Act) The Chosun Trust Business Decree, Decree No. 8, pro- mulgated on June 9, 1931, shall be hereby repealed. (3) (Transitional Measures) Those persons who have obtained a business license of trust in accordance with the Chosun Trust Business Decree shall be deemed to have obtained such license in accordance with this Act. (4) (Idem) The measures taken by the Minister of Finance and Economy in accordance with the Chosun Trust Business Decree implemented prior to this Act shall be deemed to have been taken under this Act, if there are equivalent provisions in this Act thereof.

ADDENDUM

This Act shall enter into force on the date of its promulgation. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on April 1, 1998: Provided, That the amended provision of Article 37-3 shall enter into force on January 1, 1998. Article 2 (General Transitional Measures)

(1) Authorization, approval, decision, order, disposition, and other meas- ures done by the Minister of Finance and Economy under the previous provisions before this Act enters into force shall be deemed to be measures done by the Minister of Finance and Economy, the Financial Supervisory Commission, or the Governor of the Financial Supervisory Service under this Act.

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(2) Application, reporting, and other conducts done to the Minister of Finance and Economy under the previous provisions before this Act enters into force shall be deemed to be conducted to Minister of Finance and Economy, the Financial Supervisory Commission, or the Governor of the Financial Supervisory Service under this Act.

Article 3 (Example of Application concerning Sanctions against Officers and Employees)

The amended provisions of Article 26-2 shall apply to the conducts first done after the enforcement of this Act.

Article 4 (Transitional Measures concerning Standards for Paid-in Capital) A person who has received an authorization for trust business at the time when this Act enters into force, shall meet the standards for paidin capital prescribed in the amended provisions of Article 4 within three years after this Act enters into force.

ADDENDUM

This Act shall enter into force on the date of its promulgation. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)

Articles 2 through 6 Omitted.

ADDENDA

(1) (Enforcement Date) This Act shall enter into force three months after the date of its promulgation.

(2) (Transitional Measures concerning Qualification Requirements for Offi- cers) In case where any officer of a trust company has, at the time when this Act is enforced, come to fall under the cause of disqualification under the amended provision of Article 8-2 due to causes that occurred prior to the enforcement of this Act, the previous provisions shall govern, notwith- standing such amended provisions.

(3) (Application Example concerning Accounting Audit of Trust Property) The amended provisions of Articles 12-2 and 12-3 shall apply to any trust established under the standard contractual terms and conditions first set TRUST BUSINESS ACT

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forth or modified after the enforcement date of this Act (including the trust established under the standard contractual terms and conditions set forth or modified prior to the enforcement date of this Act, which is additionally trusted after the enforcement date of this Act).

(4) (Transitional Measures concerning Penal Provisions and Fine for Neg- ligence) In the application of the penal provisions and the regulation of the fine for negligence to any acts committed prior to the enforcement of this Act, the previous provisions shall govern.

ADDENDA

(1) (Enforcement Date) This Act shall enter into force three months after the date of its promulgation.

(2) (Transitional Measures concerning Internal Control Standards) Every trust company shall lay down its internal control standards pursuant to the amended provisions of Article 24-4 within 6 months from the date on which this Act enters into force.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force one year after the date of its promulgation. Articles 2 through 6 Omitted.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Article 2 Omitted.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Articles 2 and 3 Omitted.

ADDENDA

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation.

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(2) Applicability concerning Modification of Qualifications for Executive) The amended provisions of Article 8-2 shall apply from the person who falls under disqualifications for executive due to the reasons which occur fist after the enforcement of this Act.