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Laws of the Republic of Korea |
The Enforcement Decree of the Financial Investment Services and Capital Market Act
Presidential decree No. 20947, Jul. 29, 2008
Part 1 General Provisions
Article 1 (Purpose)
The purpose of this Decree is to prescribe the matters delegated under the Financial Investment Services and Capital Market Act and the matters necessary for the enforcement thereof. Article 2 (Definition of Terms)
The definition of the terms in this Decree shall be as follows:
1. The term "foreign securities markets" in this Decree shall mean the markets similar to the securities market which are located in foreign countries;
2. The term "soliciting an offer" in this Decree shall mean an activity to solicit a person to acquire securities by informing him/her that such securities are issued or sold, and guiding the procedures for acquiring securities through advertising in newspapers, broadcasts, and magazines, etc., distributing printed materials, such as guides, leaflets, etc., holding road shows, or using telecommunications, etc.: Provided, That the same shall not apply to cases where any or all of the matters falling under each of the following items are simply announced or explained through advertisements, etc. under the conditions prescribed and publicized by the Financial Services Commission, such as excluding the name of an underwriter and the issued amount of securities:
(a) Name of an issuer;
(b) Types of securities to be issued or sold, and prospective amount of the issuance or sales;
(c) General conditions for the issuance and sales of securities; (d) Schedule of the issuance or sales of securities; and The Enforcement Decree of the Financial Investment Services and Capital Market Act (e) Others prescribed and publicized by the Financial Services Commission as unlikely to undermine the protection of investors; and
3. The term "assets denominated in foreign currencies" in this Decree shall mean assets issued, created or distributed in foreign countries and others similar thereto. Article 3 (Scope of Financial Investment Product) (1) The term "amount prescribed by the Presidential Decree, such as sales commission" under the main sentence of Article 3 (1) of the Financial Investment Services and Capital Market Act (hereinafter referred to as "the Act") other than each subparagraph shall mean those falling under each of the following subparagraphs:
1. Commissions under Article 58 (1) of the Act, sales commissions (hereinafter referred to as "sales commission") under Article 76 (4) of the Act or others paid by investors or other customers as consideration for services;
2. Business expenses and risk premium under insurance contracts; and
3. Others prescribed and publicized by the Financial Services Commission. (2) The term "amount prescribed by the Presidential Decree, such as termination commission" under the main sentence of Article 3 (1) of the Act other than each subparagraph shall mean those falling under each of the following subparagraphs:
1. Redemption commissions (hereinafter referred to as "redemption commission") under Article 236 (2) of the Act or termination commissions (including those equivalent thereto) paid by investors or other customers due to an early cancellation;
2. Various taxes;
3. The amount that cannot practically be recovered by investors or other customers because an issuer or a counter-party is unable to pay the predetermined money, etc. due to bankruptcy, debt restructuring, or any other causes equivalent thereto; and
4. Others prescribed and publicized by the Financial Services Commission. Article 4 (Requirements for Commercial Paper)
The term "requirements prescribed by the Presidential Decree" under Article 4 (3) of the Act shall be met by using the form printed with the letters of "commercial paper" distributed by a
person falling under any of the following subparagraphs who is entrusted with the payment by a company:
1. Banks (hereinafter referred to as "bank") under subparagraph 1 of Article 22 of the Act;
2. The Korea Development Bank under the Korea Development Bank Act; or
3. The Industrial Bank of Korea under the Industrial Bank of Korea Act. Article 5 (Foreign Derivatives Transaction)
The term "foreign derivatives prescribed by the Presidential Decree" under Article 5 (2) of the Act shall mean the transactions falling under any of the following subparagraphs:
1. Metal transactions on over-the-counter markets (referring to over-the-counter markets in foreign countries as similar to the derivatives market; hereafter in this Article, the same shall apply) in accordance with regulation of the London Metal Exchange;
2. Bullion transactions in accordance with the regulation of the London Bullion Market Association;
3. Over-the-counter foreign exchange transactions in accordance with the regulation of the U.S. National Futures Association;
4. Over-the-counter foreign exchange transactions under the Commodity Exchange Act of Japan;
5. Vessel freight transactions in accordance with the regulation of the Vessel Freight Leading Dealer Association; or
6. Other transactions prescribed and publicized by the Financial Services Commission which are conducted under internationally standardized conditions or procedures.. Article 6 (Exemption from Collective Investment)
(1) The term "Acts and subordinate statutes prescribed by the Presidential Decree" under Article 6 (5) 1 of the Act shall be as follows:
1. The Real Estate Investment Company Act;
2. The Ship Investment Company Act;
3. The Framework Act on the Promotion of Cultural Industries;
4. The Industrial Development Act;
5. The Support for Small and Medium Enterprise Establishment Act; The Enforcement Decree of the Financial Investment Services and Capital Market Act
6. The Specialized Credit Financial Business Act;
7. The Act on Special Measures for the Promotion of Venture Businesses; and
8. The Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Component and Material.
(2) The term "investors prescribed by the Presidential Decree" under Article 6 (5) 1 of the Act shall mean a person who does not fall under either of the following subparagraphs:
1. A person falling under any of the subparagraphs of Article 10 (1) of this Decree; or
2. A person prescribed and publicized by the Financial Services Commission among the persons under Articles 10 (3) 12 and 10 (3) 13 of this Decree. (3) The term "number prescribed by the Presidential Decree" under Article 6 (5) 1 of the Act shall be 49. In such a case, when another collective investment scheme acquires not less than 10/100 of the total number of outstanding collective investment securities of the collective investment scheme, the number of the investors (referring to the investors under paragraph (2)) in the other collective investment scheme shall be added in calculating the 49 investors. (4) The term "cases prescribed by the Presidential Decree" under Article 6 (5) 3 of the Act shall mean those falling under any of the following subparagraphs:
1. Where a depository institution (hereinafter referred to as "depository institution") under Article 74 (3) of the Act manages and distributes the deposited or entrusted deposits of investors (hereinafter referred to as "investors' deposits") under Article 74 (1) of the Act;
2. Where cases fall under either of the following items when a trust company jointly manages the entrusted money in order to manage the trust property effectively: (a) Where a proportion of money as a pooled property trust under Article 103 (2) of the Act is not more than 40/100; or
(b) Where managing profits generated from trust properties or handling the remaining properties is inevitable due to the cancellation or the redemption of trust.
3. Where a special purpose company (hereinafter referred to as "special purpose company") under Article 271 of the Act carries on its own business;
4. Where a merchant bank (hereinafter referred to as "merchant bank") under Article 336 of the Act performs the business of managing bill management accounts under Article 329 of this Decree;
5. Where a corporation meeting the requirements under Article 51-2 (1) 6 of the Corporate Tax Act collects, manages, and distributes money, etc. (hereinafter referred to as "money, etc.") under the main sentence of Article 3 (1) other than each subparagraph;
6. Where a local company mainly carries on the business of taking another company's business by possessing the equity securities thereof;
7. Where the franchise business under subparagraph 1 of Article 2 of the Fair Franchise Transaction Act is carried on;
8. Where the multilevel sales under subparagraph 5 of Article 2 of the Door-to-door Sales, etc. Act are carried on;
9. Where any person who carries on the business including manufacturing, etc. under the Korean Standard Industrial Classification publicized by the Commissioner of Korea National Statistical Office in accordance with the Statistics Act conducts the business with the money, etc. collected from investors, and distributes the results to them after having officers and employees, business offices and other manpower, and physical facilities necessary for carrying on the business: Provided, That cases where the person specifies the business and distributes the results of the specified business shall be excluded;
10. Mutual financing associations for the purpose of academics, religion, charity, arts, fellowship and other non-profit business;
11. Non-profit business for the members of the families of the same clan or other kinship groups;
12. Where a non-profit corporation under the Civil Act, a public-service corporation under the Act on the Establishment and Operation of Public-Service Corporations, a social services corporation under the Social Welfare Services Act, an employee stock ownership system under the Framework Act on Workers' Welfare, or a non-profit corporation established by obtaining license, authorization, or registration pursuant to other relevant Acts and subordinate statutes conducts any activity for the purpose of its business prescribed in its articles of incorporation;
13. Where the money, etc. collected from investors is managed and distributed upon the consent of all the investors; or
14. Others recognized by the Financial Services Commission after taking into account the matters falling under each of the following items in a comprehensive manner: The Enforcement Decree of the Financial Investment Services and Capital Market Act (a) Whether there is any professional manager who receives fees based on the result of the management;
(b) Whether the motive of investment is based on the knowledge, experience, or ability of a professional manager, or the personal relationship between an investor and the professional manager;
(c) Whether the performance of management is expected to be distributed in proportion to the investment principal within a reasonable period; (d) Whether it is necessary to separate the properties of investors from the professional manager's own properties; and
(e) Whether it is likely to clearly undermine the protection of investors when any case is not regarded as collective investment.
Article 7 (Exemption from Financial Investment Services) (1) The term "derivative-linked securities prescribed by the Presidential Decree" under Article 7 (1) of the Act shall mean those falling under either of the following subparagraphs:
1. Derivative-linked securities based on the price of equity securities (including the securities deposit receipts related thereto) or the fluctuation of the indices based thereon; or
2. Derivative-linked securities other than those under subparagraph 1 which are linked to the prices, interest rates, indicators, or units of the underlying asset or indices based thereon, as well as the proceeds including interest rates on the money, etc. paid by investors at the moment of issuance.
(2) The term "cases prescribed by the Presidential Decree" under Article 7 (4) of the Act" shall mean the cases falling under any of the following subparagraphs where a broker is delegated with all or part of an investment decision (referring to the investment decision under Article 6 (6) of the Act, hereinafter the same shall apply) on financial investment products without extra charge:
1. Where a broker is delegated by an investor with the investment decision on the quantity, price and timing of financial investment products within the designated scope when the investor designates a trading date (limited to one day) of the financial investment products and the total volume or total amount of transactions on the trading date;
2. Where a broker is delegated by an investor with the right to sell financial investment products in advance in accordance with the agreement, etc. when there is any inevitable reason, such as a sharp fall in prices of financial investment products during the period when the investor is absent temporarily due to traveling or sickness, etc.;
3. Where a broker is delegated by an investor with the right (in the case of derivatives, including the right to purchase the derivatives already sold) to sell financial investment products in accordance with the agreement, etc. when the investor fails to make a settlement or to deposit an additional margin subsequent to the purchases, sales and other transactions of financial investment products or fails to comply with an obligation to pay back or an obligation to maintain the rate of collateral related to the credit extension under Article 72 of the Act;
4. Where a broker is delegated by an investor with the right to purchase or sell collective investment securities or the rights to purchase or sell securities in return for the redemption when the investor has already entered into the agreement to purchase or sell collective investment securities of collective investment scheme of short-term finance (hereinafter referred to as "collective investment scheme of short-term finance") under subparagraph 5 of Article 229 of the Act, or to purchase or sell securities in return for the redemption without presenting any intention to deposit money into or withdraw money from an account opened by the broker; or
5. Others prescribed and publicized by the Financial Services Commission as unlikely to undermine the protection of investors and sound trade practice. (3) The term "others prescribed by the Presidential Decree" under Article 7 (6) 3 of the Act shall be as follows:
1. Where the Government or municipal governments purchase or sell financial investment products for public interest in accordance with relevant Acts and subordinate statutes;
2. Where the Bank of Korea makes open market operations pursuant to Article 68 of the Bank of Korea Act;
3. Where there is any sale with repurchase agreement under Article 81 (1) 1 of this Decree or any purchase with repurchase agreement (hereinafter referred to as "transaction with repurchase agreement") under item (b) of subparagraph 3 of Article 85 of this Decree among the persons falling under any of the following items: The Enforcement Decree of the Financial Investment Services and Capital Market Act (a) A person falling under Article 10 (2) of this Decree; (b) A person falling under Articles 10 (3) 1 through 10 (3) 4 and Articles 10 (3) 9 through 10 (3) 13 (including foreigners equivalent thereto) of this Decree; or (c) Others prescribed and publicized by the Financial Services Commission.
4. Where the Korea Financial Investment Association (hereinafter referred to as "the Association") established in accordance with Article 283 of the Act carries on the business under Article 286 (1) 4 of the Act;
5. Where a foreign dealer (referring to the person who conducts business equivalent to dealing in a foreign country in accordance with Acts and subordinate statutes thereof, hereinafter the same shall apply) conducts any activity falling under the following items when a domestic resident makes a public offering, secondary distribution or private placement in a foreign country:
(a) An activity recognized by the Financial Services Commission as making a contract for underwriting with the domestic resident in the Republic of Korea under the conditions prescribed and publicized by the Financial Services Commission; or (b) An activity to make a negotiation only in order to confirm the details of a contract for underwriting with the domestic resident under the conditions prescribed and publicized by the Financial Services Commission and to submit relevant data in advance to the Financial Services Commission.
6. Where a foreign broker or foreign dealer (referring to the person who conducts the business equivalent to brokerage in a foreign country in accordance with the Acts and subordinate statutes thereof; hereinafter the same shall apply) conducts any activity falling under the following items in a foreign country:
(a) Carrying on brokerage or dealing with a broker or dealer as a counter-party; or (b) Receiving purchasing or selling orders from a domestic resident and carrying on brokerage or dealing with the domestic resident (excluding brokers or dealers; hereafter in this item, the same shall apply) as a counter-party without soliciting investment or making investment advertisements (hereinafter referred to as "investment advertisement") under Article 57 of the Act to the domestic resident.
7. Where a foreign discretionary investment advisory company (hereinafter referred to as "foreign discretionary investment advisory company") under the proviso of Article 18 (2) 1
of the Act other than each item or a foreign non-discretionary investment advisory company (hereinafter referred to as "foreign non-discretionary investment advisory company") under the proviso of Article 18 (2) 1 of the Act other than each item provides discretionary investment advisory service or non-discretionary investment advisory service outside the Republic of Korea to a person falling under any of the following items as a counter-party without soliciting investment or making investment advertisements to the person: (a) Government;
(b) The Bank of Korea;
(c) A person falling under Articles 10 (3) 4 and 10 (3) 12 of this Decree; or (d) Others prescribed and publicized by the Financial Services Commission.
8. Where a person provides any investment advisory service on value of financial investment products or an investment decision on financial investment products as incidental to other businesses without charging any extra consideration; or
9. Where an analysis information related to the business concerned is provided by a collective investment scheme appraisal company (hereinafter referred to as "collective investment scheme appraisal company") under Article 258 of the Act, a bond appraisal company (hereinafter referred to as "bond appraisal company") under Article 263 of the Act, a certified public accountant, an appraiser, a person specialized in credit rating, an attorney-at-law, a patent attorney, a certified tax accountant, or any other person (including the group in which the person belongs to) equivalent thereto who provides advisory services pursuant to the relevant Acts and subordinate statutes. (4) Any service falling under the following subparagraphs pursuant to Article 7 (6) of the Act shall not be regarded as financial investment service under each subparagraph:
1. Article 7 (6) 1 of the Act: brokerage;
2. Article 7 (6) 2 of the Act: dealing;
3. Article 7 (6) 3 of the Act: financial investment services falling under each of the following items:
(a) Subparagraphs 1 through 3 and 5 of paragraph (3): dealing; (b) Subparagraph 4 of paragraph (3): brokerage;
(c) Subparagraph 6 of paragraph (3): brokerage or dealing; The Enforcement Decree of the Financial Investment Services and Capital Market Act (d) Subparagraph 7 of paragraph (3): discretionary investment advisory service or non- discretionary investment advisory service; and
(e) Subparagraphs 8 and 9 of paragraph (3): non-discretionary investment advisory service.
Article 8 (Scope of Specially-related Person)
The term "those in a special relationship as prescribed by the Presidential Decree" under Article 9 (1) 1 of the Act shall mean a person (hereinafter referred to as "specially-related person") falling under any of the following subparagraphs:
1. Where the principal is an individual, a person falling under any of the following items: (a) His or her spouse (including the person who is in de facto marriage; hereinafter the same shall apply);
(b) A paternal relative within the sixth degree of relationship and the wife of a paternal relative within the fourth degree of relationship; (c) The husband of a paternal relative within the third degree of relationship; (d) A maternal relative within the third degree of relationship and the spouse and children thereof;
(e) A paternal relative within the second degree of relationship of his/her spouse and the spouse thereof;
(f) A lineal ascendant of the birth parents of an adoptee; (g) An adoptee and his/her spouse and lineal descendants of the adoptive family; (h) The biological mother of a person born out of wedlock; (i) A person who maintains his/her livelihood based on money or other properties, etc. of the principal and those sharing a livelihood with the principal; (j) A corporation or a group and the officers thereof (excluding the officers in cases where confirmation documents prepared by the principal verify that the principal alone or together with related persons falling under items (a) through (i) does not exert substantial influence over the material management of the corporation or the group through the methods of the appointment or dismissal, etc. of an officer) where the principal alone or together with related persons falling under items (a) through (i) contributes not less than 30/100 to the corporation or the group, or exerts substantial
influence over the material management of the corporation or the group, including the appointment and dismissal, etc. of an officer;
(k) A corporation or a group and the officers thereof (excluding the officers in cases where confirmation documents prepared by the principal verify that the principal alone or together with related persons falling under items (a) through (j) does not exert substantial influence over the material management of the corporation or the group through the methods of the appointment or dismissal, etc. of an officer) where the principal alone or together with related persons falling under items (a) through (j) contributes not less than 30/100 to the corporation or the group, or exerts substantial influence over the material management of the corporation or the group, including the appointment and dismissal, etc. of an officer; or
2. Where the principal is a corporation or a group, a person who falls under any of the following items:
(a) Officers;
(b) Affiliates (hereinafter referred to as "affiliates") under the Monopoly Regulation and Fair Trade Act and the officers thereof;
(c) An individual (including the related persons falling under each item of subparagraph 1), corporation (excluding its affiliates; hereafter in this subparagraph, the same shall apply), group or the officers thereof who, individually or together with related persons falling under each item of subparagraph 1, contributes not less than 30/100 to the principal, or has substantial influence over the material management of the principal including the appointment and dismissal, etc. of an officer; or (d) A corporation or a group and the officers thereof (excluding the officers in cases where confirmation documents prepared by the principal verify that the principals alone or together with related persons falling under items (a) through (c) does not exert substantial influence over the material management through the methods of the appointment and dismissal, etc. of an officer) where the principal alone or together with related persons falling under items (a) through (c) contributes not less than 30/100 to the corporation or the group, or exerts substantial influence over the material management of the corporation or the group, including the appointment and dismissal, etc. of an officer. The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 9 (Scope of Major Shareholder)
The term "person designated by the Presidential Decree" under Article 9 (1) 2 (b) of the Act shall mean the person falling under any of the following subparagraphs:
1. A shareholder who has appointed the representative director or the majority of directors on its own or under the agreement or the contract, etc. with other shareholders; or
2. A shareholder prescribed and publicized by the Financial Services Commission as a person who exerts a dominant influence over business operation or important decision- making, such as management strategy, organizational changes, etc. Article 10 (Scope of Professional Investor)
(1) The term "professional investor designated by the Presidential Decree" under the proviso of Article 9 (5) of the Act other than each subparagraph shall mean a professional investor who does not fall under any of the following subparagraphs:
1. Government;
2. The Bank of Korea;
3. Any person falling under subparagraphs 1 through 17 of paragraph (2);
4. Any person falling under subparagraphs 1 through 11 of paragraph (3);
5. Any person falling under items (a) through (c) of subparagraph 18 of paragraph (3); or
6. Any foreigner equivalent to those under subparagraphs 3 and 4; (2) The term "financial institutions designated by the Presidential Decree" under Article 9 (5) 3 of the Act shall mean a financial institution falling under each of the following subparagraphs:
1. Financial institutions under the Banking Act;
2. The Korea Development Bank under the Korea Development Bank Act;
3. The Industrial Bank of Korea under the Industrial Bank of Korea Act;
4. The Export-Import Bank of Korea under the Export-Import Bank of Korea Act;
5. The National Agricultural Cooperative Federation under the Agricultural Cooperatives Act;
6. The National Federation of Fisheries Cooperatives under the Fisheries Cooperatives Act;
7. Insurance companies (hereinafter referred to as "insurance company") under the Insurance Business Act;
8. Financial investment firms [excluding integrated financial investment firms (hereinafter referred to as "integrated financial investment firm") under Article 22 of the Act];
9. Securities finance companies that obtain an authorization (hereinafter referred to as "securities finance company") in accordance with Article 324 (1) of the Act;
10. Merchant banks;
11. Fund brokerage companies that obtain an authorization (hereinafter referred to as "fund brokerage company") in accordance with Article 355 (1) of the Act;
12. Financial holding companies under the Financial Holding Companies Act;
13. Specialized financial business companies under the Specialized Financial Business Act;
14. Mutual savings banks and the National Federation thereof under the Mutual Savings Banks Act;
15. The National Forestry Cooperatives Federation under the Forestry Cooperatives Act;
16. The National Community Credit Federation under the Community Credit Cooperatives Act;
17. The National Credit Union Federation of Korea under the Credit Union Cooperatives Act; and
18. Foreign financial institutions equivalent to the institutions under subparagraphs 1 through 17.
(3) The term "others prescribed by the Presidential Decree" under Article 9 (5) 5 of the Act shall mean a person falling under each of the following subparagraphs;
1. The Korea Deposit Insurance Corporation and financial resolution institutions under the Depositor Protection Act;
2. The Korea Asset Management Corporation under the Act on the Efficient Disposal of Non-performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation;
3. The Korea Housing Finance Corporation under the Korea Housing Finance Corporation Act;
4. The Korea Investment Corporation under the Korea Investment Corporation Act;
5. The Association;
6. The Korea Securities Depository (hereinafter referred to as "the Depository") established in accordance with Article 294 of the Act;
The Enforcement Decree of the Financial Investment Services and Capital Market Act
7. The Exchange (hereinafter referred to as "the Exchange") established in accordance with Article 373 of the Act;
8. The Financial Supervisory Service (hereinafter referred to as "the Financial Supervisory Service") under the Act on the Establishment, etc. of Financial Services Commission;
9. Collective investment schemes (excluding those prescribed and publicized by the Financial Services Commission);
10. Credit guarantee funds under the Credit Guarantee Fund Act;
11. Korea technology credit guarantee funds under the Korea Technology Credit Guarantee Fund Act;
12. Funds established in accordance with the Acts (excluding those under subparagraphs 10 and 11); and corporations operating and managing the funds;
13. Corporations carrying on mutual aid projects in accordance with the Acts;
14. Municipal governments;
15. Local corporations issuing stock certificates listed on foreign securities markets;
16. Corporations or groups (excluding foreign corporations or foreign groups) meeting all the requirements falling under each of the following items: (a) Filing with the Financial Services Commission relevant materials to prove fulfillment of the requirements under item (b);
(b) Maintaining not less than ten billion won in their balance of financial investment products on the date preceding the day when the relevant materials are filed; and (c) Two years having yet to pass from the date on which the relevant materials are filed;
17. Individuals (excluding foreigners who are individuals) meeting all the requirements falling under each of the following items:
(a) Filing with the Financial Services Commission relevant materials to prove fulfillment of all the requirements under items (b) and (c);
(b) Maintaining not less than five billion won in their balance of financial investment products on the date preceding the day when the relevant materials are filed; (c) One year having passed from the date on which the accounts of a financial investment firm is opened; and
(d) Two years having yet to pass from the date on which the relevant materials are filed; and
18. Foreigners falling under any of the following items: (a) Foreign governments;
(b) International organizations established in accordance with treaties; (c) Central banks of foreign countries; or
(d) Foreigners equivalent to those under subparagraphs 1 through 17. Article 11 (Public Offering and Secondary Distribution of Securities) (1) In calculating 50 investors pursuant to Articles 9 (7) and 9 (9) of the Act, the number of persons who have been solicited to subscribe for securities without a public offering or secondary distribution of the same type of securities within the six months preceding the date on which the solicitation for offer is made shall be added, and the number of persons falling under any of the following subparagraphs shall be subtracted:
1. A professional falling under any of the following items: (a) A person falling under Articles 10 (1) 1 through 10 (1) 4 of this Decree; (b) A person prescribed and publicized by the Financial Services Commission among the persons falling under Articles 10 (3) 12 and 10 (3) 13 of this Decree; (c) An accounting firm under the Certified Public Accountant Act; (d) A credit rating agency (hereinafter referred to as "credit rating agency") under the Use and Protection of Credit Information Act;
(e) A person who holds a certificate as a certified public accountant, appraiser, attorney- at-law, patent attorney, tax accountant, etc. and provides services, such as accounting and advisory services to an issuer; or
(f) Others prescribed and publicized by the Financial Services Commission as professionals who understand the financial status or the business operation of the issuer;.
2. A relevant person falling under any of the following items: (a) The largest shareholder (referring to the largest shareholder under Article 9 (1) 1 of the Act; hereinafter the same shall apply) of an issuer and a shareholder who holds not less than 5/100 of the total number of outstanding stocks; (b) An officer (including a person falling under each subparagraph of Article 401-2 (1) of the Commercial Act; hereafter in this subparagraph, the same shall apply) of an issuer The Enforcement Decree of the Financial Investment Services and Capital Market Act and a member of employee stock ownership system under the Framework Act on Worker's Welfare;
(c) An affiliate of the issuer and the officers thereof; (d) Where an issuer is a stock-unlisted corporation (excluding corporations which have made a public offering and secondary distribution of stock certificates), the shareholders thereof;
(e) Where an issuer who is a foreign company established in accordance with foreign Acts and subordinate statutes sells its stocks to employees and officers of its local affiliates pursuant to the stock option system for the welfare of the workers, the employees and officers of the local affiliate;
(f) Where an issuer is a company in the process of establishment, the promoter thereof; or
(g) Others prescribed and publicized by the Financial Services Commission as relevant persons who understand the financial status and business operation of an issuer. (2) Even if the number of investors who receive a solicitation of an offer is less than 50 based on the calculation pursuant to paragraph (1), such conduct shall be regarded as a public offering where the securities can be transferred to not less than 50 investors within one year from the issuance date and where the type of securities and the nature of purchasers meet the resale standards prescribed and publicized by the Financial Services Commission. (3) In the application of paragraph (1), the number of investors shall be calculated based on the persons solicited outside the securities market (excluding cases where the transactions of listed stocks are arranged for pursuant to Article 78 (1) of the Act) with respect to a secondary distribution.
Article 12 (Securities Traded on KOSDAQ Market)
The term "securities prescribed by the Presidential Decree" under Article 9 (13) 2 of the Act shall mean securities falling under each of the following subparagraphs, which are not listed on the securities market:
1. Corporate bonds;
2. Stock certificates;
3. Instruments representing preemptive rights;
4. Beneficiary certificates of exchange-traded funds (hereinafter referred to as "exchange- traded fund") under Article 234 (1) of the Act;
5. Derivative-linked securities under Article 7 (1) 1 of this Decree; and
6. Securities deposit receipts (limited to those issued by the Depository) related to the stock certificates issued by foreign corporations, etc. Article 13 (Scope of Foreign Corporation)
(1) The term "international institution designated by the Presidential Decree" under Article 9 (16) 5 of the Act shall mean an international institution established in accordance with a treaty. (2) The term "corporations located in a foreign country as designated by the Presidential Decree" under Article 9 (16) 6 of the Act shall mean those falling under any of the following subparagraphs:
1. A fund or association established, supervised or managed in accordance with foreign Acts and subordinate statutes;
2. A fund or association established, supervised or managed by a foreign government, foreign municipal government or foreign public organization; or
3. A fund or association established, supervised or managed by an international organization established in accordance with a treaty.
Article 14 (Standards for Private Equity Fund)
(1) The term "investors prescribed by the Presidential Decree" under Article 9 (19) of the Act shall mean investors who do not fall under either of the following subparagraphs:
1. A person falling under any of the subparagraphs of Article 10 (1) of this Decree; or
2. A person prescribed and publicized by the Financial Services Commission among those falling under Articles 10 (3) 12 and 10 (3) 13.
(2) The term "number prescribed by the Presidential Decree" under Article 9 (19) of the Act shall be 49. In such a case, when another collective investment scheme acquires not less than 10/100 of the outstanding collective investment securities of the collective investment scheme, the number of the investors (referring to the investors under paragraph (1)) of the other collective investment scheme shall be added in calculating the 49 investors. The Enforcement Decree of the Financial Investment Services and Capital Market Act Part 2 Financial Investment Services
Chapter 1 Authorization and Registration of Financial Investment Services Section 1 Requirements and Procedures of Authorization Article 15 (Authorized Business Unit)
(1) The term "business unit prescribed by the Presidential Decree" under Article 12 (1) of the Act other than each subparagraph shall be as provided for in Appendix 1 of this Decree. (2) The term "securities prescribed by the Presidential Decree" under Article 12 (1) 2 of the Act among the securities included in the scope of financial investment products shall be as follows:
1. Debt securities;
2. Municipal bonds;
3. Special bonds (hereinafter referred to as "special bonds") under Article 4 (3) of the Act;
4. Equity securities (excluding collective investment securities);
5. Listed stocks;
6. Collective investment securities; and
7. Securities falling under Article181 (1) 1 of this Decree. (3) The term "products prescribed by the Presidential Decree" under Article 12 (1) 2 of the Act among the derivatives included in the scope of financial investment products shall be as follows:
1. Derivatives whose underlying assets are not stock certificates; and
2. Derivatives whose underlying assets are currencies or interest rates. Article 16 (Authorization Requirements)
(1) The term "financial institution prescribed by the Presidential Decree" under Article 12 (2) 1 (a) of the Act shall mean an institution falling under any of the following subparagraphs:
1. The Korea Development Bank under the Korea Development Bank Act;
2. The Industrial Bank of Korea under the Industrial Bank of Korea Act;
3. The Export-Import Bank of Korea under the Export-Import Bank of Korea Act;
4. The National Agricultural Cooperative Federation under the Agricultural Cooperatives Act;
5. The National Federation of Fisheries Cooperatives under the Fisheries Cooperatives Act;
6. Local branches of foreign financial institutions under the Banking Act;
7. Local branches of foreign insurance companies under the Insurance Business Act; or
8. Others prescribed and publicized by the Financial Services Commission. (2) A foreign financial investment firm (hereinafter referred to as "foreign financial investment firm") under Article 12 (2) 1 (b) of the Act shall meet the requirements falling under each of the following subparagraphs:
1. The foreign financial investment firm shall meet the requirements falling under items (b) through (e) of subparagraph 4 of Appendix 2 of this Decree; and
2. The supervision over the foreign financial investment firm conducted by the supervisory authorities in a foreign country shall meet the internationally accepted standards for supervision.
(3) The term "amount prescribed by the Presidential Decree" under Article 12 (2) 2 of the Act shall be as provided for in Appendix 1 of this Decree. (4) The business plan under Article 12 (2) 3 of the Act shall meet the requirements falling under each of the following subparagraphs:
1. The firm shall have appropriate and feasible estimates of revenues and expenditures;
2. The firm shall maintain the standards of prudent management under Article 31 of the Act (in the case of integrated financial investment firms, referring to the standards of prudent management prescribed by the Acts and subordinate statutes concerned);
3. The firm shall establish an appropriate internal control system in order to manage risk and prevent financial accidents;
4. The firm shall have appropriate business methods in order to protect investors; and
5. The firm shall not violate Acts and subordinate statutes and undermine sound trade practice.
(5) The manpower, data-processing equipment, and other physical facilities under Article 12 (2) 4 of the Act shall meet the requirements falling under each of the following subparagraphs:
1. Appropriate manpower shall be provided, including experts who have specialized knowledge and soundness to conduct the financial investment services (referring to the The Enforcement Decree of the Financial Investment Services and Capital Market Act experts under Article 286 (1) 3 of the Act, hereinafter the same shall apply), and computer personnel, etc. to perform the business; and
2. The physical facilities under each of the following items shall be provided (including data-processing equipment):
(a) Data-processing equipment and communication methods necessary to carry on the financial investment services;
(b) Sufficient business space, including offices, etc., and office equipment; (c) Security for protecting physical equipment, such as data-processing equipment, etc.; and
(d) Complementary equipment necessary for maintaining the business even if any accident including blackout, fire, etc. occurs.
(6) Major shareholders (referring to the major shareholders under Article 12 (2) 6 (a) of the Act; hereafter in this Chapter, the same shall apply) shall meet the requirements under Appendix 2 of this Decree: Provided, That the Financial Services Commission may prescribe and publicize other eased requirements in a case falling under any of the following subparagraphs:
1. Where a person falling under any of the subparagraphs of Article 22 of the Act intends to obtain an authorization of financial investment services; or
2. Where a financial investment firm conducts a merger, split-off, or split-and-merger with another company.
(7) The term "person prescribed by the Presidential Decree" under Article 12 (2) 6 of the Act shall be a person falling under any of the following subparagraphs: Provided, That persons falling under subparagraph 1 shall be exempted in cases prescribed and publicized by the Financial Services Commission after taking into account the nature of corporation, etc.:
1. The largest shareholder of the corporation that is the largest shareholder (including a person who virtually controls the corporation which is the largest shareholder where the person is obviously different from the largest shareholder of the corporation); or
2. The representative of the corporation that is the largest shareholder. (8) The system to prevent a conflict of interests under Article 12 (2) 7 of the Act (hereafter in this Section, referred to as "system to prevent a conflict of interests") shall meet the requirements falling under each of the following subparagraphs:
1. The firm shall have appropriate internal control standards to identify, assess, and manage the possibility of a conflict of interests pursuant to Article 44 of the Act; and
2. The firm shall have an appropriate system to prevent any activity falling under each subparagraph of Articles 45 (1) and 45 (2) of the Act. (9) Where a foreign financial investment firm, foreign financial institution under the Banking Act, or foreign insurance company under the Insurance Business Act (hereafter in this paragraph, referred to as "foreign financial investment firm, etc.") establishes branches or other business offices (hereafter in this paragraph, referred to as "branches, etc.") in the Republic of Korea pursuant to Article 12 (3) of the Act, the branches, etc. shall be regarded as one financial investment firm. In such a case, the foreign financial investment firm, etc. shall, when it intends to establish additional branches, etc. in Korea to conduct financial investment services, submit relevant materials to the Financial Services Commission under the conditions prescribed and publicized by the Commission.
(10) Specific standards necessary for the authorization requirements under paragraphs (2), (4) through (6), (8), and (9) shall be prescribed and publicized by the Financial Services Commission.
Article 17 (Methods and Procedures of Authorization) (1) An authorization application submitted to the Financial Services Commission pursuant to Article 13 (1) of the Act shall contain the matters falling under each of the following subparagraphs:
1. Trade name;
2. Locations of the head office, branches and other business offices;
3. Matters on officers;
4. Matters on authorized business units intended to operate (referring to the authorized business units under Article 12 (1) of the Act; hereinafter the same shall apply);
5. Matters on financial status, such as equity capital;
6. Matters on a business plan;
7. Matters on manpower and physical facilities, such as data-processing equipment, etc.;
8. Matters on major shareholders or foreign financial investment firms;
9. Matters on a system to prevent conflict of interests; and The Enforcement Decree of the Financial Investment Services and Capital Market Act
10. Others prescribed and publicized by the Financial Services Commission as necessary for review for authorization..
(2) The authorization application in paragraph (1) shall have the documents falling under each of the following subparagraphs attached:
1. Articles of incorporation (including those equivalent thereto);
2. Documents to prove the decision-making of establishment or application for authorization, including the minutes from a general meeting of promoters, from an inaugural meeting of shareholders, and from board of directors;
3. Documents indicating the locations and names of the head office, branches and other business offices;
4. Curriculum vitae and career certificates of officers;
5. Documents indicating the types of authorized business units and the business methods thereof;
6. Financial statements and the addenda thereof for the latest three business years (in the case of a corporation for which three business years have yet to pass since its establishment, referring to the financial statements and the addenda thereof from its establishment to the latest business year);
7. Business plan (including pro forma financial statement) and estimated income and expense statement for three business years after the commencement of business;
8. Documents to identify the current status of manpower and physical facilities, etc.;
9. Documents indicating the names or titles of shareholders who hold not less than 1/100 of the outstanding stocks and the number of their stocks as of the date of the application for authorization (referring to the end of the latest business year in the case of application for authorization to add authorized business units or application for authorization of integrated financial investment firms);
10. Documents to identify that major shareholders or foreign financial investment firms meet all the requirements falling under each item of Article 12 (2) 6 of the Act;
11. Documents to identify whether any system to prevent a conflict of interests has been established; and
12. Other documents prescribed and publicized by the Financial Services Commission as necessary for review for authorization.
(3) Where a person who intends to obtain an authorization of financial investment services applies for a preliminary authorization under Article 14 of the Act and any matter indicated in a preliminary authorization application and accompanying documents submitted at the time of the application is not changed, the person may omit a part of the matters indicated in the authorization application under paragraph (1) by specifying the reference to the same information, or may skip the submission of the accompanying documents among the accompanying documents under paragraph (2).
(4) The Financial Services Commission which receives an authorization application under paragraph (1) shall verify the certified copy of corporate register through administrative data matching pursuant to Article 21 (1) or 22-2 (1) of the E-Government Act and shall require the applicant to submit the certified copy when the applicant does not consent to the verification in such a way.
(5) The Financial Services Commission shall, when it receives an authorization application under paragraph (1), confirm whether the contents of the application for authorization are true, and then review whether the application meets the authorization requirements under Article 12 (2) of the Act after taking into account the opinions collected from interested persons, etc. (6) The Financial Services Commission may conduct an actual investigation by way of interviewing interested persons, promoters or officers if necessary to confirm the application for authorization of financial investment service pursuant to paragraph (5). (7) The Financial Services Commission shall make a public notice on the applicant, application date, contents of the application, methods and period for presenting opinions in order to collect opinions of interested persons on the application for authorization of financial investment services pursuant to paragraph (5).
(8) The Financial Services Commission shall notify an applicant of the opinions recognized as unfavorable thereto among the opinions collected pursuant to paragraph (7) and allow the applicant to respond to those opinions within the period set by the Commission. (9) The Financial Services Commission may hold a public hearing where it is recognized as necessary that the authorization of financial investment services is likely to have a significant influence on the financial market.
(10) A person who obtains an authorization of financial investment services pursuant to Article 13 (2) of the Act shall commence the operation within six months from the date on which the The Enforcement Decree of the Financial Investment Services and Capital Market Act authorization is obtained: Provided, That where the Financial Services Commission sets a different period or extends the period upon the application of the person who obtains an authorization of financial investment services, the person may commence the authorized business within such period.
(11) The Financial Services Commission shall, when it adds conditions to the authorization of financial investment services, confirm whether such conditions are met. (12) In addition to the maters prescribed under paragraphs (1) through (11), necessary matters on the application for and review of an authorization of financial investment services, the form of authorization application, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 18 (Preliminary Authorization)
(1) A person who intends to apply for a preliminary authorization under Article 14 (1) of the Act shall file a preliminary authorization application indicating the matters falling under each of the subparagraphs of Article 17 (1) of this Decree with the Financial Services Commission. (2) The preliminary authorization application under paragraph (1) shall accompany the documents falling under each of the following subparagraphs:
1. Articles of incorporation or provisional articles of incorporation (including other equivalent matters);
2. Documents to prove the decision-making of establishment or application for authorization, such as minutes from general meetings of promoters, from inaugural meetings of shareholders, and from board of directors, etc.;
3. Curriculum vitae and career certificates of officers (including persons yet to be appointed);
4. Documents indicating types of the authorized business units and the business methods thereof;
5. Financial statements and the addenda thereof for the latest three business years (excluding corporations in the process of establishment and in the case of a corporation for which three business years have yet to pass since its establishment, referring to the financial statements and the addenda thereof from its establishment to the latest business year);
6. Business plan (including pro forma financial statement) and estimated revenues and expenses statement for three business years after the commencement of business;
7. Documents to identify the current status of manpower, physical facilities, etc. (including manpower and physical facilities, etc. scheduled for employment and purchase);
8. Documents indicating the names or titles of shareholders who have not less than 1/100 of the total number of outstanding stocks and the number of their stocks as of the application date for preliminary authorization (in the case of an application for preliminary authorization by integrated financial investment firms, the end of the latest business year);
9. Documents to identify that major shareholders or foreign financial investment firms meet all the requirements falling under each item of Article 12 (2) 6 of the Act;
10. Documents to identify whether any system to prevent the conflict of interests has been established; and
11. Other documents prescribed and publicized by the Financial Services Commission as necessary for review for a preliminary authorization.. (3) Articles 17 (4) through 17 (9) shall apply to the methods and procedures of reviewing a preliminary authorization applied for pursuant to Article 14 (1) of the Act. In such a case, "an authorization of financial investment service" shall be regarded as "a preliminary authorization."
(4) A person who obtains a preliminary authorization pursuant to Article 14 (2) of the Act shall apply for an authorization of financial investment services (hereafter in this paragraph, referred to as "main authorization") under Article 12 of the Act within six months from the date of obtaining the preliminary authorization after fulfilling the matters and conditions of the preliminary authorization: Provided, That where the Financial Services Commission sets a different period for a main authorization when it grants a preliminary authorization, or extends a period for a main authorization upon the request of the person who obtains a preliminary authorization, the person may apply for the main authorization within such period. (5) In addition to matters prescribed in paragraphs (1) through (4), other necessary matters on the application, review, form preparation thereof, etc. with respect to a preliminary authorization shall be prescribed and publicized by the Financial Services Commission. Article 19 (Eased Requirements for Maintaining Authorization) (1) The term "eased requirements prescribed by the Presidential Decree" under Article 15 of the Act shall be as follows:
The Enforcement Decree of the Financial Investment Services and Capital Market Act
1. In the case of Article 12 (2) 2 of the Act: not less than 70/100 of minimum equity capital of each authorized business unit specified in Appendix 1 of this Decree shall be maintained. In such a case, the requirements for maintaining authorization shall be applied based on the end of each fiscal year, and a financial investment firm that fails to meet the requirements for maintaining authorization as of the end of a specific fiscal year shall be regarded as meeting the requirements by the end of the next fiscal year; and
2. In the case of Article 12 (2) 6 of the Act: the requirements under the classification falling under the following items:
(a) Major shareholders falling under any of subparagraphs 1 through 3 of Appendix 2 of this Decree shall maintain the requirements specified in items (d), (e)-1 and (e)-3 of subparagraph 1 of Appendix 2 of this Decree. In such a case, under item (d)-1 of subparagraph 1 of Appendix 2 of this Decree, "during the last five years" shall be deemed "during the last five years, the largest shareholder," and "fine" shall mean "fine of 500 million won;"
(b) Major shareholders falling under subparagraph 4 or item (d) of subparagraph 5 of Appendix 2 of this Decree shall maintain the requirements specified in items (e)-1 and (e)-3 of subparagraph 1 and item (d) of subparagraph 4 of Appendix 2 of this Decree. In such a case, under item (e)-1 of subparagraph 1 of Appendix 2 of this Decree, "during the last five years" shall be deemed "during the last five years, the largest shareholder," and "fine" shall be deemed "fine of 500 million won," under item (d) of subparagraph 4 of Appendix 2 of this Decree, "during the last three years" shall be deemed "during the last three years, the largest shareholder," and "the fact that the financial investment firm has been subject to administrative actions by supervisory authorities in its home country, such as corporate warning or heavier actions or criminal punishment equivalent to fines" shall be deemed "the fact that the financial investment firm has been subject to a fine of 500 million won taken by judicial authorities in its home country;" (c) Major shareholders falling under subparagraph 5 (excluding item (d)) of Appendix 2 of this Decree shall maintain the requirements under items (e)-1 and (e)-3 of subparagraph 1 of Appendix 2 of this Decree. In such a case, under item (e)-1 of subparagraph 1 of Appendix 2 of this Decree, "during the last five years" shall be
deemed "during the last five years, the largest shareholder, " and "fine" shall be deemed "fine of 500 million won;" and
(d) A foreign financial investment firm falling under Article 12 (2) 6 (b) of the Act shall maintain the requirements under item (b) of this subparagraph. In such a case, "the largest shareholder" shall be deemed "a foreign financial investment firm," respectively.
(2) In a case falling under any of the subparagraphs of Article 16 (6) of this Decree, the Financial Services Commission may ease the requirements under each item of subparagraph 2 of paragraph (1) and publicize the eased requirements. Section 2 Requirements and Procedures of Registration Article 20 (Registered Business Unit)
The term "business units prescribed by the Presidential Decree" under Article 18 (1) of the Act other than each subparagraph shall be the same as provided in Appendix 3 of this Decree. Article 21 (Requirements for Registration)
(1) The term "amount prescribed by the Presidential Decree" under Article 18 (2) 2 of the Act shall be as provided for in Appendix 3 of this Decree. (2) The term "number of investment advisors as prescribed by the Presidential Decree" under Article 18 (2) 3 (a) of the Act shall be one full-time employee or officer: Provided, That in the case of merchant banks (limited to the merchant banks which are existing or established through a merger in accordance with the authorization under Article 4 of the Financial Industry Structural Improvement Act), the number shall be four full-time employees or officers. (3) The term "number of fund managers as prescribed by the Presidential Decree" under Article 18 (2) 3 (b) of the Act shall be two full-time employees or officers. (4) The term "social standing prescribed by the Presidential Decree" under Article 18 (2) 5 (a) of the Act shall mean the requirements falling under each of the following subparagraphs:
1. Major shareholders falling under subparagraphs 1 through 3 and 5 (excluding item (d)) of Appendix 2 of this Decree shall meet the requirements specified in item (e) of subparagraph 1 of Appendix 2 of this Decree: Provided, That the Financial Services Commission may The Enforcement Decree of the Financial Investment Services and Capital Market Act prescribe and publicize different requirements when a person who has obtained an authorization of financial investment services under Article 12 of the Act intends to make a registration of financial investment services; and
2. Major shareholders falling under subparagraph 4 or item (d) of subparagraph 5 of Appendix 2 of this Decree shall meet the requirements specified in items (a), (d) and (e) of subparagraph 4 of Appendix 2 of this Decree. In such a case, "authorization" under item (a) of subparagraph 4 of Appendix 2 of this Decree shall be deemed "registration," and "intends to obtain an authorization" shall be deemed "intends to obtain a registration." (5) The term "social credit prescribed by the Presidential Decree" under Article 18 (2) 5 (b) of the Act shall mean the requirements falling under items (a), (d) and (e) of subparagraph 4 of Appendix 2 of this Decree. In such a case, under item (a) of subparagraph 4 of Appendix 2 of this Decree, "authorization" shall be deemed "registration," and "intends to obtain an authorization" shall be deemed "intends to obtain a registration," and under item (d) of subparagraph 4 of Appendix 2 of this Decree, "three years" shall be deemed "two years." (6) The system to a prevent conflict of interests (hereafter, in this Section, referred to as "system to prevent a conflict of interests") under Article 18 (2) 6 of the Act shall meet the requirements falling under each of the following subparagraphs:
1. The system shall have appropriate internal control standards to identify, assess, and manage any possibility of conflict of interests pursuant to Article 44 of the Act; and
2. The firm shall have an appropriate system to prevent any activity falling under each subparagraph of Articles 45 (1) and 45 (2) of the Act. (7) Specific standards necessary for registration requirements under paragraphs (4) through (6) shall be prescribed and publicized by the Financial Services Commission. Article 22 (Methods and Procedures of Registration) (1) A registration application submitted to the Financial Services Commission pursuant to Article 19 (1) of the Act shall include the matters falling under each of the following subparagraphs:
1. Trade name;
2. Location of the head office;
3. Matters on officers;
4. Matters on the registered business units (referring to the registered business units under Article 18 (1) of the Act; hereinafter the same shall apply) that an applicant intends to operate;
5. Matters on the financial status, including equity capital, etc.;
6. Matters on investment advisors (hereinafter referred to as "investment advisor") under Article 286 (1) 3 (a) of the Act or fund managers (hereinafter referred to as "fund manager") under Article 286 (1) 3 (c) of the Act;
7. Matters on a major shareholder, a foreign discretionary investment advisory company or a foreign non-discretionary investment advisory company;
8. Matters on a system to prevent a conflict of interests; and
9. Other matters prescribed and publicized by the Financial Services Commission as necessary for reviewing a registration.
(2) The registration application under paragraph (1) shall accompany the documents falling under each of the following subparagraphs:
1. Articles of incorporation (including those equivalent thereto);
2. Documents indicating the location and name of the head office;
3. Curriculum vitae and career certificates of officers;
4. Documents indicating the type of registered business units and the business methods thereof;
5. Financial statements and the addenda thereof for the latest three business years (excluding corporations in the process of incorporation and in the case of a corporation for which three business years have yet to pass since its establishment). In the case of a corporation for which three business years have yet to pass since its establishment, referring to the financial statements and the addenda thereof from its establishment to the latest business year);
6. Documents to identify the current status of investment advisors or fund managers;
7. Documents indicating the names or titles of shareholders and the number of their stocks as of the application date of the registration (the end of the latest business year in the case of an application for registration to add registered business units or an application for registration by integrated financial investment firms); The Enforcement Decree of the Financial Investment Services and Capital Market Act
8. Documents to identify that a major shareholder, foreign discretionary investment advisory company, or foreign non-discretionary investment advisory company meets all the requirements falling under each item of Article 18 (2) 5 of the Act;
9. Documents to identify whether any system to prevent the conflict of interests has been established; and
10. Other documents prescribed and publicized by the Financial Services Commission as necessary for reviewing a registration.
(3) The Financial Services Commission shall, when it receives a registration application under paragraph (1), verify the certified copy of corporate register through administrative data matching pursuant to Article 21 (1) or 22-2 (1) of the E-Government Act and shall require the applicant to submit the certified copy when the applicant does not consent to the verification in such a way.
(4) The Financial Services Commission shall, when it receives a registration application under paragraph (1), confirm whether the content of the application for the registration of financial investment services is true or not, and then review whether the content meets the registration requirements under Article 18 (2) of the Act.
(5) In addition to the matters prescribed in paragraphs (1) through (4), necessary matters on the application, review, form, preparation thereof, etc. with respect to a registration of financial investment services shall be prescribed and publicized by the Financial Services Commission. Article 23 (Eased Requirements for Maintaining Registration) The term "eased requirements prescribed by the Presidential Decree" under Article 20 of the Act shall be as follows:
1. In the case of Article 18 (2) 2 of the Act: not less than 70/100 of minimum equity capital of each registered business unit specified in Appendix 3 of this Decree shall be maintained. In such a case, the requirements shall be applied based on the end of each fiscal year, and a financial investment firm that fails to meet the requirements at the end of a specific fiscal year shall be regarded as meeting the requirements by the end of the next fiscal year; and
2. In the case of Article 18 (2) 5 of the Act: the requirements under the classification falling the following items shall be maintained:
(a) Major shareholders falling under any of subparagraphs 1 through 3 or subparagraph 5 (excluding item (d)) of Appendix 2 of this Decree shall maintain the requirements specified in items (e)-1 and (e)-3 of subparagraph 1 of Appendix 2 of this Decree. In such a case, under item (e)-1 of subparagraph 1 of Appendix 2 of this Decree, "during the last five years" shall be deemed "during the last five years, the largest shareholder," and "fine" shall mean "fine of 500 million won."
(b) Major shareholders falling under subparagraph 4 or item (d) of subparagraph 5 of Appendix 2 of this Decree shall maintain the requirements specified in items (e)-1 and (e)-3 of subparagraph 1 and item (d) of subparagraph 4 of Appendix 2 of this Decree. In such a case, under item (e)-1 of subparagraph 1 of Appendix 2 of this Decree, "during the last five years" shall be deemed "during the last five years, the largest shareholder," and "fine" shall be deemed "fine of 500 million won," under item (d) of subparagraph 4 of Appendix 2 of this Decree, "during the last three years" shall be deemed "during the last three years, the largest shareholder," and "the fact that the financial investment firm has been subject to administrative actions by supervisory authorities in its home country, such as corporate warning or heavier actions, or criminal punishment equivalent to fines" shall be deemed "the fact that the financial investment firm has been subject to a fine of 500 million won taken by judicial authorities in its home country;" and
(c) A foreign discretionary investment advisory company or foreign non-discretionary investment advisory company falling under Article 18 (2) 5 (b) of the Act shall maintain the requirements under item (b) of this subparagraph. In such a case, "the largest shareholder" shall be deemed "a foreign discretionary investment advisory company or foreign non-discretionary investment advisory company," respectively, and under item (d) of subparagraph 4 of Appendix 2 of this Decree, "three years" shall be deemed "two years."
Chapter 2 Corporate Governance of Financial Investment Firm Article 24 (Scope of Application)
The Enforcement Decree of the Financial Investment Services and Capital Market Act The term "financial institutions, etc. prescribed by the Presidential decree" under subparagraph 3 of Article 22 of the Act shall mean a financial institution falling under any of the following subparagraphs:
1. The Korea Development Bank under the Korea Development Bank Act;
2. The Industrial Bank of Korea under the Industrial Bank of Korea Act;
3. The Export-Import Bank of Korea under the Export-Import Bank of Korea Act;
4. Securities finance companies;
5. Merchant banks;
6. Fund brokerage companies;
7. Companies for brokerage of foreign exchange under the Foreign Exchange Transactions Act;
8. The Korea Housing Finance Corporation under the Korea Housing Finance Corporation Act; or
9. Others prescribed and publicized by the Financial Services Commission. Article 25 (Scope of Person Exempted from Approval of Alteration of Major Shareholder) The term "person prescribed by the Presidential Decree" under Article 23 (1) of the Act shall mean a person falling under any of the following items:
1. Government;
2. The Korea Deposit Insurance Corporation under the Depositor Protection Act; or
3. A person who holds not more than 1/100 of the total number of outstanding stocks with voting rights as a result of acquiring stocks as a shareholder (limited to the shareholder who is not the largest shareholder) who is a specially-related person of the largest shareholder. Article 26 (Requirements for Approval of Alteration of Major Shareholders) (1) The term "requirements prescribed by the Presidential Decree" under Article 23 (1) of the Act shall be as provided for in Appendix 4 of this Decree. (2) A person who intends to obtain an approval pursuant to Article 23 (1) of the Act shall file with the Financial Services Commission a written application for the approval of alteration of major shareholders specifying the matters falling under each of the following subparagraphs:
1. Matters on the applicant;
2. Current status of stocks issued by the financial investment firm targeted by the person who intends to become a major shareholder;
3. Acquisition plan of stocks issued or to be issued by the financial investment firm targeted by the person who intends to become a major shareholder; and
4. Others prescribed and published by the Financial Services Commission as necessary for review for approval.
(3) The written application for the approval of alteration under paragraph (2) shall accompany the documents falling under each of the following subparagraphs:
1. Articles of incorporation (including those equivalent thereto and limited to a corporation);
2. In the case of a foreign company, documents equivalent to the certified copy of corporate register;
3. Financial statements as of the end of the latest business year and semi-annual reports (limited to a corporation) in cases where a half year has passed since the end of the latest business year;
4. Audit reports and examination reports prepared by an accounting auditor (referring to the auditor under Article 3 (1) of the Act on External Audit of Stock Companies; hereinafter the same shall apply) with respect to the financial statements under subparagraph 3;
5. Where a person who intends to become a major shareholder is a financial institution, the financial status calculated by the standards for financial prudence applied to the financial institution, and the examination report thereof prepared by an accounting auditor; and
6. Others prescribed and publicized by the Financial Services Commission as necessary for review for approval.
(4) The Financial Services Commission shall, when it receives an application for the approval of alteration under paragraph (2), verify the administrative information falling under each of the following subparagraphs through administrative data matching under Article 21 (1) or 22-2 (1) of the E-Government Act and shall require the applicant to submit such documents (the documents under subparagraph 2 may be replaced with the business registration certificate) when the applicant does not consent to the verification:
1. Certified copies of corporate register (limited to local corporations);
2. Certified copies of resident registration; and The Enforcement Decree of the Financial Investment Services and Capital Market Act
3. Certified copies of corporate register of the financial investment firm targeted by the person who intends to become a major shareholder. (5) The Financial Services Commission shall, when it receives an application for approval of alteration under paragraph (2), review the application, make a decision on either granting or denying the approval within 60 days, and notify the applicant of the results and the reasons therefor in writing. In such a case, the Commission may, when the application is found to be defective, request that the applicant supplement such application. (6) In calculating the review period referred to in paragraph (5), the period prescribed and publicized by the Financial Services Commission, including the supplementation period for a defective application, shall not be added to the review period. (7) The Financial Services Commission shall, when it orders a disposal pursuant to Article 23 (2) of the Act, issue the order in writing after specifying the number of stocks to be disposed of and the disposal period, etc.
(8) In addition to the matters prescribed in paragraphs (1) through (7), other matters on the methods and procedures of reviewing an approval, and the specific standards for the requirements under paragraph (1) shall be prescribed and publicized by the Financial Services Commission.
Article 27 (Reasons for Disqualification of Officers) (1) The term "finance-related Acts and subordinate statutes prescribed by the Presidential Decree" under subparagraph 3 of Article 24 of the Act shall mean the Acts and subordinate statutes (hereafter in this Article referred to as "finance-related Acts and subordinate statutes") falling under any of the following items:
1. The Bank of Korea Act;
2. The Banking Act;
3. The Korea Development Bank Act;
4. The Industrial Bank of Korea Act;
5. The Export-Import Bank of Korea Act;
6. The Insurance Business Act;
7. The Mutual Saving Banks Act;
8. The Credit Guarantee Fund Act;
9. The Korea Technology Credit Guarantee Fund Act;
10. The Credit Unions Act;
11. The Community Credit Cooperatives Act;
12. The Use and Protection of Credit Information Act;
13. The Foreign Exchange Transactions Act;
14. The Act on the Establishment, etc. of Financial Services Commission;
15. The Asset- Backed Securitization Act;
16. The Act on the Efficient Disposal of Non-performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation;
17. The Act on Real Name Financial Transactions and Guarantee of Secrecy;
18. The Foreign Investment Promotion Act;
19. The Act on the Structural Improvement of the Financial Industry;
20. The Korea Housing Finance Corporation Act;
21. The Public Notice of Values and Appraisal of Real Estate Act;
22. The Housing Act;
23. The Depositor Protection Act;
24. The Special Purpose Companies for Mortgage-Backed Bonds Act;
25. The Secured Debentures Trust Act;
26. The Financial Holding Companies Act;
27. The Guarantee of Workers' Retirement Benefits Act;
28. The Agricultural Cooperatives Act;
29. The Fisheries Cooperatives Act;
30. The Electronic Financial Transaction Act;
31. The Act on Report on Specific Financial Transaction Information and Utilization Thereof, etc.;
32. The Act on External Audit of Stock Companies;
33. The Act on Registration of Credit Business and Protection of Finance Users;
34. The Registration of Bonds and Debentures Act;
35. The Certified Public Accountant Act;
36. The Act on the Regulation of Conducting Fund-raising Business without Permission;
37. The Act on Private Participation in Infrastructure; The Enforcement Decree of the Financial Investment Services and Capital Market Act
38. The Real Estate Investment Company Act;
39. The Ship Investment Company Act;
40. The Framework Act on the Promotion of Cultural Industries;
41. The Industrial Development Act;
42. The Support for Small and Medium Enterprise Establishment Act;
43. The Specialized Credit Financial Business Act;
44. The Act on Special Measures for the Promotion of Venture Businesses;
45. The Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Component and Material; or
46. The Overseas Resources Development Business Act. (2) The term "person prescribed by the Presidential Decree" under subparagraph 5 of Article 24 of the Act shall mean an employee or officer falling under any of the following subparagraphs (in the case of a corporation whose license, authorization, registration, etc. is revoked pursuant to Article 14 (2) of The Act on the Structural Improvement of the Financial Industry, referring to the employee or officer at the time when any grounds for timely corrective measures under Article 10 of the same Act occur) at the time when any grounds for the revocation of license, authorization, registration, etc. occur:
1. An auditor or a member of the audit committee;
2. An officer who is subject to dismissal, suspension, disciplinary warning, cautionary warning, caution, or other measures by the Financial Services Commission [including the Governor of the Financial Supervisory Service (hereinafter referred to as "the Governor of the Financial Supervisory Service"); hereafter in this Article, the same shall apply] due to illegal or unfair activities with respect to the occurrence of the grounds for the revocation of license, authorization, registration, etc.;
3. An employee who is subject to dismissal or suspension by the Financial Services Commission due to illegal or unfair activities with respect to the occurrence of the grounds for the revocation of license, authorization, registration, etc.; or
4. A person who is subject to the measures under subparagraph 2 or 3 and has retired before such measures are taken.
(3) The term "others prescribed by the Presidential Decree" under subparagraph 8 of Article 24 of the Act shall mean those falling under any of the following subparagraphs:
1. An officer who is retired from office after being subject to dismissal, suspension or disciplinary warning by the Financial Services Commission or foreign financial supervisory authorities in accordance with the Act, finance-related Acts and subordinate statutes or foreign finance-related Acts and subordinate statutes (referring to the foreign finance-related Acts and subordinate statutes under subparagraph 3 of Article 24 of the Act; hereafter in this Article, the same shall apply) and for whom the periods prescribed in each of the following items have yet to pass:
(a) Request for dismissal: five years from the date when the request for dismissal is made;
(b) Suspension from office: four years from the date when suspension from office is terminated; and
(c) Disciplinary warning: three years from the date when disciplinary warning is issued;
2. An employee who has been subject to dismissal, suspension from office or salary reduction by the Financial Services Commission or foreign financial supervisory authorities under the Act, finance-related Acts and subordinate statutes or foreign finance-related Acts and subordinate statutes, and for whom the periods prescribed in each of the following items have yet to pass:
(a) Request for dismissal: five years from the date when the request for dismissal is made;
(b) Request for suspension from office: four years from the date when suspension from office is issued; and
(c) Request of salary reduction: three years from the date when the request of salary reduction is made;
3. An officer who is retired from office after being subject to suspension or disciplinary warning by the organization in which the officer is engaged in accordance with the Act, finance-related Acts and subordinate statutes or foreign finance-related Acts and subordinate statutes, or an employee who is subject to suspension from office or salary reduction and for whom the periods prescribed in each of the following items have yet to pass: (a) Suspension or discontinuation from office: four years from the date when suspension or discontinuation from office is terminated; and The Enforcement Decree of the Financial Investment Services and Capital Market Act (b) Disciplinary warning or salary reduction: three years from the date when disciplinary warning or salary reduction is issued; or
4. A retired officer or employee who had been notified that, if the person were in the post or office, he/she would have been subject to measures prescribed in subparagraphs 1 through 3 (excluding the measures under item (a) of subparagraph 1 and item (a) of subparagraph 2) in accordance with the Act, finance-related Acts and subordinate statutes or foreign finance- related Acts and subordinate statutes, and for whom three years have yet to pass from the date of retirement or resignation.
Article 28 (Appointment of Outside Directors)
(1) The term "financial investment firm prescribed by the Presidential Decree" under Article 25 (1) of the Act shall mean those falling under any of the following subparagraphs:
1. A financial investment firm whose total assets are not more than two trillion won as of the end of the latest business year: Provided, That the same shall not apply to cases where the total amount of the collective investment properties, discretionary investment properties (hereinafter referred to as "discretionary investment property") under subparagraph 5 of Article 85 of the Act or trust properties managed by the financial investment firm is not less than six trillion won as of the end of the latest business year;
2. Local branches and other business offices of a foreign financial investment firm;
3. A financial investment firm that is determined to be dissolved due to merger, etc. within six months from the date of a general meeting of shareholders;
4. A financial investment firm whose workout process is initiated in accordance with the Debtor Rehabilitation and Bankruptcy Act or which is declared bankrupt; or
5. A financial investment firm that resolves the dissolution of the entity. (2) The term "corporation that is in an important business relationship prescribed by the Presidential Decree, a competitive relationship or a cooperative relationship with the company concerned" under Article 25 (5) 6 of the Act shall mean the corporations falling under each of the following subparagraphs: Provided, That the same shall not apply to the Bank of Korea, persons falling under any of the subparagraphs of Article 10 (2) of this Decree, persons falling under any of Articles 10 (3) 1 through 10 (3) 13 of this Decree and foreign corporations equivalent thereto:
1. A corporation whose total amount of transaction performance with the financial investment firm concerned is not less than 10/100 of the total amount of assets (referring to the total amount of assets on the balance sheet of the financial investment firm as of the end of the latest business year) or the total amount of sales (referring to the total amount of sales on the income statement of the financial investment firm as of the end of the latest business year; hereafter in this Article, the same shall apply) during the last three business years;
2. A corporation that has entered into a single trading contract with the financial investment firm concerned, of which the contract amount is equivalent to not less than 10/100 of the total amount of sales during the latest business year;
3. A corporation for which the aggregate amount of money and securities lent or borrowed, and debt guarantees including collateral is not less than 10/100 of the equity capital (referring to the equity capital on the balance sheet of the financial investment firm as of the end of the latest business year) during the latest business year;
4. A corporation in which not less than 5/100 of the equity capital (referring to the equity capital of the corporation contributed by the financial investment firm) is invested by the financial investment firm concerned as of the date of a regular general meeting of shareholders of the financial investment company;
5. A corporation that has entered into a technical tie-up contract with the financial investment firm concerned;
6. An accounting firm that is designated as an accounting auditor of the financial investment firm concerned; or
7. A corporation that has entered into an advisory contract with the financial investment firm concerned, such as legal or management consulting, etc. (3) The term "others prescribed by the Presidential Decree" under Article 25 (5) 8 of the Act shall mean a person falling under any of the following subparagraphs:
1. A person who works as an outside director, non-permanent director, or non-permanent auditor of more than two stock-listed corporations in addition to the financial investment firm concerned;
2. A person who provides advisory services as a certified public accountant, certified tax accountant, attorney-at-law, or others equivalent thereto, who carries on the business of accounting audit over the financial investment firm concerned, conducts tax business as The Enforcement Decree of the Financial Investment Services and Capital Market Act proxy for the financial investment firm concerned, or enters into an advisory contract for legal or management consulting, etc. with the financial investment firm concerned;
3. A person who holds (referring to the holding under the main sentence of Article 133 (3) of the Act) not less than 1/100 of the total number of outstanding stocks of the financial investment firm concerned; or
4. A person whose balance of transactions (excluding transactions with the financial investment firm concerned in accordance with the agreements under Article 2 (1) of the Regulation of Standardized Contract Act) with the financial investment firm concerned is not less than 100 million won.
Article 29 (Audit Committee)
(1) The term "financial investment firm prescribed by the Presidential Decree" under Article 26 (1) of the Act shall mean those falling under any of the subparagraphs of Article 28 (1) of this Decree.
(2) The term "accounting or financial expert prescribed by the Presidential Decree" under Article 26 (2) 2 of the Act shall mean those falling under any of the following subparagraphs:
1. A person who has worked for not less than five years as a certified public accountant in a field related to such qualifications;
2. A person who has worked in total not less than five years as a researcher, or a full-time lecturer or in a higher position in a field related to accounting or finance at research institutes or universities with a master's degree or higher degree in a field related to accounting or finance;
3. A person who has worked not less than five years in total as an officer or not less than ten years in total as an employee, in a field related to accounting or finance in a stock-listed corporation; or
4. A person who has worked in total not less than five years in a field related to finance or accounting or supervision thereof in the institutions falling under any of the following items: (a) Government;
(b) The Bank of Korea;
(c) Institutions falling under any of the items of Article 10 (2) of this Decree; (d) Institutions falling under Articles 10 (3) 1 through 10 (3) 14 of this Decree;
(e) In addition to the institutions under items (c) and (d), institutions subject to inspection under Article 38 of the Act on the Establishment, etc. of Financial Services Commission; (f) Public agencies (excluding the institutions prescribed and publicized by the Financial Services Commission) under the Act on the Management of Public Agencies other than the institutions under items (b) through (e);
(g) Accounting firms under the Certified Public Accountant Act; or (h) Foreign corporations, etc. equivalent to items (a) through (g). (3) The term "others prescribed by the Presidential Decree" under Article 26 (3) 3 of the Act shall mean those falling under any of the following subparagraphs:
1. Spouses and lineal ascendants and descendants of major shareholders;
2. Spouses and lineal ascendants and descendants of full-time officers; or
3. Full-time officers or employees of an affiliate or former full-time officers or employees who worked for an affiliate within the last two years. Article 30 (Full-time Auditor)
The term "financial investment firm prescribed by the Presidential Decree" under the main sentence of Article 27 (1) of the Act shall mean a person falling under any of the following subparagraphs:
1. A financial investment firm whose total amount of assets is not more than 100 billion won as of the end of the latest business year: Provided, That the same shall not apply to cases where the total amount of collective investment property, discretionary investment property and trust property managed by the financial investment firm is not less than three trillion won as of the end of the latest business year; or
2. A person falling under any of Articles 28 (1) 2 through 28 (1) 5 of this Decree. Article 31 (Internal Control Standards)
(1) The internal control standards (hereinafter referred to as "internal control standard") under Article 28 (1) of the Act shall include the matters falling under each of the following subparagraphs:
1. Matters on the allocation of duties and the organizational structure; The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. Matters on the guidance on risk management occurring in the process of managing and conducting proprietary property and investors' property;
3. Matters on the procedures that the officers and employees are required to comply with in performing their duties;
4. Matters on the establishment of a system to efficiently deliver the information necessary for decision-making on management;
5. Matters on the methods and procedures to identify whether the officers and employees comply with the internal control standards and the measures taken against the officers and employees who violate the internal control standards;
6. Matters on the procedures and standards for preventing unfair trades under the Act, such as reporting related to the purchase and sale of financial investment products by the officers and employees;
7. Matters on the procedures to establish or amend internal control standards;
8. Matters on the procedures of appointing and dismissing compliance officers (hereinafter referred to as "compliance officer") under Article 28 (2) of the Act;
9. Matters on the identification, assessment and management of the conflict of interests;
10. Mattes on the compliance with Acts and subordinate statutes and internal guidance related to the exercise of voting rights on the stocks belonging to the collective investment properties or trust properties;
11. Matters on the standards for selecting a broker who is entrusted with the purchase and sale of the assets belonging to the collective investment properties or trust properties; and
12. Others prescribed and publicized by the Financial Services Commission as necessary for internal control standards.
(2) A financial investment firm (excluding branches and other business offices of foreign financial investment firms) shall, when it intends to establish or amend internal control standards, go through the resolution made by the board of directors. (3) Where the Governor of the Financial Supervisory Service finds that a financial investment firm violates any Acts and subordinate statues, the Financial Services Commission may recommend that the financial investment firm amend its internal control standards in order to prevent other violations of the Acts and subordinate statutes.
(4) Specific standards related to the internal control standards shall be prescribed and publicized by the Financial Services Commission.
Article 32 (Compliance Officer)
(1) The term "discretionary investment advisory company or non-discretionary investment advisory company prescribed by the Presidential Decree" under Article 28 (2) of the Act shall mean those who do not provide financial investment services other than discretionary investment advisory service or non-discretionary investment advisory service and manage not more than 500 billion won of discretionary investment properties as of the end of the latest business year.
(2) The term "finance-related Acts and subordinate statutes prescribed by the Presidential Decree" under Article 28 (4) 3 of the Act shall mean those falling under the subparagraphs of Article 27 (1) of this Decree.
(3) The term "institutions prescribed by the Presidential Decree" under Article 28 (4) 3 of the Act shall mean those falling under any of the following subparagraphs:
1. An organization in which the employee concerned is engaged; or
2. A person (excluding the Financial Services Commission and the Governor of the Financial Supervisory Service) who has the authority to take measures in accordance with the finance-related Acts and subordinate statutes under paragraph (2) including the Minister of Land, Transport and Maritime Affairs.
Article 33 (Exercise of Minority Shareholders' Rights) (1) The term "financial investment firm prescribed by the Presidential Decree" under Article 29 (1) of the Act shall mean those falling under Articles 28 (1) 1 and 28 (1) 2 of the Act. (2) The term "financial investment firm prescribed by the Presidential Decree" under Articles 29 (2) through 29 (6) of the Act shall mean financial investment firms whose capital is not less than 100 billion won as of the end of the latest business year, respectively. Chapter 3 Maintenance of Prudent Management
Section 1 Supervision of Prudent Management
The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 34 (Maintenance of Financial Prudence)
(1) The term "financial investment firm prescribed by the Presidential Decree" under Article 30 (1) of the Act other than each subparagraph shall mean a financial investment firm which provides only one of the financial investment services falling under the following subparagraphs:
1. Non-discretionary investment advisory service;
2. Discretionary investment advisory service; or
3. Both discretionary investment advisory service and non-discretionary investment advisory service.
(2) The term "period prescribed by the Presidential Decree" under Article 30 (3) of the Act shall be one month.
Article 35 (Standards of Prudent Management)
The term "others prescribed by the Presidential Decree" under Article 31 (1) 4 of the Act shall mean the matters falling under each of the following subparagraphs:
1. Matters on risk management;
2. Matters on prudence of foreign exchanges; and
3. Others prescribed and publicized by the Financial Services Commission as necessary to secure prudent management.
Article 36 (Time Limit for Submission of Business Report) (1) The term "period prescribed by the Presidential Decree" under Article 33 (1) of the Act shall be one month.
(2) The term "where any matter prescribed by the Presidential Decree occurs" under Article 33 (3) of the Act shall be as follows:
1. In the case of brokerage or dealing: (a) Where massive bad debts, losses or other financial accidents occur; (b) Where any timely corrective measure under Article 10 of the Act on the Structural Improvement of the Financial Industry is issued;
(c) Cases falling under any of the subparagraphs of Article 161 (1) of the Act (limited to financial investment firms which are not reporting corporations under Article 159 (1) of the Act);
(d) Where the corporation concerned or the officers and employees thereof are subject to criminal punishment with respect to carrying on brokerage or dealing; (e) Where any settlement is not executed on the securities market and derivatives market, etc.; or
(f) Others prescribed and publicized by the Financial Services Commission;
2. In the case of collective investment scheme service: (a) Cases falling under any of items (a) through (c) of subparagraph 1; (b) Where the corporation concerned or the officers and employees thereof are subject to criminal punishment with respect to providing collective investment scheme service; or (c) Others prescribed and publicized by the Financial Services Commission;
3. In the case of discretionary investment advisory service or non-discretionary investment advisory service:
(a) Cases falling under any of items (a) through (c) of subparagraph 1; (b) Where the corporation concerned or the officers and employees thereof are subject to criminal punishment with respect to providing discretionary investment advisory service or non-discretionary investment advisory service; or (c) Others prescribed and publicized by the Financial Services Commission; and
4. In the case of trust service: (a) Cases falling under any of items (a) through (c) of subparagraph 1; (b) Where the corporation concerned or the officers and employees thereof are subject to criminal punishment with respect to providing trust service; (c) Where any bill or check issued by a constructor or entruster is dishonored, or any transaction with a bank is suspended or prohibited; or (d) Others prescribed and publicized by the Financial Services Commission. (3) The business reports under Article 33 (1) of the Act shall include the matters falling under each of the following subparagraphs:
1. Outline of the financial investment firm;
2. Matters on the contents of the business carried on by the financial investment firm; The Enforcement Decree of the Financial Investment Services and Capital Market Act
3. Current financial status;
4. Matters on the operation;
5. Matters on the largest shareholder (including specially-related persons thereof) and major shareholders;
6. Matters on transactions with specially-related persons;
7. Matters on the management of branches, other business offices and manpower;
8. Matters on the current status of investors' properties and the protection thereof;
9. Matters on the business related to the purchase, sale, and other transactions of over-the- counter derivatives, and the current status of transactions and profit and loss appraised (including appraised profit and loss of the related transactions to avoid the risk of over-the- counter derivatives);
10. Where the financial investment firm and the officers and employees thereof are subject to any measure by the Financial Services Commission and the Governor of the Financial Supervisory Service, etc. for the last five years, the details thereof; and
11. Others prescribed and publicized by the Financial Services Commission as related to the operation or management of the financial investment firm. (4) The disclosure documents under Article 33 (2) of the Act shall be as follows:
1. Matters falling under subparagraphs 1 through 7 of paragraph (3); and
2. Others prescribed and publicized by the Financial Services Commission as necessary to notify investors.
(5) A financial investment firm shall, when any matter falling under the subparagraphs of paragraph (2) occurs, report the fact to the Financial Services Commission and publicize it through the Internet website, etc. until the day following the date when such fact occurs. (6) Where a financial investment firm fails to make a faithful disclosure under Article 33 (2) or 33 (3) of the Act, including a misstatement or an omission of material matters (hereinafter referred to as "material matter") under Article 47 (3) of the Act, the Financial Services Commission may require the financial investment firm to correct such disclosure or to make a disclosure again.
(7) In addition to the matters prescribed in paragraphs (1) through (6), other specific standards for the form, contents, preparation, etc. with respect to business reports, disclosure documents,
and disclosure of business circumstances shall be prescribed and publicized by the Financial Services Commission.
Section 2 Restrictions on Transactions with Major Shareholders Article 37 (Restriction on Transactions with Major Shareholders) (1) The term "otherwise prescribed by the Presidential Decree" under the proviso of Article 34 (1) of the Act other than each subparagraph shall mean the matters falling under any of the following subparagraphs. In such a case, the Financial Services Commission shall prescribe and publicize the holding period for each of the following items, respectively:
1. In the application of Article 34 (1) 1 of the Act, cases falling under any of the following items:
(a) Where the securities already held by a financial investment firm are deemed to be the securities issued by a major shareholder as a result of changes in major shareholders; (b) Where the securities concerned are acquired for underwriting; (c) Where corporate bonds are acquired, whose payments of principal and interest are guaranteed by the financial institutions, etc. which are permitted to conduct the business of guaranteeing corporate bonds according to relevant Acts and subordinate statutes; (d) Where special bonds are acquired; or
(e) Other cases prescribed and publicized by the Financial Services Commission as unlikely to undermine prudent management of a financial investment firm; and
2. In the application of Article 34 (1) 2 of the Act, cases falling under any of the following items:
(a) Where the stocks, bonds, and promissory notes (hereafter in this subparagraph, referred to as "promissory note") under Article 34 (1) 2 of the Act already held by a financial investment firm are deemed to be the securities, bonds and promissory notes issued by a specially-related person as a result of changes in specially-related persons; (b) Cases falling under any of items (b) through (e) of subparagraph 1; (c) Where stocks are acquired using the contributions prescribed and publicized by the Financial Services Commission including cases where a financial investment firm acquires equity for the purpose of participating in management; The Enforcement Decree of the Financial Investment Services and Capital Market Act (d) Where stocks, bonds and promissory notes are held for the purpose of executing transactions prescribed and publicized by the Financial Services Commission as a transaction to avoid arbitrage transactions or investment risks; (e) Where the ratio prescribed under paragraph (3) is exceeded as a result of changes in the equity capital under paragraph (3) or the price fluctuation of stocks, bonds or promissory notes issued by specially-related persons; or (f) Others prescribed and publicized by the Financial Services Commission as unlikely to undermine prudent management of a financial investment firm. (2) The term "who are prescribed by the Presidential Decree" under the main sentence of Article 34 (1) 2 of the Act shall mean an affiliate. (3) The term "ratio prescribed by the Presidential Decree" under the proviso of Article 34 (1) 2 of the Act shall be 8/100 of the equity capital prescribed and publicized by the Financial Services Commission.
(4) The term "others prescribed by the Presidential Decree" under Article 34 (1) 3 of the Act shall mean those falling under any of the following subparagraphs:
1. Making transactions with major shareholders or specially-related persons under conditions unfavorable to the financial investment firm concerned as compared with transactions with persons other than the major shareholders or specially-related persons; or
2. Conducting any activity falling under the following items for the purpose of avoiding the restriction under Article 34 (1) 1 or 34 (1) 2 of the Act, or subparagraph 1 of this paragraph: (a) Making transactions by crossholding through contracts or collusion with a third party; or
(b) Using over-the-counter derivatives transactions, trust contracts, linked transactions, etc.
Article 38 (Scope of Credit Extension)
(1) The term "transactions as prescribed by the Presidential Decree" under the main sentence of Article 34 (2) of the Act shall be as follows:
1. Transactions to provide collateral for major shareholders (including the specially-related persons thereof; hereafter in this Article, the same shall apply);
2. Transactions to endorse notes (excluding the notes which have no collateral effect under Article 15 (1) of the Bills of Exchange and Promissory Notes Act) for major shareholders;
3. Transactions to promise to make contributions on behalf of major shareholders;
4. Transactions falling under any of the following items for avoiding the restrictions of lending properties with economic value, including money, securities, etc., guaranteeing the repayment of debts, purchasing securities for financial support, or any transaction falling under any of subparagraphs 1 through 3:
(a) Transactions conducted by crossholding through contracts or collusion with a third party; or
(b) Transactions using over-the-counter derivatives transactions, trust contracts, and linked transactions, etc.; and
5. Others prescribed and publicized by the Financial Services Commission as transactions carrying credit risks, such as transfer of debts, etc. (2) The term "credit extension prescribed by the Presidential Decree" under the proviso of Article 34 (2) of the Act shall mean those falling under any of the following subparagraphs:
1. Credit extension provided to officers within the extent of the smaller amount between annual salary (referring to the taxable income paid by the financial investment firm during the working period) and 100 million won;
2. Debt guarantee for foreign subsidiaries prescribed and publicized by the Financial Services Commission; or
3. Where cases falling under any of the following subparagraphs fall under the credit extension under the main sentence of Article 34 (2) of the Act, the credit extension: (a) Conducting any activity under each subparagraph of Article 34 (1) of the Act as necessary to exercise rights including collateral rights, etc.; (b) Conducting any activity under each subparagraph of Article 34 (1) of the Act as stabilization under Article 176 (3) 1 of the Act or market making under Article 176 (3) 2 of the Act;
(c) Cases under Article 37 (1) of this Decree; or (d) Holding stocks, bonds and promissory notes (referring to the promissory notes under Article 34 (1) 2 of the Act; hereafter in Article 39, the same shall apply) with the ratio under Article 37 (3) of this Decree.
The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 39 (Transactions not Requiring Resolution of Board of Directors) (1) The term "those prescribed by the Presidential Decree" under the former part of Article 34 (3) and Article 34 (4) of the Act shall mean activities possessing money or extending credits of a single transaction amount prescribed and publicized by the Financial Services Commission within the scope of the smaller amount between the amount equivalent to 10/10,000 of equity capital (referring to equity capital under Article 37 (3) of this Decree) and one billion won: Provided, That the single transaction amount shall not include the transaction amount based on the agreement under Article 2 (1) of the Regulation of Standardized Contract Act as ordinary transactions by the financial investment firm.
(2) The term "matters prescribed by the Presidential Decree" under Article 34 (5) of the Act shall be as follows:
1. Holding stocks, bonds and promissory notes pursuant to the proviso of Article 34 (1) 2 of the Act:
(a) Volume of stocks, bonds and promissory notes held as of the end of a quarter; (b) Increase and decrease in stocks, bonds and promissory notes during a quarter; (c) Acquisition or disposal prices; and
(d) Other matters prescribed and publicized by the Financial Services Commission; and
2. Extending credits pursuant to the proviso of Article 34 (2) of the Act: (a) Volume of credit extensions as of the end of a quarter; (b) Increase and decrease in credit extensions during a quarter; (c) Trading conditions for credit extension; and
(d) Other matters prescribed and publicized by the Financial Services Commission. Article 40 (Restriction on Transactions with Major Shareholders) The term "cases prescribed by the Presidential Decree" under Article 34 (7) of the Act shall mean cases falling under either of the following subparagraphs:
1. Where the liabilities of major shareholders (referring to companies only and including specially-related persons who are companies; hereafter in this Article, the same shall apply) exceed the assets thereof; or
2. Where more than two credit rating agencies assign below-investment grades for a major shareholder.
Article 41 (Scope of Unjust Influence)
The term "others prescribed by the Presidential Decree" under subparagraph 3 of Article 35 of the Act shall mean those falling under any of the following subparagraphs:
1. Asking financial investment firms to commit violations;
2. Demanding transactions with major shareholders themselves or a third party under trading conditions that are different from commonly accepted conditions with respect to interest rates, commissions, collateral, etc.; or
3. Exerting influence in the process of preparing research and analysis documents (hereinafter referred to as "research and analysis document") under subparagraph 2 of Article 71 of the Act.
Chapter 4 Regulations on Conduct of Business
Section 1 Common Regulations on Conduct of Business Subsection 1 Duty of Good Faith
Article 42 (Restrictions on Trade Name)
(1) The term "letters prescribed by the Presidential Decree" under the main sentence and proviso of Article 38 (1) of the Act shall mean securities (including their phonetic spelling in Korean) or other foreign letters with the same meaning (including their phonetic spelling in Korean), respectively.
(2) The term "letters prescribed by the Presidential Decree" under Article 38 (2) of the Act shall mean derivatives or futures (including their phonetic spelling in Korean) or other foreign letters with the same meaning (including their phonetic spelling in Korean). (3) The term "letters prescribed by the Presidential Decree" under the main sentence of Article 38 (3) of the Act shall mean collective investment, pooled investment, investment trust, unit trust or asset management (including their phonetic spelling in Korean) or other foreign The Enforcement Decree of the Financial Investment Services and Capital Market Act letters with the same meaning (including their phonetic spelling in Korean), and the term "letters as prescribed by the Presidential Decree" under the proviso of Article 38 (3) of the Act shall mean investment trust (including their phonetic spelling in Korean) or other foreign letters with the same meaning (including their phonetic spelling in Korean). (4) The term "letters prescribed by the Presidential Decree" under the main sentence and proviso of Article 38 (4) of the Act shall mean investment advisory (including their phonetic spelling in Korean) or other foreign letters with the same meaning (including their phonetic spelling in Korean), respectively.
(5) The term "letters prescribed by the Presidential Decree" under Article 38 (5) of the Act shall mean discretionary investment (including their phonetic spelling in Korean) or other foreign letters with the same meaning (including their phonetic spelling in Korean). (6) The term "letters prescribed by the Presidential Decree" under the main sentence and proviso of Article 38 (6) of the Act shall mean trust (including their phonetic spelling in Korean) or other foreign letters with the same meaning (including their phonetic spelling in Korean), respectively.
Article 43 (Scope of Business of Financial Investment Firms) (1) The term "financial investment firm prescribed by the Presidential Decree" under the former part of Article 40 of the Act other than each subparagraph shall mean those falling under any of the following subparagraphs:
1. In the application of subparagraphs 3 and 4 of Article 40 of the Act, a financial investment firm which does not carry on brokerage or dealing;
2. In the application of subparagraph 5 of Article 40 of the Act, a financial investment firm conducting only the financial investment service falling under any of the following subparagraphs:
(a) Non-discretionary investment advisory service; (b) Discretionary investment advisory service; or (c) Both discretionary investment advisory service and non-discretionary investment advisory service; or
3. Other financial investment firms prescribed and publicized by the Financial Services Commission.
(2) The term "finance-related Acts and subordinate statutes prescribed by the Presidential Decree" under subparagraph 1 of Article 40 of the Act shall mean those falling under each subparagraph of Article 27 (1) of this Decree.
(3) The term "financial businesses prescribed by the Presidential Decree" under subparagraph 1 of Article 40 of the Act shall mean those falling under any of the following subparagraphs:
1. Businesses of a general fund administrator (hereinafter referred to as "general fund administrator") under Article 254 (8) of the Act;
2. Foreign exchange business and brokerage of foreign exchange under the Foreign Exchange Transactions Act;
3. Electronic funds transfer under the Electronic Finance Transaction Act (limited to electronic funds transfer by becoming a participant of the payment gateway system under subparagraph 6 of Article 2 of the Electronic Finance Transaction Act, or via representative participants under Article 15 (2) 2 of the Enforcement Decree of the Electronic Finance Transaction Act);
4. Businesses of an operator of retirement pension funds under the Guarantee of Workers' Retirement Benefits Act;
5. Trust services for secured debentures under the Secured Debentures Trust Act;
6. Businesses of an asset management company under the Real Estate Investment Company Act;
7. Businesses of a corporate restructuring specialized company under the Industrial Development Act;
8. Businesses of a small or medium enterprise start-up investment company under the Support for Small and Medium Enterprise Establishment Act;
9. Financing businesses for new technology projects under the Specialized Credit Financial Business Act; or
10. Other financial businesses prescribed and publicized by the Financial Services Commissions as unlikely to undermine the protection of investors or sound trade practice. (4) The term "finance-related Acts and subordinate statutes prescribed by the Presidential Decree" under subparagraph 2 of Article 40 of the Act shall mean those falling under each subparagraph of Article 27 (1) of this Decree.
The Enforcement Decree of the Financial Investment Services and Capital Market Act (5) The term "financial businesses prescribed by the Presidential Decree" under subparagraph 5 of Article 40 of the Act shall mean those falling under each of the following subparagraphs: Provided, That the business under subparagraph 4 shall be limited to conducting dealing of securities, the business under subparagraph 5 shall be limited to conducting brokerage or dealing of the securities concerned, the business under subparagraph 6 shall be limited to conducting dealing of securities and over-the-counter derivatives, and the businesses under subparagraphs 7 and 8 shall be limited to conducting brokerage or dealing of debt securities:
1. Business of an asset manager under the Asset-Backed Securitization Act and trust business of a special purpose company for asset securitization;
2. Business of managing collateral rights of a third party to securities, money, etc. belonging to investors' accounts;
3. Trust business of public offering of corporate bonds under Article 484 (1) of the Commercial Act;
4. Corporate financing business under subparagraph 3 of Article 71 of the Act, and loan business related to other businesses prescribed and publicized by the Financial Services Commission;
5. Business of conducting loan transaction of securities, or arranging for and intermediating the loan transaction, or acting as an agent for that purpose;
6. Business of guaranteeing payment;
7. Business of purchasing or selling certificates of deposit denominated in Korean won, arranging for or intermediating such business or acting as an agent for that purpose;
8. Business of purchasing or selling loans and other bonds, arranging for or intermediating such business, or acting as an agent for that purpose;
9. Business of arranging for or intermediating lending, or acting as an agent for that purpose; and
10. Other financial businesses prescribed and publicized by the Financial Services Commissions as unlikely to undermine the protection of investors or sound trade practice. Article 44 (Publication of Incidental Business)
(1) Where a financial investment firm reports the incidental business that it intends to carry on, the Financial Services Commission shall disclose the matters falling under each of the
following subparagraphs through the Internet website, etc. within seven days from the reporting date pursuant to Article 41 (4) of the Act:
1. Name of the financial investment firm;
2. Reporting date of the incidental business;
3. Expected date of commencing the incidental business;
4. Contents of the incidental business; and
5. Others prescribed and publicized by the Financial Services Commission. (2) The Financial Services Commission shall, when it issues a restriction order or correction order under Article 41 (2) of the Act, disclose the contents thereof and the reasons therefor through the Internet website, etc.
Article 45 (Scope of Businesses Prohibited from Delegation) The term "businesses prescribed by the Presidential Decree" under the proviso of Article 42 (1) of the Act shall be as follows:
1. Businesses (limited to cases where the right of decision-making on the businesses concerned is delegated) falling under each of the following items: (a) Business of a compliance officer excluding businesses prescribed and publicized by the Financial Services Commission;
(b) Business of performing internal auditing;
(c) Business of managing risk; and
(d) Business of analyzing and assessing credit risk; and
2. Businesses falling under each of the following items pursuant to the classification of financial investment services:
(a) In the case of dealing, businesses falling under Articles 47 (1) 1 (a) (excluding simple businesses, such as opening accounts and verifying real names), 47 (1) 1 (b), and 47 (1) 1 (d) of this Decree;
(b) In the case of brokerage, businesses falling under Articles 47 (1) 2 (a) (excluding simple businesses, such as opening accounts and verifying real names) and 47 (1) 2 (c) of this Decree;
(c) In the case of collective investment scheme service, businesses falling under each item of Article 47 (1) 3 of this Decree: Provided, That the same shall not apply to the The Enforcement Decree of the Financial Investment Services and Capital Market Act business of managing or instructing to manage [including the exercise of voting rights of equity securities (including the securities deposit receipts related thereto) belonging to the collective investment properties; hereafter in this item, the same shall apply] assets denominated in foreign currencies among the collective investment property, the business of managing or instructing to manage (limited to the delegation to financial investment firms) collective investment properties which are the assets denominated in Korean won (referring to the assets that are not assets denominated in foreign currencies; hereafter in this subparagraph, the same shall apply) within 20/100 of the total amount thereof, the business of conducting research and analysis related to the management or management instruction, the business of placing simple orders of purchasing or selling securities, derivative-linked securities or overseas payment methods under the Foreign Exchange Transactions Act, and the business of assessing collective investment properties whose rights to decision-making are not entrusted; (d) In the case of non-discretionary investment advisory service, businesses falling under Articles 47 (1) 4 (a) and 47 (1) 4 (b) of this Decree: Provided, That the same shall not apply to the business of providing investment decisions on assets denominated in foreign currencies among the assets subject to the contract for non-discretionary investment advisory service and the business (limited to the delegation to financial investment firms) of providing investment decisions within 20/100 of the total amount of the assets subject to the contract for non-discretionary investment advisory service, which are the assets denominated in Korean won;
(e) In the case of discretionary investment advisory service, businesses falling under Articles 47 (1) 5 (a) and 47 (1) 5 (b) of this Decree: Provided, That the same shall not apply to the business of managing assets denominated in foreign currencies among the discretionary investment properties, the business (limited to the delegation to financial investment firms) of managing 20/100 of the total amount of discretionary investment properties which are the assets denominated in Korean won, the business of conducting research and analysis related to the management, and the business of placing simple orders of purchasing or selling securities, derivative-linked securities or overseas payment methods under the Foreign Exchange Transactions Act; and
(f) In the case of trust service, businesses falling under Articles 47 (1) 6 (a) through 47 (1) 6 (d) of this Decree: Provided, That the same shall not apply to the business of the custody and management (including the business of managing collective investment properties that are the assets denominated in foreign currencies and executing management instruction thereof) of the securities to be deposited under Article 308 of the Act, or collective investment properties and trust properties that are the assets denominated in foreign currencies, the business [including the exercise of voting rights of equity securities (including the securities deposit receipts related to the equity securities) belonging to the trust properties; hereafter in this item, the same shall apply] of managing assets denominated in foreign currencies among the trust properties, the business (limited to the delegation to financial investment firms) of managing 20/100 of the total amount of the trust properties that are the assets denominated in Korean won, the business of conducting research and analysis related to the management or management instruction, and the business of placing simple orders of purchasing or selling securities, derivative-linked securities or overseas payment methods under the Foreign Exchange Transactions Act.
Article 46 (Reporting on Delegation)
(1) A financial investment firm shall report the business delegated pursuant to Article 42 (1) of the Act to the Financial Services Commission with accompanying documents falling under each of the following subparagraphs within the seven days preceding the date on which the person who is delegated with the business intends to commence such business:
1. Copies of the delegation contract;
2. Operating standards for delegation (hereafter in this paragraph, referred to as "operating standards for delegation") under Article 42 (7) of the Act;
3. Review opinions prepared by a compliance officer (where there is no compliance officer, referring to those equivalent thereto, such as an auditor, etc.) that the delegation contract does not fall under any of the subparagraphs of Article 42 (3) of the Act and does not violate any operating standards for the delegation, and the data related thereto;
4. Where the financial investment firm delegates its principal business (referring to the principal business under Article 42 (4) of the Act) to a foreign financial investment firm The Enforcement Decree of the Financial Investment Services and Capital Market Act pursuant to the latter part of Article 42 (4) of the Act, documents to prove that the foreign financial investment firm meets the requirements under Article 47 (2) of this Decree; and
5. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors and sound trade practice. (2) The term "others prescribed by the Presidential Decree" under Article 42 (2) 4 of the Act shall mean matters falling under any of the following subparagraphs:
1. Matters on the cancellation of a delegation contract;
2. Matters on delegation fees, etc.; or
3. Others prescribed and publicized by the Financial Services Commission, such as a system to prevent a conflict of interests caused by delegation. (3) The Financial Services Commission shall, when it issues a restriction order or correction order pursuant to Article 42 (3) of the Act, use the documents specifying the contents thereof and the reasons therefor.
Article 47 (Scope of Principal Businesses)
(1) The term "businesses prescribed by the Presidential Decree" under the former part of Article 42 (4) of the Act shall mean those falling under each of the following subparagraphs pursuant to the classification by the type of financial investment services:
1. In the case of dealing, businesses falling under each of the following items: (a) Business of entering into and canceling a contract for dealing; (b) Business of publishing quotations for the transactions of financial investment products;
(c) Business of accepting, delivering, executing and confirming transaction orders; (d) Business of underwriting securities;
(e) Business of assessing the value of securities subject to underwriting; and (f) Business of determining the price of underwritten securities, handling affairs for subscription, and performing distribution;
2. In the case of brokerage, businesses falling under each of the following items: (a) Business of entering into and canceling a contract for brokerage; (b) Business of conducting daily marking-to-market; (c) Business of handling deposit money and closing transactions; and
(d) Business of accepting, delivering, executing and confirming transaction orders;
3. In the case of collective investment scheme service, businesses falling under each of the following items:
(a) Business of entering into and canceling a trust contract for establishing an investment trust under Article 9 (18) 1 of the Act (hereinafter referred to as "investment trust"), and business of establishing an investment limited liability company under Article 9 (18) 3 of the Act (hereinafter referred to as "investment limited liability company"), investment limited partnership company under Article 9 (18) 4 of the Act (hereinafter referred to as "investment limited partnership company"), investment limited partnership under Article 9 (18) 5 of the Act (hereinafter referred to as "investment limited partnership"), and investment undisclosed association under Article 9 (18) 6 of the Act (hereinafter referred to as "investment undisclosed association");
(b) Business of managing or instructing to manage [including the exercise of voting rights of equity securities (including the securities deposit receipts related thereto) belonging to the collective investment properties] collective investment properties; and (c) Business of assessing collective investment properties;
4. In the case of non-discretionary investment advisory service, businesses falling under each of the following items:
(a) Business of entering into and canceling a contract for non-discretionary investment advisory service; and
(b) Business of providing investment decisions upon the request for advisory consulting on investment;
5. In the case of discretionary investment advisory service, businesses falling under each of the following items:
(a) Business of entering into and canceling a contract for discretionary investment advisory service; and
(b) Business of managing discretionary investment properties; and
6. In the case of trust service, businesses falling under each of the following items: (a) Business of entering into and canceling a trust contract (including the trust contract for establishing an investment trust) and a contract for the custody and management of collective investment properties (excluding investment trust properties); The Enforcement Decree of the Financial Investment Services and Capital Market Act (b) Business of providing the custody and management of trust properties (excluding investment trust properties; hereafter in this subparagraph, the same shall apply); (c) Business of providing the custody and management (including the business of managing and executing the management instruction) of collective investment properties; and
(d) Business of managing [including the exercise of voting rights of equity securities (including the securities deposit receipts related thereto) belonging to the trust properties] trust properties.
(2) The term "requirements prescribed by the Presidential Decree" under the latter part of Article 42 (4) of the Act shall mean that a foreign financial investment firm shall provide financial investment services to be delegated after obtaining a license, authorization or registration from foreign financial supervisory authorities in a country where the firm is located, or shall operate businesses equivalent to the financial services specified in subparagraph 1 of Article 40 of the Act.
Article 48 (Scope of Re-delegation)
The term "cases prescribed by the Presidential Decree" under the proviso of Article 42 (5) of the Act shall mean cases where businesses falling under each of the following subparagraphs are delegated:
1. Businesses falling under any of the following items as part of the delegated business: (a) Management and operation of a data-processing system; (b) Delivery of notices, etc.;
(c) Custody (excluding the custody falling under trust service); (d) Research analysis;
(e) Legal review;
(f) Accounting management;
(g) Receipt of documents, etc.;
(h) Bonds collection; or
(i) Other simple businesses prescribed and publicized by the Financial Services Commission;
2. Business of managing or instructing to manage [including the exercise of voting rights of equity securities (including the securities depository receipts related thereto) belonging to the collective investment properties] collective investment properties that are assets denominated in foreign currencies among the businesses under Article 47 (1) 3 (b) of this Decree and business (limited to the business of assessing assets denominated in foreign currencies whose right of decision-making is not delegated) under Article 47 (1) 3 (c) of this Decree; and
3. Business of providing the custody and administration (including the business of the management and the execution of the management instruction) of the securities, etc. to be deposited under Article 308 of the Act and assets denominated in foreign currencies among the businesses under Articles 47 (1) 6 (b) and 47 (1) 6 (c) of this Decree, and business of the management of trust properties [including the exercise of voting rights of equity securities (including the securities depository receipts related thereto) belonging to the trust property] that are assets denominated in foreign currencies among the businesses under Article 47 (1) 6 (d) of this Decree.
Article 49 (Standards for Providing Information on Delegation) (1) The term "conditions prescribed by the Presidential Decree" under Article 42 (6) of the Act shall be as follows:
1. Provided information shall be related to the delegated business;
2. Records related to the provided information shall be maintained; and
3. A delegatee shall be managed and supervised when he/she uses the provided information. (2) A financial investment firm shall include the matters falling under each of the following subparagraphs in operating standards for the delegation under Article 42 (7) of the Act:
1. Matters on managing and assessing risks incurred from delegation;
2. Matters on the procedures to decide or terminate delegation;
3. Matters on managing and supervising a delegatee;
4. Matters on protecting investors' information;
5. Matters on preparing for contingencies, such as bankruptcy of a delegatee;
6. Matters on obtaining measures to request the data related to delegation; and
7. Others prescribed and publicized by the Financial Services Commission. The Enforcement Decree of the Financial Investment Services and Capital Market Act (3) Articles 42 (2) and 42 (3) of the Act shall apply to the amendment of a delegation contract. (4) Articles 42 (2) through 42 (4), the main sentence of Article 42 (5), Articles 42 (6) through (10), and Article 43 of the Act and paragraphs (2), (3), and (5) of this Article shall apply to re- delegations. In such a case, in the application of Articles 42 (2), 42 (7) and 42 (8) of the Act, the financial investment firm which has delegated business in the beginning shall be the person who is required to report re-delegation to the Financial Services Commission, shall be the person who is required to establish operating standards for re-delegation and shall be the person who is required to indicate the delegation in contract documents and report thereon to an investor.
(5) In addition to the matters prescribed in paragraphs (1) through (4), other necessary matters on the form of the report on delegation, the preparation thereof, accompanying documents, etc. shall be prescribed and publicized by the Financial Services Commission. (6) The term "others prescribed by the Presidential Decree" under subparagraph 312 of Appendix 1 of the Act under Article 43 (2) 4 of the Act shall mean those falling under any of the subparagraphs of Appendix 5 of this Decree.
Article 50 (Information Barrier of Financial Investment Firm) (1) The term "cases prescribed by the Presidential Decree" under Article 45 (1) of the Act other than each subparagraph shall mean those falling under either of the following subparagraphs:
1. Information sharing between management of its own properties (excluding the management pursuant to the methods prescribed and publicized by the Financial Services Commission including the deposit in financial institutions), brokerage, or dealing and collective investment scheme service or trust service: Provided, That the same shall not apply to the information sharing between corporate financing business (referring to the corporate financing business under subparagraph 3 of Article 71 of the Act; hereafter in this Article, the same shall apply) of brokerage or dealing and corporate financing business of collective investment scheme service; or
2. Information sharing between corporate financing business and the management of its own properties or financial investment services (excluding corporate financing business).
(2) The term "information on the purchase and sale of financial investment products and any other information prescribed by the Presidential Decree" under Article 45 (1) 1 of the Act shall mean those falling under any of the following subparagraphs: Provided, That the same shall not apply to the information provided under the conditions prescribed and publicized by the Financial Services Commission where there is little possibility of a conflict of interests:
1. Information on the purchase and sale of financial investment products;
2. Information on current status of the possession of financial investment products: Provided, That the same shall not apply to cases where an investor provides information on the total amount of deposited securities and the total amount of the securities by type, and others prescribed and publicized by the Financial Services Commission;
3. Information on the portfolio and management of collective investment properties, discretionary investment properties and trust properties: Provided, That the same shall not apply to cases where the information which is two months old is provided with respect to the portfolio and management of collective investment properties, discretionary investment properties and trust properties in accordance with the methods and procedures prescribed and publicized by the Financial Services Commission; or
4. Undisclosed material information under Article 174 (1) of the Act other than each subparagraph, which is gathered in the course of carrying on corporate financing business. (3) The term "ways prescribed by the Presidential Decree" under Article 45 (1) 3 of the Act shall be as follows:
1. The way that offices are not separated by a wall or partition, or a gate is shared; and
2. The way that data-processed materials on the information under Article 45 (1) 1 of the Act are not stored, managed, or accessed in an independent manner to prevent information sharing.
(4) The term "others prescribed by the Presidential Decree" under Article 45 (1) 4 of the Act shall mean cases falling under either of the following subparagraphs:
1. Where the divisions in charge of the businesses under each subparagraph of paragraph (1) are not separated as independent divisions or the division in charge of the businesses fails to carry on the businesses concerned in an independent manner: Provided, That the same shall not apply to cases where there is little possibility of a conflict of interests, including the The Enforcement Decree of the Financial Investment Services and Capital Market Act information provided under the conditions prescribed and publicized by the Financial Services Commission; or
2. Where officers or employees who carry out the business under each subparagraph of paragraph (1) fail to keep records and to receive confirmation from a compliance officer (where there is no compliance officer, referring to those equivalent thereto, such as an auditor, etc.) at least once a month when they have held a meeting or communicated with each other with respect to the business.
Article 51 (Information Barrier between Financial Investment Firm and Its Affiliate) (1) The term "company prescribed by the Presidential Decree" under Article 45 (2) of the Act other than each subparagraph shall mean those falling under both of the following subparagraphs:
1. Where a financial investment firm provides collective investment scheme service, the broker or dealer (hereafter in this Article, referred to as "company distributing collective investment securities") who sells collective investment securities of a collective investment scheme managed by the financial investment firm; and
2. Where a financial investment firm is a branch or any other business office of a foreign financial investment firm, the foreign financial investment firm. (2) The term "cases prescribed by the Presidential Decree" under Article 45 (2) of the Act other than each subparagraph shall mean the cases that do not fall under any of the following subparagraphs:
1. In the application of Article 45 (2) 1 of the Act, cases falling under either of the following subparagraphs:
(a) Where a financial investment firm provides information to its affiliates (including those under subparagraph 2 of paragraph (1); hereafter in this subparagraph, the same shall apply) after obtaining a confirmation from the Financial Services Commission in order to fulfill the duty to report and disclose holding stocks in accordance with domestic and foreign Acts and subordinate statutes;
(b) Where, in addition to the compliance officer (where there is no compliance officer, referring to those equivalent thereto, such as auditor, etc.; hereafter in this Article, the same shall apply) of a financial investment firm, affiliates of the financial investment
firm inspect the compliance with internal control standards and the financial investment firm provides its affiliates with the information on the purchase and sale of financial investment products and other information prescribed and publicized by the Financial Services Commission as necessary for inspection following the methods and procedures prescribed and publicized by the Financial Services Commission; (c) Where a financial investment firm carrying on brokerage or dealing provides its affiliates with the information on the total amount of the securities deposited by investors and the total amount of the securities by type and other information prescribed and publicized by the Financial Services Commission;
(d) Where a financial investment firm delegates its affiliates with the business of placing simple orders of selling or purchasing securities belonging to collective investment properties, investment discretionary properties or trust properties, exchange-traded derivative and overseas payment methods under the Foreign Exchange Transactions Act, and the financial investment firm provides its affiliates with the information prescribed and publicized by the Financial Services Commission including the type, price and quantity, etc. of the securities and exchange-traded derivatives necessary for the business of placing purchasing and selling orders pursuant to the methods and procedures prescribed and publicized by the Financial Services Commission; (e) Where a financial investment firm providing collective investments scheme service provides companies distributing collective investment securities with the information which is two months old among information on the portfolio and management of collective investment properties following the methods and procedures prescribed and publicized by the Financial Services Commission; or (f) Where a financial investment firm delegates its affiliates with a part of the businesses conducted by the financial investment firm pursuant to Article 42 (1) of the Act and provides its affiliates with the information under Article 42 (6) of the Act; or
2. In the application of Article 45 (2) 2 of the Act, cases falling under any of the following subparagraphs while obtaining a confirmation from the Financial Services Commission: (a) Where a full-time officer of a financial investment firm (in the case of integrated financial investment firms, limited to the officers or employees who perform duties of financial investment services; hereafter in this subparagraph, the same shall apply) The Enforcement Decree of the Financial Investment Services and Capital Market Act concurrently holds the post of a non-standing officer or employee of a person under subparagraph 2 of paragraph (1) or a financial investment firm (including foreign financial investment firms; hereafter in this subparagraph, the same shall apply) which is an affiliate, or where a non-standing officer or employee concurrently holds the post of an officer or employee of a person under subparagraph 2 of paragraph (1) or another financial investment firm which is an affiliate of the financial investment firm as prescribed and publicized by the Financial Services Commission; (b) Where a full-time officer or employee of a financial investment firm concurrently holds the post of a non-standing officer or employee of a financial holding company (referring to the financial holding company under the Financial Holding Company Act and including a company similar thereto which is established under foreign Acts and subordinate statutes; hereafter in this subparagraph, the same shall apply) which is an affiliate of the financial investment firm, or where a non-standing officer or employee of the financial investment firm concurrently holds the post of an officer or employee of a financial holding company which is an affiliate of the financial investment firm; (c) Where a financial investment firm sends an officer or employee thereof to work for a person under subparagraph 2 of paragraph (1) or a financial investment firm or financial holding company which is an affiliate or where an officer or employee of the affiliate or the person under subparagraph 2 of paragraph (1) is sent to the financial investment firm as prescribed and publicized by the Financial Services Commission; (d) Where an officer or employee of a financial investment firm concurrently holds the post of a non-standing officer or employee of the company (limited to the company in compliance with the investment purpose of a private equity company) invested by a private equity company (referring to the private equity company under Article 9 (18) 7 of the Act; hereinafter the same shall apply) whose executive officer is the financial investment firm concerned or where the financial investment firm sends its officer or employee to the company;
(e) Where a financial investment firm establishes or incorporates a foreign collective investment scheme (hereinafter referred to as "foreign collective investment scheme") under Article 279 (1) of the Act in a foreign country in accordance with foreign Acts and subordinate statutes and an officer or employee of the financial investment firm
concurrently holds the post of a non-standing officer of the foreign collective investment scheme; or
(f) Others prescribed and publicized by the Financial Services Commission as equivalent to the provisions under items (a) through (e).
(3) The term "information on the purchase and sale of financial investment products and any other information prescribed by the Presidential Decree" under Article 45 (2) 1 of the Act shall mean the information falling under any of the following subparagraphs: Provided, That the same shall not apply to the information provided under the conditions prescribed and publicized by the Financial Services Commission as unlikely to cause a conflict of interests:
1. Information on the purchase and sale of financial investment products;
2. Information on the current status of the possession of financial investment products;
3. Information on the portfolio and management of collective investment properties, discretionary investment properties and trust properties; or
4. Undisclosed material information under Article 174 (1) of the Act other than each subparagraph, which is gathered in the course of carrying on corporate financing business. (4) The term "way prescribed by the Presidential Decree" under Article 45 (2) 3 of the Act shall mean those falling under each subparagraph of Article 50 (3) of this Decree. (5) The term "others prescribed by the Presidential Decree" under Article 45 (2) 4 of the Act shall mean cases where an officer or employee who carries out financial investment services in a financial investment firm fails to keep records or fails to receive confirmation from a compliance officer at least once a month when they have held a meeting or made communication on the business of the financial investment firm with the officers or employees of its affiliates (including those under subparagraph 2 of paragraph (1)) or a company distributing collective investment securities.
Subsection 2 Investment Solicitation
Article 52 (Methods of Confirming Investment Objective) The term "others prescribed by the Presidential Decree" under Article 46 (2) of the Act shall mean methods falling under any of the following subparagraphs:
1. Emails and other electronic communications similar thereto; The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. Letters; or
3. ARS. Article 53 (Duty to Provide Product Guidelines to Investor) (1) The term "details prescribed by the Presidential Decree" under Article 47 (1) of the Act shall be as follows:
1. Structure and nature of investment components (referring to investment components under the main sentence of Article 3 (1) of the Act other than each subparagraph; hereinafter the same shall apply) of financial investment products;
2. Matters on commissions under Article 58 (1) of the Act;
3. Where there is any condition of early repayment, the details thereof; and
4. Matters on the cancellation and termination of a contract. (2) The term "measure prescribed by the Presidential Decree" under Article 47 (2) of the Act shall mean those falling under any of the subparagraphs of Article 52 of this Decree. Article 54 (Exemption from Prohibition of Investment Solicitation Without Request) (1) The term "cases prescribed by the Presidential Decree" under the proviso of subparagraph 3 of Article 49 of the Act shall mean activities to solicit investment with respect to securities and exchange-traded derivatives.
(2) The term "cases prescribed by the Presidential Decree" under the proviso of subparagraph 4 of Article 49 of the Act shall mean activities falling under any of the following subparagraphs:
1. Soliciting investment with respect to insurance contracts with investment components;
2. Re-soliciting investment after the period prescribed and publicized by the Financial Services Commission has passed since an investor has rejected investment solicitation; or
3. Soliciting investment with respect to other types of financial investment products. In such a case, specific matters on the other types shall be prescribed and publicized by the Financial Services Commission.
Article 55 (Prohibition of Unfair Solicitation)
The term "matters prescribed by the Presidential Decree" under subparagraph 5 of Article 49 of the Act shall mean activities to solicit investment under the conditions on lending money, intermediating or arranging for such lending, or acting as an agent for that purpose without accepting the requests from investors (excluding professional investors and non-professional investors who have investment experience by accepting credit extension under Article 72 (1) of the Act).
Article 56 (Qualifications for Introducing Broker) The term "qualification requirements prescribed by the Presidential Decree" under Article 51 (1) 2 of the Act shall mean cases where all the requirements falling under each of the following subparagraphs are met:
1. A person falling under any of the following items: (a) Those who have passed an examination to test qualifications as an investment advisor, which is supervised by the Association pursuant to Article 286 (1) 3 (a) of the Act; (b) Those who have passed an examination to test qualifications as a fund manager, which is supervised by the Association pursuant to Article 286 (1) 3 (c) of the Act; or (c) The individuals who meet the registration requirements for an insurance planner, insurance agency, or certified insurance broker under Appendix 3 of the Enforcement Decree of the Insurance Business Act, and carry out insurance solicitation (limited to cases where the person solicits investment of collective investment securities as an agent); and
2. A person who has completed the training prescribed by the Association. Article 57 (Delegation of Registration)
The Financial Services Commission shall, when it delegates the registration to the Association pursuant to the latter part of Article 51 (3) of the Act, enter into a delegation contract containing the provisions falling under each of the following subparagraphs with the Association in advance:
1. The provision that the Association shall comply with Articles 51 (5) through 51 (8) of the Act and Articles 58 (3) and 58 (4) of this Decree when it conducts the delegated registration The Enforcement Decree of the Financial Investment Services and Capital Market Act service. In such a case, "the Financial Services Commission" shall be regarded as "the Association;"
2. The provision that the Association shall report the current status of registration to the Financial Services Commission on a quarterly basis. Article 58 (Methods and Procedures of Registration) (1) A registration application under Article 51 (4) of the Act shall include the matters falling under each of the following subparagraphs:
1. Trade name of the financial investment firm;
2. Personal information of a person who intends to register himself/herself as an introducing broker (hereinafter referred to as "introducing broker") under Article 51 (9) of the Act;
3. Financial investment products for which investment solicitation is to be entrusted and the scope of contracts; and
4. Others prescribed and publicized by the Financial Services Commission as necessary for review for registration.
(2) The registration application under paragraph (1) shall accompany the documents falling under each of the following subparagraphs:
1. Certified copies of resident registration (including those equivalent thereto) of a person who intends to register himself/herself as an introducing broker;
2. Copies of contracts;
3. Documents to identify the qualifications under Article 51 (1) 2 of the Act; and
4. Others prescribed and publicized by the Financial Services Commission as necessary for review for registration.
(3) The Financial Services Commission shall confirm whether the content of the application for registration under Article 51 of the Act is true or not, and then review whether the content meets the registration requirements under Article 51 (1) of the Act. (4) When the Financial Services Commission receives a registration application and recognizes that the registration requirements are met, the Commission shall issue a certificate of introducing broker to the applicant.
(5) In addition to the matters prescribed in paragraphs (1) through (4), others necessary for the application for and review for registration, the form of a registration application and the
preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 59 (Prohibited Activities of Introducing Broker) (1) The term "others prescribed by the Presidential Decree" under Article 52 (2) 4 of the Act shall mean those falling under any of the following subparagraphs:
1. Concluding contracts on behalf of investors;
2. Being delegated with the right to purchase or sell financial investment products from investors;
3. Intermediating, arranging for or acting as an agent for making third persons lend money to investors;
4. Soliciting investment or running investment advertisements on the conclusion of a contract for discretionary investment advisory or trust contract as if investment discretionary properties or trust properties are managed collectively without separating them for each investor or each trust property;
5. Entering into a delegation contract for investment solicitation with more than two financial investment firms;
6. Entering into a delegation contract for investment solicitation between an insurance planner under item (c) of subparagraph 1 of Article 56 of this Decree and an insurance company other than the company in which the insurance planner is engaged; or
7. Others prescribed and publicized by the Financial Services Commission as likely to undermine the protection of investors or sound trade practice; (2) The term "others prescribed by the Presidential Decree" under Article 52 (3) 4 of the Act shall mean those falling under any of the following subparagraphs:
1. The effect that an introducing broker is not entitled to enter into a contract on behalf of investors;
2. The effect that an introducing broker is unable to be delegated with the right to purchase or sell financial investment products by investors; or
3. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors or sound trade practice. The Enforcement Decree of the Financial Investment Services and Capital Market Act Subsection 3 Prohibitions of Using Information on Duties Article 60 (Investment Advertisement)
(1) The term "matters prescribed by the Presidential Decree" under Article 57 (2) of the Act shall mean the matters falling under each of the following subparagraphs:
1. The effect that a financial investment firm under Article 57 (2) of the Act (hereafter in this Article, referred to as "financial investment firm") has an obligation to provide sufficient guidelines on financial investment products;
2. The recommendation that investment shall be made after a financial investment firm provides the guidelines under subparagraph 1;
3. Matters on commissions under Article 58 (1) of the Act; and
4. Others prescribed and publicized by the Financial Services Commission after taking into account the person who runs an investment advertisement, the contents thereof, the media, the size, time, etc. of the investment advertisement. (2) The term "matters prescribed by the Presidential Decree" under Article 57 (3) of the Act other than each subparagraph shall be as follows:
1. Matters on the details, such as trade name, etc. of the collective investment manager, the trust company in charge of the custody and management of collective investment properties, and the broker or dealer (where a general fund administrator exists, including the general fund administrator) who sells collective investment securities;
2. Matters on the fees or commissions paid to the person falling under subparagraph 1;
3. Matters on the fund managers of the collective investment scheme concerned;
4. Where there is any past management performance, the management performance;
5. Matters on the redemption of collective investment securities; and
6. Other matters prescribed and publicized by the Financial Services Commission recognized as unlikely to undermine the protection of investors even if they are included in the investment advertisement.
(3) A financial investment firm shall, when it runs investment advertisements, comply with the matters falling under each of the following subparagraphs:
1. Where any profit or performance is indicated, the financial investment firm shall not show only the profit or performance for a certain period when the financial investment firm has performed well;
2. Where any comparative advertisement of financial investment products is made, the financial investment firm shall not indicate that the financial investment products of other firms are inferior or disadvantageous without any clear grounds; and
3. The financial investment firm shall follow the methods prescribed and publicized by the Financial Services Commission, including a prior confirmation from its compliance officer (where there is no compliance officer, referring to those equivalent thereto, such as an auditor, etc.).
Article 61 (Distribution of Contract Document and Cancellation of Contract) (1) The term "cases prescribed by the Presidential Decree" in the proviso of Article 59 (1) of the Act shall mean those falling under any of the following subparagraphs:
1. Where a financial investment firm enters into a framework contract for trading financial investment products, such as establishing transaction accounts and then conducts transactions pursuant to the contents of the contract continuously or repeatedly;
2. Where an investor gives notice, in writing, that he/she refuses to receive contract documents;
3. Where an investor gives notice, in writing, that he/she receives contract documents through mail or e-mail and a financial investment firm provides the contract documents in such a way; or
4. Others prescribed and publicized by the Financial Services Commission as unlikely to undermine the protection of investors.
(2) The term "contracts prescribed by the Presidential Decree" under Article 59 (2) of the Act shall mean a contract for non-discretionary investment advisory service. (3) The term "amount prescribed by the Presidential Decree" under Article 59 (4) and the proviso of Article 59 (5) of the Act shall mean the amount under the classification falling under each of the following subparagraphs:
The Enforcement Decree of the Financial Investment Services and Capital Market Act
1. Where a financial investment firm refuses to provide advisory services under a contract for non-discretionary investment advisory service: The amount equivalent to the socially accepted costs to conclude a contract for non-discretionary investment advisory service;
2. Where a contract for non-discretionary investment advisory service prescribes that commissions are calculated based on the number of times advisory service is provided: The amount (where the amount exceeds the amount socially accepted as commissions for providing advisory service, the amount subtracting such excessive portion) equivalent to the commissions calculated based on the number of times advisory service has been provided by the time when the contract is cancelled; and
3. Cases other than those under subparagraphs 1 and 2: The amount (where the amount exceeds the amount socially accepted as commissions for providing advisory service, the amount subtracting such excessive portion) calculated by multiplying the number of days from the date on which the contract documents under Article 59 (1) of the Act are sent to the date on which the contract is terminated by the amount calculated by dividing the commissions during the whole period of the contract as agreed in the contract for non- discretionary investment advisory service by the total number of days of the contract period. Article 62 (Recordkeeping)
(1) A financial investment firm shall record and keep data falling under each of the following subparagraphs for the period falling under each of the following subparagraphs pursuant to Article 60 (1) of the Act: Provided, That the Financial Services Commission may publicize a shortened period in cases where it is unlikely to undermine the protection of investors:
1. Data on the operation: (a) Data on investment solicitation: ten years;
(b) Data on the purchases, sales and other transactions of financial investment products, including record of orders and details of transactions, etc.: ten years; (c) Data on the management of collective investment properties, discretionary investment properties and trust properties, etc.: ten years; (d) Data on the contracts entered into with investors, including the establishment and agreement for transaction accounts: ten years;
(e) Data on the delegation: five years;
(f) Data on incidental business: five years; and
(g) Other data on the operation: five years;
2. Data on the financial status: ten years;
3. Data on the business: (a) Data on resolutions of general meetings of shareholders or the board of directors: ten years;
(b) Data on matters indicated in the report on material change (hereinafter referred to as "report on material change") under Article 161 of the Act: five years; (c) Data on management of proprietary properties: three years; and (d) Other data on business, including the acquisition and disposal of assets: three years;
4. Data on internal control: (a) Data on compliance, including internal control standards and risk management, etc.: five years;
(b) Data on qualifications of officers, major shareholders and experts and details of transactions with any stakeholder, etc.: five years; and (c) Other data on internal control: three years; and
5. Other books and documents required to be prepared and kept pursuant to related Acts and subordinate statutes: the period prescribed by the Acts and subordinate statutes (where the period is not prescribed by the Acts and subordinate statutes, referring to the period prescribed and publicized by the Financial Services Commission after taking into account the period falling under subparagraphs 1 through 4). (2) Specific standards for the type and classification of data under paragraph (1) shall be prescribed and publicized by the Financial Services Commission. Article 63 (Depository of Securities Held)
(1) The term "those prescribed by the Presidential Decree" under the main sentence of Article 61 of the Act shall be as follows:
1. Certificates of deposit denominated in Korean won; and
2. Others prescribed and publicized by the Financial Services Commission. (2) The term "cases prescribed by the Presidential Decree" under the proviso of Article 61 of the Act shall mean those falling under either of the following subparagraphs: The Enforcement Decree of the Financial Investment Services and Capital Market Act
1. Where a financial investment firm opens an account to deposit securities denominated in foreign currencies (hereinafter referred to as "securities denominated in foreign currencies") under Article 3 (1) 8 of the Foreign Exchange Transactions Act in the Depository and makes a centralized deposit in the foreign custodians appointed by the Depository among the foreign custodians prescribed and publicized by the Financial Services Commission; or
2. Where a financial investment firm makes a centralized deposit in the foreign custodians prescribed and publicized by the Financial Services Commission when the Depository is unable to designate foreign custodians due to foreign Acts, subordinate statutes, practices, etc.
(3) Where a broker or dealer comes into custody of certificates or securities other than securities to be deposited under Article 308 of the Act through lock-up business or any other way, such certificates or securities shall be regarded as deposited pursuant to Article 61 of the Act.
Article 64 (Transaction of Financial Investment Products by Officer or Employee) (1) The term "financial investment firm prescribed by the Presidential Decree" under Article 63 (1) of the Act other than each subparagraph shall mean a financial investment firm falling under either of the following subparagraphs:
1. A person falling under subparagraphs 1 and 2 of Article 22 of the Act; or
2. A person falling under subparagraphs 1 through 3 and subparagraphs 5 through 9 of Article 24 of this Decree.
(2) The term "financial investment products prescribed by the Presidential Decree" under Article 63 (1) of the Act other than each subparagraph shall mean a financial investment product falling under any of the following subparagraphs:
1. Equity securities [including stock certificates traded through the over-the-counter transactions under Article 178 of this Decree, and excluding stock certificates of investment companies (hereinafter referred to as "investment company") under Article 9 (18) 2 of the Act, equity securities of an investment limited liability company, investment limited partnership company, investment limited partnership, or investment undisclosed association] listed on the securities market;
2. Securities deposit receipts (limited to the securities deposit receipts related to the equity securities under subparagraph (1); hereafter in this paragraph, the same shall apply) listed on the securities market;
3. Stock-linked debentures under subparagraph 4 of Article 71 of the Act which are related to the equity securities under subparagraph 1 or securities deposit receipts under subparagraph 2;
4. Derivatives-linked securities linked to the fluctuation of the equity securities under subparagraph 1, the securities deposit receipt under subparagraph 2 or the index based thereon;
5. Exchange-traded derivatives; or
6. Over-the-counter derivatives linked to the fluctuation of the equity securities under subparagraph 1, the securities deposit receipts under subparagraph 2 or the index based thereon.
(3) The term "cases prescribed by the Presidential Decree" under the proviso of Article 63 (1) 2 shall mean those falling under any of the following subparagraphs:
1. Where any transaction may be conducted through more than two companies, cases falling under any of the following items:
(a) Where a broker who trades with an officer or employee of the financial investment firm does not provide financial investment products that the officer or employee intends to purchase or sell;
(b) Where an officer or employee subscribes for securities issued or traded through public offering or secondary distribution of securities; or (c) Others prescribed and publicized by the Financial Services Commission.
2. Where any transaction may be conducted through two or more accounts, cases falling under any of the following items:
(a) Where a broker opens two or more accounts because it shall classify and establish accounts by type of financial investment products; (b) Where a separate account is opened to receive special taxation pursuant to the Restriction of Special Taxation Act; or
(c) Others prescribed and publicized by the Financial Services Commission. The Enforcement Decree of the Financial Investment Services and Capital Market Act (4) An officer or employee of a financial investment firm shall, when he/she purchases or sells financial investment products falling under any of the subparagraphs of paragraph (2) for his/her own account, comply with the methods and procedures falling under each of the subparagraphs pursuant to Article 63 (1) 4 of the Act:
1. In the case of opening an account to purchase or sell financial investment products, the officer or employee shall report thereon to the compliance officer (where there is no compliance officer, referring to those equivalent thereto, such as an auditor, etc.; hereafter in this paragraph, the same shall apply) of the financial investment firm;
2. Where the compliance officer of the financial investment firm requires the officer or employee to provide evidence on the purchases, sales, or other transactions, the officer or employee shall comply with the requirement;
3. The officer or employee shall comply with the matters prescribed by the internal control standards of the financial investment firm; and
4. The officer or employee shall comply with other methods and procedures prescribed and publicized by the Financial Services Commission.
Article 65 (Business Fund of Foreign Financial Investment Firm) (1) The term "business fund prescribed by the Presidential Decree" under the Article 65 (1) of the Act shall be as follows:
1. A business fund denominated in Korean won provided by a foreign financial investment firm in order to establish branches and other business offices or conduct businesses;
2. A business fund transferred from the reserves of branches and other business offices of a foreign financial investment firm; and
3. A business fund transferred by a foreign financial investment firm from retained earnings of branches and other business offices thereof in the Republic of Korea in order to establish additional branches and other business offices.
(2) Branches or other business offices of a foreign financial investment firm shall secure assets in the Republic of Korea following the methods falling under each of the following subparagraphs pursuant to Article 65 (2) of the Act:
1. Cash or deposits, installment deposits or installments deposited in financial institutions in the Republic of Korea;
2. Securities deposited or kept in the Republic of Korea;
3. Loans or other debts to a Korean resident;
4. Fixed assets in the Republic of Korea; and
5. Other assets prescribed and publicized by the Financial Services Commission among the assets that may be subject to compulsory execution under the domestic laws. (3) Branches and other business offices of a foreign financial investment firm shall comply with the matters falling under both of the following subparagraphs:
1. The branches and other business offices shall make an accounting settlement independent of the head office; and
2. Where the total amount of the assets secured in the Republic of Korea following the methods falling under each of the subparagraphs of paragraph (2) falls short of the aggregate amount of the business fund under Article 65 (1) of the Act and the liabilities after accounting settlement, the branches and other business offices of a foreign financial investment firm shall compensate for the shortage within 60 days from the date when the settlement is completed.
Article 66 (Representative and Proxy Representative of Branch) (1) Where branches and other business offices of a foreign financial investment firm have no representative or where a representative is unable to perform his/her duties, a person who has interests in the branches and other business offices of the foreign financial investment firm may require the Financial Services Commission to designate a person (hereafter in this Article, referred to as "proxy representative") to perform the duties by proxy temporarily when a representative is not newly appointed or a person acting for the representative is not designated. (2) The Financial Services Commission shall, when it receives the request from the interested person pursuant to paragraph (1), require the branches and business offices of a foreign financial investment firm to appoint a representative or designate a proxy representative within ten days.
Section 2 Conduct of Business Regulations by Type of Financial Investment Firms Subsection 1 Conduct of Business Regulations of Broker and Dealer The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 67 (Disposal Period of Treasury Stocks)
The term "period as prescribed by the Presidential Decree" under the latter part of Article 69 of the Act shall be three months from the date of acquisition. Article 68 (Prohibition on Unfair Business Practice) (1) The term "cases prescribed by the Presidential Decree" under the proviso of Article 71 of the Act other than each subparagraph shall mean those falling under any of the following subparagraphs:
1. In the application of subparagraph 1 of Article 71 of the Act, cases falling under either of the following items:
(a) Where it is proved that any information on the purchasing or selling orders of investors is not used; or
(b) Where it is objectively clear that the information of investors is not used intentionally for arbitrage trade taking advantage of the price differences between the securities market and the derivatives market and other transactions equivalent thereto.
2. In the application of subparagraph 2 of Article 71 of the Act, cases falling under any of the following items:
(a) Where the contents of research and analysis documents do not induce the purchase or sale of specific financial investment products directly or indirectly; (b) Where the transactions and price fluctuation caused by the publication of research and analysis documents are not used intentionally; (c) Where it is proved that the transactions are made without using the published research and analysis documents; or
(d) Where the research and analysis documents do not include new contents as compared with the previous research and analysis documents; or
3. In the application of subparagraph 3 of Article 71 of the Act, cases where the research and analysis documents have been prepared for the purpose of carrying out the business within the financial investment firm and have not been published or provided to investors. (2) The term "corporate financing business prescribed by the Presidential Decree" under subparagraph 3 of Article 71 shall mean the business falling under any of the following subparagraphs:
1. Underwriting business;
2. Business of arranging for public offerings, secondary distribution or private placement of securities;
3. Business of arranging for and intermediating the merger and acquisition of companies, or acting as an agent for that purpose;
4. Business of providing advisory services on the merger and acquisition of companies; or
5. Business of managing properties of a private equity company. (3) The term "stock-linked debentures prescribed by the Presidential Decree" under subparagraph 4 of Article 71 of the Act shall mean convertible bonds, instruments representing preemptive rights, and exchangeable bonds (limited to exchangeable bonds with claims to exchange with stock certificates, convertible bonds, or instruments representing preemptive rights).
(4) The term "period prescribed by the Presidential Decree" under subparagraph 4 of Article 71 of the Act shall be 40 days.
(5) The term "activities prescribed by the Presidential Decree" under subparagraph 7 of Article 71 of the Act shall mean activities falling under each of the following subparagraphs:
1. Disagreeing with the request of a professional investor (excluding any person falling under each subparagraph of Article 10 (1) of this Decree), without any justifiable cause, that he/she be treated as a non-professional investor pursuant to the proviso of Article 9 (5) of the Act;
2. Soliciting a non-professional investor too frequently without taking into account their investment objective, financial status, and investment experiences, etc.;
3. Providing investors (where an investor is a corporation and any other group, including the officers thereof) or counter-parties (where a counter party is a corporation and any other group including the officers thereof) with benefits that have a property value or receiving such benefits from investors or counter parties directly or indirectly in violation of the standards prescribed and publicized by the Financial Services Commission with respect to the business;
4. Conducting activities falling under any of the following items with respect to the business of underwriting securities or arranging for public offerings, secondary distribution or private placement of securities:
The Enforcement Decree of the Financial Investment Services and Capital Market Act (a) Failing to take reasonable care necessary to prevent an issuer from making any misstatement or omission of material matters in any registration statement (including the amendment statement and the additional documents thereof under Article 122 (1) of the Act) under Article 119 (3) of the Act or any prospectus (including the preliminary prospectus under Article 124 (1) 2 of the Act and the simple prospectus under Article 124 (2) 3 of the Act) under Article 123 (1) of the Act; (b) Demanding or promising, in advance, the purchase of securities to a person who makes a public offering, secondary distribution of securities or the specially-related persons thereof in return for the underwriting of the securities after the public offering, secondary distribution or private placement of securities; (c) Receiving benefits with property value that are gained from the investment in securities subject to underwriting (including the arrangement for private placement, public offering or secondary distribution of securities; hereafter in this subparagraph, the same shall apply) directly or indirectly in return for the allocation thereof, or requiring additional purchases of the securities;
(d) Distributing securities subject to underwriting to subscribers therefor with any unreasonable discrimination; or
(e) Others prescribed and publicized by the Financial Services Commission as likely to undermine the protection of investors or sound trade practice.
5. Purchasing or selling the financial investment products concerned by soliciting investors to purchase and sell them without notifying the investors in advance of the matters which materially affect the value of the financial investment products;
6. Being entrusted with purchases, sales or other transactions after the knowledge that the investors have an intention to execute the purchase, sale and other transactions in violation of Articles 174, 176, and 178 of the Act;
7. Using unfair methods in order to hide illegal transactions of investors with respect to the purchases, sales or other transactions of financial investment products;
8. Being entrusted with the purchase, sale, or other transactions of financial investment products without any justifiable cause even after recognizing that it is unlikely to execute settlement for the purchases, sales, or other transactions of financial investment products;
9. Soliciting investors to purchase or sell the treasury stocks issued by the broker or dealer concerned;
10. Purchasing collective investment securities (excluding the collective investment securities listed on the securities market) from investors, or arranging for or intermediating such activities, or acting as an agent for that purpose: Provided, That the same shall not apply to the purchase pursuant to the proviso of Article 235 (6) of the Act;
11. Using over-the-counter derivative transactions, trust contracts, linked transactions, etc. for the purpose of avoiding any prohibition or restriction under Articles 55 and 71 of the Act;
12. Receiving any blank check or blank bill in order to secure rights as a creditor; and
13. Others prescribed and publicized by the Financial Services Commission as likely to undermine the protection of investors or sound trade practice. Article 69 (Credit Extension)
(1) A broker or dealer may extend credit to investors in a way falling under either of the following subparagraphs pursuant to Article 72 (1) of the Act:
1. Loaning money to purchase securities or lending the securities to be purchased to a person who has opened a securities transaction account in the broker or dealer; or
2. Loaning money to a person who deposits securities in the broker or dealer by taking the securities as collateral.
(2) The specific standards for credit extension under paragraph (1), the ratio of collateral, and the methods of collecting collateral shall be prescribed and publicized by the Financial Services Commission.
Article 70 (Notification of Details of Transaction) (1) A broker or dealer shall, when he/she notifies investors pursuant to Article 73 of the Act, follow the methods falling under both of the following subparagraphs:
1. Notify investors of the type, item, quantity, price, all the costs including commissions, and other details of transactions without delay after the transactions are concluded, and notify the details of monthly transactions, monthly profits and losses, and current status of balance and outstanding contracts, etc. as of the end of the month by the 20th day of the month following the date when the transactions are concluded; and The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. Notify investors through the methods (in the case of the transactions that are not managed or recorded on accounting books, limited to item (a)) that have been agreed on in advance between the broker or dealer and the investors among the methods falling under any of the following items: Provided, That where an investor does not want to be notified, the notification may be replaced with the furnishing of the information at branches and other business offices, or posting it on the Internet website, etc. to enable the access at any time: (a) Notification in writing;
(b) Telephone call, telegram, or FAX;
(c) E-mail, and other electronic communications similar thereto; or (d) Others prescribed and publicized by the Financial Services Commission. (2) Specific matters necessary for the notification under paragraph (1) shall be prescribed and publicized by the Financial Services Commission.
Article 71 (Exceptions of Deposit in Securities Finance Company) The term "broker or dealer designated by the Presidential Decree" under the former part of Article 74 (2) of the Act shall be as follows:
1. Banks;
2. The Korea Development Bank under the Korea Development Bank Act;
3. The Industrial Bank of Korea under the Industrial Bank of Korea Act; and
4. Insurance companies. Article 72 (Exceptional Transfer of Investors' Deposit) The term "cases prescribed by the Presidential Decree" under Article 74 (4) of the Act shall mean cases falling under any of the following subparagraphs:
1. Where a depositing financial investment firm under Article 74 (4) of the Act (hereinafter referred to as "depositing financial investment firm") transfers investors' deposits deposited or entrusted in a depository institution to a surviving or established company after the merger with another company or the merger by absorption to another company;
2. Where a depositing financial investment firm transfers investors' deposits deposited or entrusted in a depository institution to a transferee in accordance with the contents of the transfer when it transfers all or part of its financial investment services;
3. Where a depositing financial investment firm provides a bank with investors' deposits deposited or entrusted in a depository institution as collateral within the limit prescribed and publicized by the Financial Services Commission under the conditions prescribed and publicized by the Financial Services Commission with respect to the business of transferring money under subparagraph 4 of Article 40 of the Act; or
4. Others prescribed and publicized by the Financial Services Commission as unlikely to undermine the protection of investors.
Article 73 (Notification Period of Investors' Deposit) The term "period determined by the Presidential Decree" under the latter part of Article 74 (5) other than each subparagraph shall mean two months from the date when any cause specified in each subparagraph of Article 74 (5) of the Act occurs: Provided, That where it is impractical to make a notification and publication within such period due to the occurrence of inevitable causes, the period may be extended up to one month under the confirmation of the Financial Services Commission.
Article 74 (Management of Investors' Deposit)
(1) The term "financial institutions prescribed by the Presidential Decree" under Article 74 (7) 2 of the Act shall mean a financial institution falling under any of the following subparagraphs:
1. Banks;
2. The Korea Development Bank under the Korea Development Bank Act;
3. The Industrial Bank of Korea under the Industrial Bank of Korea Act;
4. Insurance companies;
5. Brokers or dealers;
6. Securities finance companies;
7. Merchant banks;
8. Credit guarantee funds under the Credit Guarantee Fund Act; or
9. Technology credit guarantee funds under the Korea Technology Credit Guarantee Fund Act.
The Enforcement Decree of the Financial Investment Services and Capital Market Act (2) The term "others prescribed by the Presidential Decree" under Article 74 (7) 3 of the Act shall mean a method falling under any of the following subparagraphs:
1. Loans taking securities or certificates of deposit denominated in Korean won as collateral;
2. Deposits in the Bank of Korea or postal service offices under the Postal Savings and Insurance Act;
3. Purchases of special bonds; or
4. Others prescribed and publicized by the Financial Services Commission as likely to manage investors' deposits in a safe manner.
Article 75 (Scope of Investors' Deposit)
(1) The scope of investors' deposit to be deposited or entrusted in a depository institution by a broker or dealer pursuant to Articles 74 (1) and 74 (2) of the Act shall be the amount calculated by deducting the amount under subparagraph 2 from the amount under subparagraph 1:
1. The aggregate amount of the following items: (a) The amount deposited by investors for the purchase, sale and other transactions of financial investment products;
(b) The amount paid to investors by the broker or dealer as interest on investors' deposit; and
(c) The profits earned from daily marking-to-market of exchange-traded derivatives held by investors;
2. The aggregate amount of the following items: (a) The amount that the broker or dealer deposits in the Exchange (including those prescribed and publicized by the Financial Services Commission) or other brokers or dealers for the purchase, sale, and other transactions of financial investment products conducted by investors on the securities market or the derivatives market; (b) The amount that the broker or dealer deposits in foreign securities markets (including the settlement institutions thereof) or foreign derivatives markets (referring to foreign derivatives markets under Article 5 (2) of the Act and including the settlement institutions thereof) and foreign brokers or dealers for the purchase, sale, and other transactions conducted by investors outside the Republic of Korea;
(c) All the expenses related to the purchase, sale, and other transactions of financial investment products conducted by investors, including brokerage commissions; (d) Money under Articles 3 (3) 1 through 3 (3) 4 of the Enforcement Decree of The Depositor Protection Act; and
(e) Losses incurred from daily marking-to-market of exchanged-traded derivatives held by investors.
(2) A broker or dealer shall deposit or entrust not less than 100/100 of the amount calculated pursuant to paragraph (1) in a depository institution. (3) A depositing financial investment firm may withdraw investors' deposits deposited or entrusted in depository institutions under the conditions falling under each of the following subparagraphs:
1. Where investors' deposits already deposited or entrusted exceed the investors' deposits that are required to be deposited or entrusted, the amount calculated by deducting the investors' deposits to be deposited or entrusted from the investors' deposits already deposited or entrusted;
2. Where any reason for a preferential payment occurs in accordance with each subparagraph of Article 74 (5) of the Act, the investors' deposits deposited or entrusted; and
3. Where the Financial Services Commission recognizes that it is necessary to withdraw investors' deposits, including cases where massive claims for the investors' deposits are filed, the recognized amount.
(4) A depository institution shall manage investors' deposits deposited or entrusted separately from its own properties under the principle of good faith. (5) The scope of investors' deposits under paragraph (1) and the details necessary for the period, interval, ratio, methods, withdrawal, management, etc. of deposit and entrustment shall be prescribed and publicized by the Financial Services Commission. Article 76 (Deposit of Investors' Deposit Receipts) (1) The term "those prescribed by the Presidential Decree" under the main sentence of Article 75 of the Act shall be as follows:
1. Certificates of deposit denominated in Korean won; and The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. Others prescribed and publicized by the Financial Services Commission. (2) The term "cases prescribed by the Presidential Decree" under the proviso of Article 75 of the Act shall mean those falling under any of the subparagraphs of Article 63 (2) of this Decree. (3) Where a broker or dealer comes into custody of securities or certificates other than the securities to be deposited under Article 308 of the Act to the Depository through lock-up business or any other way, such securities or certificates shall be regarded as deposited pursuant to Article 75 of the Act.
Article 77 (Special Cases for Sales of Collective Investment Securities) (1) The term "cases prescribed by the Presidential Decree" under the proviso of Article 76 (1) of the Act shall be as follows:
1. Where an investor pays money, etc. to a broker or dealer after the base point of time for the purpose of fixing the date for claims to purchase collective investment securities prescribed in a collective investment agreement;
2. Cases falling under any of the following subparagraphs where a broker or dealer sells collective investment securities of a collective investment scheme of short-term finance: (a) Where an investor makes a contract in advance with a broker or dealer who sells collective investment securities in order to purchase collective investment securities of a collective investment scheme of short-term finance using the settlement funds earned from the sales or redemption of financial investment products on a settlement date; or (b) Where an investor makes a contract in advance with a broker or dealer who sells collective investment securities in order to purchase collective investment securities of a collective investment scheme of short-term finance using the money, etc. received on a regular basis such as salaries, etc. on the date when such money, etc. is received; and
3. Where collective investment securities of a collective investment scheme of short-term finance are sold to a person falling under either of the following items: (a) Foreign exchange equalization fund under Article 13 of the Foreign Exchange Transactions Act; or
(b) A collective investment scheme of short-term finance which comprehensively manages surplus funds under Article 81 of the Finance Act.
(2) The term "standard price determined by the Presidential Decree" under the proviso of Article 76 (1) of the Act shall be as follows:
1. Subparagraph 1 of paragraph (1): the standard price publicized after three business days from the payment date of money, etc.; and
2. Subparagraphs 2 and 3 of paragraph (1): the standard price publicized on the payment date of money, etc.
(3) The term "cases prescribed by the Presidential Decree" under the proviso of Article 76 (3) of the Act shall mean cases where general advertisements of the collective investment scheme are unlikely to undermine the interests of investors because the sales of a new type of collective investment securities are already scheduled in accordance with the amendment of relevant Acts and subordinate statutes. In such a case, when the amendment is not determined, such advertisements shall indicate that the contents thereof may be changed after the amendment of relevant Acts and subordinate statutes is determined. (4) Sales commissions or sales fees (hereinafter referred to as "sales fees") under Article 76 (4) of the Act paid to a broker and dealer shall not exceed the limit falling under each of the following subparagraphs: Provided, That the same shall not apply to private equity funds:
1. Sales commissions: 5/100 of the money paid or the redemption money; and
2. Sales fees: 5/100 of the annual average of collective investment properties. (5) A broker or dealer may receive sales commissions or sales fees through the methods falling under both of the following subparagraphs in accordance with a collective investment agreement:
1. Sales commissions: receiving sales commissions from investors in a lump sum at the time of the sales or redemption or in installments during an investment period; and
2. Sales fees: receiving sales fees from a collective investment scheme in proportion to the size of collective investment properties on a daily basis. (6) Sales commissions may be imposed differentially based on sales methods, brokers or dealers, sales amount, investment period, etc.
(7) The base point of time under subparagraph 1 of paragraph (1), the standards for calculating the specific limit of sales commissions and sales fees under paragraphs (4) and (5), and other necessary details shall be prescribed and publicized by the Financial Services Commission. The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 78 (Business Standards for Electronic Securities Brokerage) The term "standards prescribed by the Presidential Decree" under Article 78 (1) of the Act other than each subparagraph shall mean the standards falling under each of the following subparagraphs:
1. The listed stocks subject to the brokerage transactions shall be listed stocks other than those falling under each of the following items:
(a) Listed stocks designated by the Exchange as items subject to administration and those equivalent thereto pursuant to the Listing Regulations under Article 390 of the Act; (b) Listed stocks without voting rights; and
(c) Listed stocks prescribed and publicized by the Financial Services Commission when taking into account the protection of investors and sound trade practice, including the listed stocks, etc. with poor records of purchase and sale contracts;
2. Where the Exchange suspends the trade of the listed stocks subject to the brokerage transactions or revokes the suspension, the trade of the listed stocks shall be suspended, or the suspension shall be revoked;
3. Brokerage transactions shall be targeted at many people at the same time, and the disclosure standards for the quantity to be purchased and sold and the principles or methods of concluding contracts on brokerage for purchase and sale shall be established;
4. The Depository shall be a settlement institution and the methods of guaranteeing the execution of settlement shall be prescribed, including the reserve of joint funds for compensating for losses caused by a breach of the contracts for transactions;
5. The minimum collection rate of consignment guarantee money for the broker or dealer who participates in the brokerage transactions shall be set forth;
6. Matters for which a consignment is to be refused pursuant to the Securities Market Regulations under Article 393 (1) of the Act shall be set forth;
7. Details of the companies of issuers of the listed stocks (excluding each item of subparagraph 1) disclosed by the Exchange shall be publicized;
8. Daily prices and trading volumes for each item shall be published and be reported to the Exchange within one day. In such a case, the contents of the reports shall include trading details for each item of the broker or dealer participating in the brokerage transactions;
9. No brokerage transaction shall be made during the hours of transactions (including the hours for the receipt of quotations) on the securities market;
10. Reasons for suspending the brokerage transactions and the days of such suspension shall be set forth. In such a case, the brokerage transactions shall be suspended until the securities market reopens after its suspension due to the causes other than its closure.
11. Business standards containing the matters falling under subparagraphs 1 through 10 shall be set forth; and
12. Where any business standard under subparagraph 11 is established or amended, such establishment or amendment shall be reported to the Financial Services Commission and the Exchange, and shall be disclosed through the Internet websites, etc. Subsection 2 Conduct of Business Regulations of Collective Investment Managers Article 79 (Instructions on Asset Management)
(1) The term "conditions prescribed by the Presidential Decree" under the main sentence of Article 80 (1) of the Act shall mean the conditions in which the instructions can be objectively and accurately managed through an electronic system. (2) The term "cases prescribed by the Presidential Decree" under the proviso of Article 80 (1) of the Act shall mean cases where the investment assets are managed by ways falling under any of the following subparagraphs as agreed on in a trust contract:
1. Purchase and sale of securities listed on the securities market or foreign securities markets;
2. Purchase and sale of exchange-traded derivatives;
3. Short-term loans under Article 83 (4) of the Act;
4. Loans under Article 251 (4) of the Act;
5. Purchase and sale of the bills issued, discounted, traded, intermediated, underwritten or guaranteed by financial institutions falling under any of the following items: (a) Banks;
(b) The Korea Development Bank under the Korea Development Bank Act; (c) The Industrial Bank of Korea under the Industrial Bank of Korea Act; (d) The Export-Import Bank of Korea under the Export-Import Bank of Korea Act; The Enforcement Decree of the Financial Investment Services and Capital Market Act (e) Brokers or dealers;
(f) Securities finance companies;
(g) Merchant banks; or
(h) Mutual saving banks under the Mutual Savings Banks Act.
6. Purchase and sale of certificates of deposit;
7. Purchase and sale of overseas payment methods under the Foreign Exchange Transactions Act;
8. Purchase and sale of over-the-counter derivatives for the purpose of avoiding investment risk, or conclusion of contracts under Article 5 (1) 3 of the Act pursuant to the standards prescribed and publicized by the Financial Services Commission; or
9. Others prescribed and publicized by the Financial Services Commission as necessary for effective management of investment trust property. (3) Paragraph (1) shall apply to cases where a collective investment manager of a collective investment scheme other than an investment trust gives necessary instructions on the custody and management of properties acquired or disposed of to a trust company of the collective investment scheme concerned.
Article 80 (Exceptions to Restrictions on Asset Management) (1) The term "cases prescribed by the Presidential Decree" under the proviso of Article 81 (1) of the Act other than each subparagraph shall mean conducting activities falling under any of the following subparagraphs:
1. In the application of Article 81 (1) 1 (a) of the Act, investing in the investment assets falling under any of the following items up to 100/100 of the total amount of assets of each collective investment scheme [in the case of items (d) through (g), referring to collective investment schemes of real estate (hereinafter referred as "collective investment scheme of real estate") under subparagraph 2 of Article 229 of the Act and in the case of items (h) through (j), referring to collective investment schemes of special assets (hereinafter referred to as "collective investment scheme of special asset") under subparagraph 3 of Article 229 of the Act and limited to cases where the agreements of each collective investment scheme prescribe the contents]:
(a) Government bonds;
(b) Monetary stabilization bonds of the Bank of Korea under Article 69 of the Bank of Korea Act;
(c) Bonds whose repayment of the principal and interest are guaranteed by the Government or municipal governments;
(d) Securities issued by a company (hereinafter referred to as "real estate development company") established for a certain development of real estate after setting forth its existence period;
(e) Asset-backed securities (hereinafter referred to as "asset-backed securities") issued based on real estate or assets related to the real estate prescribed and publicized by the Financial Services Commission pursuant to subparagraph 4 of Article 2 of the Asset- Backed Securitization Act, whose total amount of the underlying assets is not less than 70/100 of the value of the securitization assets (hereinafter referred to as "securitization asset") under subparagraph 3 of Article 2 of the Asset-Backed Securitization Act; (f) Mortgage-backed bonds or mortgage-backed securities under the Special Purpose Companies for Mortgage-Backed Bonds Act or the Korea Housing Finance Corporation Act, whose payment is guaranteed by a special purpose company for mortgage securitization under the Special Purpose Companies for Mortgage-Backed Bonds Act or a financial institution falling under Articles 79 (2) 5 (a) through 79 (2) 5 (g) of this Decree;
(g) Equity securities issued by a company (hereinafter referred to as "special purpose company for real estate") meeting the following requirements: 1) The company shall be established for the purpose of investing in real estate or investment securities of other special purpose companies for real estate; and 2) The aggregate amount of real estate and assets under Article 240 (4) 4 of this Decree shall be not less than 90/100 of the aggregate amount of the assets held by the special purpose company and its subsidiaries (referring to the companies equivalent to the subsidiaries under the Act on External Audit of Stock Companies). (h) Stocks and bonds issued by a corporation aimed at carrying out infrastructure projects under the Act on Private Participation in Infrastructure; The Enforcement Decree of the Financial Investment Services and Capital Market Act (i) Loans to a corporation aimed at carrying out infrastructure projects under the Act on Private Participation in Infrastructure; or
(j) Equity securities of a corporation (excluding investment and loan companies for infrastructure under the Act on Private Participation in Infrastructure) established for the investment through the methods of acquiring stocks and bonds issued by a corporation aimed at carrying out one infrastructure project under the Act on Private Participation in Infrastructure or acquiring loans extended to the corporation;
2. In the application of Article 81 (1) 1 (a) of the Act, investing in the investment assets falling under any of the following items up to 30/100 of the total amount of assets of each collective investment scheme:
(a) Municipal bonds;
(b) Special bonds (excluding items (b) and (c) of subparagraph 1) and bonds issued by a corporation which is directly established in accordance with Acts [limited to commercial papers (hereinafter referred to as "commercial paper") under Article 4 (3) of the Act and bills discounted, traded, intermediated or underwritten by a financial institution falling under each item of Article 79 (2) 5 of this Decree]; (c) Derivative-linked securities;
(d) Bills or certificates of deposit issued by a financial institution falling under Articles 79 (2) 5 (a) through 79 (2) 5 (g) of this Decree and bonds issued by a financial institution falling under Articles 79 (2) 5 (a) and 79 (2) 5 (e) through 79 (2) 5 (g) of this Decree; (e) Bonds or bills (limited to the bonds issued by public offerings) whose payments are guaranteed by a financial institution falling under Articles 79 (2) 5 (a) through 79 (2) 5 (g) of this Decree;
(f) Bonds issued by a government that is a member state of the Organization for Economic Cooperation and Development;
(g) Subordinate bonds among the corporate bonds under Article 31 of the Asset-Backed Securitization Act or subordinate beneficiary certificates among the beneficiary certificates (limited to the collective investment schemes prescribed in the collective investment agreement as determined to make investment in subordinate bonds or subordinate beneficiary certificates above the ratio prescribed and publicized by the Financial Services Commission) under Article 32 of the same Act; or
(h) Mortgage-backed bonds or mortgage-backed securities under the Special Purpose Companies for Mortgage-Backed Bonds Act or the Korea Housing Finance Corporation Act, whose payment is guaranteed by a special purpose company for mortgage securitization under the Special Purpose Companies for Mortgage-Backed Bonds Act or a financial institution falling under Articles 79 (2) 5 (a) through 79 (2) 5 (g) of this Decree;
3. In the application of Article 81 (1) 1 (a) of the Act, where the market capitalization weight of equity securities (including securities deposit receipts related to the equity securities issued by the corporation, etc.: hereinafter the same shall apply) issued by the same corporation, etc. exceeds 10/100, investing up to the market capitalization weight. In such a case, the market capitalization weight shall be calculated by the securities market, the KOSDAQ market or other securities markets in foreign countries and other necessary matters for the methods of calculation, the base date thereof, application periods, etc. shall be prescribed and publicized by the Financial Services Commission;
4. In the application of Article 81 (1) 1 (b) or 81 (1) 1 (c) of the Act, investing in the equity securities falling under either of the following items up to 100/100 of the total number of equity securities using the total amount of assets of all the collective investment schemes for real estate managed by each collective investment scheme or the total amount of assets of each collective investment scheme for real estate: (a) Equity securities issued by a real estate development company; or (b) Equity securities issued by a special purpose company for real estate;
5. In the application of Article 81 (1) 1 (b) or 81 (1) 1 (c) of the Act, investing in the equity securities falling under either of the following items up to 100/100 of the total number of equity securities using the total amount of assets of all the collective investment schemes of special asset managed by each collective investment scheme or the total amount of assets of each collective investment scheme of special asset: (a) Stocks issued by a corporation aimed at carrying out infrastructure projects under the Act on Private Participation in Infrastructure; or (b) Equity securities of a corporation (excluding investment and loan companies for infrastructure under the Act on Private Participation in Infrastructure) established to make investments through the methods of acquiring stocks and bonds issued by a The Enforcement Decree of the Financial Investment Services and Capital Market Act corporation aimed at carrying out one infrastructure project under the Act on Private Participation in Infrastructure or acquiring loans extended to the corporation;
6. In the application on Article 81 (1) 3 (a) or 81 (1) 3 (b) of the Act, investing in the collective investment securities falling under any of the following items up to 100/100 of the total amount of assets of each collective investment scheme (limited to collective investment schemes that are permitted to invest in excess of 40/100 of the total amount of assets): (a) Where collective investment properties of a collective investment scheme (including foreign collective investment schemes under Article 279 (1) of the Act; hereafter in this paragraph, the same shall apply) managed by a collective investment manager (including foreign collective investment managers under Article 279 (1) of the Act; hereafter in this paragraph, the same shall apply) are invested only in assets denominated in foreign currencies, collective investment securities of such collective investment scheme; (b) Collective investment securities (including foreign collective investment securities under Article 279 (1) of the Act; hereafter in this paragraph, the same shall apply) of an exchange-traded fund (including foreign exchange-traded funds similar to the exchange- traded fund; hereafter in this paragraph, the same shall apply) prescribed and publicized by the Financial Services Commission; or
(c) Where the management of collective investment properties of a collective investment scheme (including foreign collective investment schemes under Article 279 (1) of the Act; hereafter in this item, the same shall apply) managed by the same collective investment manager is entrusted to more than two other collective investment managers (including foreign collective investment managers under Article 279 (1) of the Act), collective investment securities (limited to cases where not less than 90/100 of the total amount of assets of a collective investment scheme managed by the same collective investment manager) of such collective investment scheme;
7. In the application of Article 81 (1) 3 (b) of the Act, investing in the collective investment securities (excluding the collective investment securities under item (b) of subparagraph 6) of an exchange-traded fund up to 30/100 of the total amount of assets of each collective investment scheme;
8. In the application of Article 81 (1) 3 (a) or 81 (1) 3 (b) of the Act, investing in the same collective investment manager (including foreign collective investment schemes) up to
100/100 of the total amount of assets of each investment trust established by an insurance company pursuant to Article 251 (1) of the Act;
9. In the application of Article 81 (1) 3 (e) of the Act, investing up to 100/100 of the total number of collective investment securities of the same collective investment scheme (including foreign collective investment schemes) using the investment trust property established by an insurance company pursuant to Article 251 (1) of the Act;
10. In the application of Article 81 (1) 3 (f) of the Act, investing in excess of the limit under Article 81 (1) 3 (f) of the Act using the investment trust property established by an insurance company pursuant to Article 251 (1) of the Act; or
11. Others prescribed and publicized by the Financial Services Commission as unlikely to undermine the protection of investors or the stable management of collective investment properties.
(2) The term "securities prescribed by the Presidential Decree" under Article 81 (1) 1 of the Act other than each item shall mean foreign collective investment securities under Article 279 (1) of the Act.
(3) The term "investment assets prescribed by the Presidential Decree" under Article 81 (1) 1 of the Act other than each item shall mean investment assets falling under any of the following subparagraphs:
1. Certificates of deposit denominated in Korean won;
2. Bills other than commercial papers; or
3. In addition to those falling under subparagraphs 1 and 2, loans, deposits, and other bonds prescribed and publicized by the Financial Services Commission. (4) The term "ratio prescribed by the Presidential Decree" under the former part of Article 81 (1) 1 (a) of the Act shall be 10/100.
(5) The term "qualifying requirements prescribed by the Presidential Decree" under Article 81 (1) 1 (d) of the Act shall mean cases where both of the requirements are met:
1. A person shall fall under any of the subparagraphs of Article 10 (1) of this Decree; and
2. A person shall have been assessed by a credit rating agency (including a person conducting business equivalent to the business of assessing credit in a foreign country in accordance with foreign Acts and subordinate statutes) above the investment grade. The Enforcement Decree of the Financial Investment Services and Capital Market Act (6) The term "standard prescribed by the Presidential Decree" under Article 81 (1) 1 (e) of the Act shall be 100/100 of the value calculated by deducting the total amount of liabilities of each collective investment scheme from the total amount of assets. (7) The term "period prescribed by the Presidential Decree" under the main sentence of Article 81 (1) 2 (a) of the Act shall be as follows:
1. Real estate in the Republic of Korea: three years; and
2. Real estate in foreign countries: the period prescribed in a collective investment agreement.
(8) The term "cases prescribed by the Presidential Decree" under the proviso of Article 81 (1) 2 (a) of the Act shall mean the merger, termination, or dissolution of a collective investment scheme.
(9) The term "cases prescribed by the Presidential Decree" under the proviso of Article 81 (1) 2 (b) of the Act shall mean cases where it has proven that the real estate project is difficult to carry out and that disposal of the land is inevitable because the business feasibility has been significantly undermined by the enactment, amendment, or repeal of related Acts and subordinate statutes after acquiring the land for the real estate project. (10) The term "limit prescribed by the Presidential Decree" under Article 81 (1) 3 (f) of the Act shall mean the limit prescribed under Article 77 (4) of this Decree. Article 81 (Exceptions from Limits on Asset Management) (1) The term "activity prescribed by the Presidential Decree" under Article 81 (1) 4 of the Act shall mean those falling under any of the following subparagraphs:
1. Conducting purchases with repurchase agreement (referring to cases where securities are sold with a commitment to repurchase the securities later at a specified time: hereinafter the same shall apply) in excess of the ratio prescribed and publicized by the Financial Services Commission within the total amount of the securities belonging to each collective investment scheme;
2. Lending securities in excess of the ratio prescribed and publicized by the Financial Services Commission within the amount of securities belonging to each collective investment scheme; or
3. Borrowing securities in excess of the ratio prescribed and publicized by the Financial Services Commission within the total amount of assets of each collective investment scheme. (2) The term "grounds prescribed by the Presidential Decree" under Article 81 (3) of the Act shall mean those falling under any of the following subparagraphs:
1. Price fluctuation of the investment assets belonging to collective investment properties;
2. Termination of part of investment trust or partial retirement of collective investment securities of an investment company, investment limited liability company, investment limited partnership company, investment limited partnership and investment undisclosed association;
3. Exercise of rights such as collateral rights, etc.;
4. Merger or split-and-merger of a corporation which has issued the securities belonging to collective investment properties; or
5. Other cases where the investment limits under Article 81 (1) of the Act are exceeded without acquiring additional investment assets.
(3) The term "period prescribed by the Presidential Decree" under Article 81 (3) of the Act shall be three months (in the case of the investment assets which are unable to be disposed of due to bankruptcy, etc., referring to the period when the assets concerned are able to be disposed of).
(4) The term "period prescribed by the Presidential Decree" under Article 81 (4) of the Act shall be one month.
Article 82 (Disposal of Treasury Collective Investment Securities) A collective investment manager of an investment trust or investment undisclosed association shall dispose of collective investment securities which are acquired pursuant to the former part of subparagraph 1 of Article 82 of the Act within one month of the acquisition date through the methods falling under either of the following subparagraphs:
1. Retirement; or
2. Sales through a broker or dealer. Article 83 (Restrictions on Monetary Borrowing)
The Enforcement Decree of the Financial Investment Services and Capital Market Act (1) A collective investment manager may borrow money for the account of a collective investment scheme pursuant to the proviso of Article 83 (1) of the Act from a financial institution falling under any of the following subparagraphs:
1. Financial institutions falling under any of the items of Article 79 (2) 5 of this Decree;
2. Insurance companies; or
3. Foreign financial institutions equivalent to those falling under subparagraph 1 or 2. (2) A collective investment manager shall not, when it borrows money pursuant to paragraph (1), acquire additional investment assets (excluding the resale and redemption of derivatives) until the total amount of the borrowed money is repaid. (3) The term "financial institution prescribed by the Presidential Decree" under Article 83 (4) of the Act shall mean a financial institution falling under any of the subparagraphs of Article 345 (1) of this Decree.
Article 84 (Scope of Interested Persons)
The term "interested persons prescribed by the Presidential Decree" under the main sentence of Article 84 (1) of the Act other than each subparagraph shall mean a person falling under any of the following subparagraphs:
1. Officers or employees of the collective investment manager, and their spouses;
2. Major shareholders of the collective investment manager, and their spouses;
3. Affiliates of the collective investment manager, officers and employees of the affiliates, and their spouses;
4. Brokers or dealers (hereafter in this Subsection, referred to as "affiliated broker or dealer") who has sold or has been entrusted to sell not less than 30/100 of collective investment securities of all the collective investment schemes managed by a collective investment manager;
5. Trust companies in charge of the custody and management of not less than 30/100 of collective investment properties of all the collective investment schemes managed by a collective investment manager; or
6. Supervisory directors of an investment company whose corporate director is a collective investment manager.
Article 85 (Exceptions from Restrictions on Transaction with Interested Persons) The term "transactions prescribed by the Presidential Decree" under Article 84 (1) 4 of the Act shall mean those falling under any of the following subparagraphs:
1. Purchase and sale of investment assets with persons other than interested persons in accordance with the methods prescribed and publicized by the Financial Services Commission through an interested person who arranges for or intermediates such transactions, or acts as an agent for that purpose;
2. Purchase and sale of the investment assets falling under any of the following items with interested persons through brokerage service (referring to the brokerage in the form of transactions prescribed and publicized by the Financial Services Commission) by the interested persons concerned:
(a) Debt securities;
(b) Certificates of deposit denominated in Korean won; or (c) Notes (excluding commercial papers);
3. Transactions with the interested persons (excluding major shareholders or affiliates of the collective investment manager) to manage collective investment properties within the ratio of 10/100 of the total amount of assets of each collective investment scheme through the methods falling under either of the following items: (a) Short-term loans under Article 83 (4) of the Act; or (b) Purchase with repurchase agreement (referring to cases where securities are purchased with a commitment to resell the securities after a certain period; hereinafter the same shall apply);
4. Deposit in a financial institution (limited to the financial institutions under Article 83 (1) 1 of this Decree and foreign financial institutions equivalent thereto; hereafter in this subparagraph, the same shall apply) which is an interested person. In such a case, the amount deposited in a financial institution which is an interested person out of the total amount of collective investment properties managed by a collective investment manager shall not exceed 10/100 of the total amount deposited in all the financial institutions;
5. Purchase and sale of foreign currencies under the Foreign Exchange Transactions Act with a trust company which is an interested person; or The Enforcement Decree of the Financial Investment Services and Capital Market Act
6. Other transactions confirmed by the Financial Services Commission as unlikely to be in a conflict of interest with collective investment schemes when taking into account the type, condition and method of transaction.
Article 86 (Restrictions on Acquisition of Securities by Affiliates) (1) The term "limit prescribed by the Presidential Decree" under Article 84 (4) of the Act shall be as follows:
1. Where equity securities (including the securities deposit receipts related to the equity securities; hereafter in this Article, the same shall apply) issued by any affiliate are acquired with collective investment properties of all the collective investment schemes managed by a collective investment manager, the acquisition amount of the entire equity securities issued by the affiliate shall not exceed 10/100 of the amount available to invest in equity securities among the total amount of assets of all the collective investment schemes managed by the collective investment manager and shall not exceed 50/100 of the total amount of assets of each collective investment scheme managed by the collective investment manager: Provided, That cases falling under any of the following items shall be excluded: (a) Where the aggregate of the market capitalization weight of the entire equity securities issued by the affiliate (referring to the market capitalization weight calculated pursuant to the latter part of Article 80 (1) 3 of this Decree; hereafter in this subparagraph, the same shall apply) exceeds 10/100 of the amount available to invest in equity securities among the total amount of assets of all the collective investment schemes managed by the collective investment manager, and where the entire equity securities issued by the affiliate are acquired to the extent of the market capitalization weight; or (b) Where equity securities issued by an affiliate are acquired to the extent of the weight in indices using collective investment properties of a collective investment scheme whose purpose is to manage the properties by linking to fluctuations in the indices prescribed and publicized by the Financial Services Commission among the indices presenting the price levels of many items in a comprehensive manner; and
2. Where an investment is made in the securities (excluding equity securities among the securities falling under Article 84 (4) of the Act) issued by the affiliate (excluding corporations established directly under the Acts and subordinate statutes; hereafter in this
subparagraph, the same shall apply) using collective investment properties of all the collective investment schemes managed by each collective investment manager, the amount equivalent to the ratio contributed to the collective investment manager by all affiliates. In such a case, the amount equivalent to the ratio contributed to the collective investment manager by all affiliates shall be the amount calculated by multiplying the equity capital (where the equity capital is below the capital, referring to the capital) of the collective investment manager by the rate calculated by dividing the number of stocks with voting rights of the collective investment manager held by all affiliates by the total number of outstanding stocks with voting rights of the collective investment manager; (2) The term "securities prescribed by the Presidential Decree" under Article 84 (4) of the Act shall mean securities falling under any of the following subparagraphs:
1. Collective investment securities (excluding beneficiary certificate of an investment trust) and foreign collective investment securities under Article 279 (1) of the Act;
2. Derivative-linked securities; or
3. Beneficiary certificates under Article 110 of the Act. (3) The term "investment assets prescribed by the Presidential Decree" under Article 84 (4) of the Act shall mean the investment assets falling under any of the following subparagraphs:
1. Certificates of deposit denominated in Korean won;
2. Bills other than commercial papers; or
3. In addition to those falling under subparagraphs 1 and 2, loans, deposits and other bonds prescribed and publicized by the Financial Services Commission. (4) Where a collective investment manager acquires the entire stocks of its affiliates in excess of 10/100 of the total amount of assets of each collective investment scheme pursuant to each item of subparagraph 1 of paragraph (1), the collective investment manager shall exercise voting rights to the stocks of the affiliates pursuant to the main sentence of Article 87 (1) of the Act other than each subparagraph with respect to the stocks of the affiliates which exceed the weight of the stocks held by each affiliate belonging to the collective investment properties, based on 10/100 of the total amount of assets of the collective investment scheme. (5) Where the limit falling under each subparagraph of paragraph (1) is exceeded due to the causes prescribed and publicized by the Financial Services Commission, even if a collective investment manager does not acquire additional securities under Article 84 (4) of the Act, the The Enforcement Decree of the Financial Investment Services and Capital Market Act collective investment manager shall manage to comply with the limit under each subparagraph of paragraph (1) within three months of the date when such causes occur. Article 87 (Prohibition of Unfair Business Practice) (1) The term "cases prescribed by the Presidential Decree" under the proviso of Article 85 of the Act other than each subparagraph shall mean those falling under any of the following subparagraphs:
1. In the application of subparagraph 1 of Article 85 of the Act, cases falling under either of the following items:
(a) Where it is proven that any information on the management of collective investment properties is not used; or
(b) Where arbitrage transactions taking advantage of the price differences between the securities market and the derivatives market and other transactions equivalent thereto are conducted and where it is objectively clear that the information on the management of collective investment properties is not used intentionally;
2. In the application of subparagraph 2 of Article 85 of the Act, cases where securities, etc. are purchased three months from the date of underwriting; or
3. In the application of subparagraph 5 of Article 85 of the Act, cases falling under any of the following items where any purchase or sale of the investment assets falling under each of the items of subparagraph 2 of Article 85 of this Decree is conducted through the brokerage service under subparagraph 2 of Article 85 of this Decree, or where one party sells assets (including debt payable under Article 224 (4) of this Decree) and the other party purchases the same assets at the same time among the collective investment schemes managed by the collective investment manager. In such a case, trading prices, procedures and methods of transactions and other necessary matters for the transactions among the collective investment schemes shall be prescribed and publicized by the Financial Services Commission:
(a) Where it is inevitable to comply with the investment limits prescribed in the collective investment agreement of the initially incorporated or established collective investment schemes (limited to the period of up to one month from the date of initial establishment or incorporation of a collective investment scheme);
(b) Where it is inevitable to meet the claims of the redemption of collective investment securities;
(c) Where it is inevitable to pay cancellation fees, etc. due to the termination or dissolution of collective investment schemes; or
(d) Others recognized by the Financial Services Commission as unlikely to undermine the interest of investors.
(2) The term "relevant underwriter prescribed by the Presidential Decree" under subparagraph 2 of Article 85 of the Act shall mean an underwriter falling under either of the following subparagraphs:
1. An underwriter who is in the same business group (referring to the business group under subparagraph 2 of Article 2 of the Monopoly Regulation and Fair Trade Act; hereinafter the same shall apply) with a collective investment manager; or
2. An underwriter who has sold collective investment securities of all the collective investment schemes managed by a collective investment manager exceeding the ratio prescribed and publicized by the Financial Services Commission. (3) The term "underwriting business prescribed by the Presidential Decree" under subparagraph 3 of Article 85 of the Act shall mean the business of determining underwriting conditions upon the request for underwriting directly from issuers or secondary distributors. (4) The term "others prescribed by the Presidential Decree" under subparagraph 8 of Article 85 of the Act shall mean those falling under any of the following subparagraphs:
1. Managing collective investment properties in violation of a collective investment agreement or prospectus;
2. Purchasing or selling financial investment products too frequently using collective investment properties without taking into account the management directions or strategies of a collective investment scheme;
3. Directly or indirectly providing benefit which has a property value to a broker or dealer (including the officers, employees, and introducing brokers thereof) who sells collective investment securities of a collective investment scheme managed by a collective investment manager with respect to the business in violation of the standards prescribed and publicized by the Financial Services Commission;
The Enforcement Decree of the Financial Investment Services and Capital Market Act
4. Directly or indirectly gaining benefit which has a property value from a broker or dealer (including the officers and employees thereof) with respect to the business in violation of the standards prescribed and publicized by the Financial Services Commission;
5. Managing collective investment properties upon the order, instruction and request from an investor under a side agreement, etc. with the investor;
6. Managing collective investment properties upon the order, instruction and request from a broker or dealer who sells collective investment securities of a collective investment scheme managed by a collective investment manager under a side agreement, etc. with such broker or dealer;
7. Using over-the-counter derivatives transactions, trust contracts, and linked transactions, etc. for the purpose of avoiding any prohibition or restriction under Articles 55, 81, 84 and 85 of the Act;
8. Receiving any blank check or blank note to secure rights as a creditor; or
9. Others prescribed and publicized by the Financial Services Commission as likely to undermine the protection of investors or sound trade practice. Article 88 (Restrictions on Bonus)
(1) The term "cases prescribed by the Presidential Decree" under Article 86 (1) 2 of the Act shall mean cases where all the requirements falling under each of the following subparagraphs are met. In such a case, necessary matters on the methods of calculating a bonus, the payment date, etc. shall be prescribed and publicized by the Financial Services Commission:
1. The bonus shall be calculated based on the reference (hereafter in this Article, referred to as "reference") which meets the requirements prescribed and publicized by the Financial Services Commission;
2. A collective investment manager shall establish a remuneration system that determines lower management fees than the bonus calculated based on the performance when the management performance of a collective investment scheme is lower than that of the reference;
3. No bonus shall be paid where the management performance of a collective investment scheme represents negative profits even if such performance exceeds those of the reference
or where the management performance falls short of the standards prescribed and publicized by the Financial Services Commission;
4. A collective investment scheme shall be composed of only the investors who make an investment above the minimum investment limit prescribed and publicized by the Financial Services Commission; and
5. A collective investment scheme shall be established or incorporated in the form of a closed-end collective investment scheme (hereinafter referred to as "closed-end collective investment scheme") under Article 230 of the Act with the existence period not less than one year, and shall not issue additional collective investment securities. (2) The term "matters prescribed by the Presidential Decree" under Article 86 (2) of the Act shall be as follows:
1. The intention that bonus will be paid and the limit thereof;
2. The fact that the exposure to investment risk is likely to be higher than that of the collective investment scheme that does not require the payment of bonus;
3. Matters on all the remunerations, including bonus;
4. Reference;
5. Payment period of bonus;
6. Matters on cases where the bonus is not paid; and
7. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
Article 89 (Restrictions on Exercising Voting Rights) (1) The term "person prescribed by the Presidential Decree" under Article 87 (1) 1 (a) of the Act shall mean specially-related persons and co-owners under Article 141 (2) of this Decree. (2) The term "person prescribed by the Presidential Decree" under Article 87 (1) 1 (b) of the Act shall mean those falling under either of the following subparagraphs:
1. Affiliated brokers or dealers, and the affiliates thereof; or
2. Major shareholders (including shareholders who are specially-related persons of the largest shareholder) of a collective investment manager (referring to the collective investment manager under Article 87 (1) of the Act). The Enforcement Decree of the Financial Investment Services and Capital Market Act (3) The term "relation prescribed by the Presidential Decree" under Article 87 (1) 2 (b) of the Act shall mean a relation where a person becomes those falling under any of the subparagraphs of paragraph (2).
Article 90 (Recordkeeping of Exercise of Voting rights) (1) The term "amount or ratio prescribed by the Presidential Decree" under Article 87 (7) of the Act shall be 5/100 of the total amount of assets of each collective investment scheme or ten billion won.
(2) The term "methods prescribed by the Presidential Decree" under Article 87 (7) of the Act shall be indicating whether a corporation subject to the disclosure of voting rights under Article 87 (7) of the Act exercises its voting rights, and the details thereof (where the voting rights are not exercised, the reasons therefor) on the asset management reports under Article 88 of the Act (hereinafter referred to as "asset management report") and the business reports under Article 90 of the Act.
Article 91 (Disclosure of Exercise of Voting Rights) (1) The disclosure of the exercise of voting rights under Article 87 (8) of the Act shall follow the methods falling under either of the following subparagraphs:
1. A collective investment manager shall, when it intends to exercise voting rights of the stocks issued by a corporation that is a stock-listed corporation, disclose details on the exercise of the voting rights through the securities market within the five days preceding the date of a general meeting of shareholders; or
2. A collective investment manager shall, when it intends to exercise voting rights of the stocks issued by a corporation that is not a stock-listed corporation, disclose details on the exercise of the voting rights under the methods falling under each of the subparagraphs of Article 93 (1) of this Decree, and make them available to the public. (2) Where it is difficult to make a disclosure under paragraph (1) within the five days preceding the date of a general meeting of shareholders, including cases where specific contents of subject matter at the general meeting of shareholders are not determined within the five days preceding the date of the general meeting of shareholders, a collective investment manager (referring to the collective investment manager under Article 87 (1) of the Act; hereafter in this
Article, the same shall apply) shall disclose such circumstances before the date of the general meeting of shareholders, and disclose the exercise of the voting rights at the general meeting of shareholders within the five days preceding the date of the general meeting of shareholders through the method falling under each subparagraph of paragraph (1). (3) The term "documents prescribed by the Presidential Decree" under Article 87 (9) of the Act shall be as follows:
1. Internal directives of a collective investment manager on the exercise of the voting rights;
2. The number of stocks held by a collective investment manager for each collective investment scheme with respect to the exercise of the voting rights; and
3. Documents indicating whether the relation between a collective investment manager and a corporation subject to the exercise of voting rights fit the relation specified under Article 89 (1) or 89 (2) of this Decree.
Article 92 (Asset Management Report)
(1) The term "cases prescribed by the Presidential Decree" under the proviso of Article 88 (1) of the Act shall mean cases falling under any of the following subparagraphs:
1. Where an investor proclaims, in writing, that he/she refuses to receive asset management reports;
2. Where a collective investment manager establishes or incorporates a collective investment scheme of short-term finance and discloses asset management reports through the methods prescribed and publicized by the Financial Services Commission more than once in a month;
3. Where a collective investment manager establishes or incorporates a closed-end collective investment scheme (limited to cases where the collective investment securities are listed pursuant to Article 230 (3) of the Act) and discloses asset management reports through the methods prescribed and publicized by the Financial Services Commission more than once every three months; or
4. Where the value of the collective investment securities held by an investor is not more than 100,000 won and the collective investment agreement prescribes that no asset management report is provided in such a case.
(2) The term "turnover rate of the trading prescribed by the Presidential Decree" under Article 88 (2) 4 of the Act shall mean the rate calculated by dividing the total amount of the The Enforcement Decree of the Financial Investment Services and Capital Market Act value of stocks sold during the management period concerned (referring to the management period under Article 88 (2) 2 of the Act) by the average value of the stocks held during the same period.
(3) The term "others prescribed by the Presidential Decree" under Article 88 (2) 5 of the Act shall be as follows:
1. Details of the investment assets belonging to collective investment properties as of the reference date (referring to the reference date under Article 88 (2) 1 of the Act; hereafter in this Article, the same shall apply);
2. Matters on the fund managers of a collective investment scheme;
3. Traded amount, commissions and weights of transactions conducted by each broker classified by type of stocks, securities other than stocks and exchange-traded derivatives on a monthly basis;
4. Matters on transactions with interested persons;
5. Whether the voting rights to a corporation subject to the disclosure of voting rights under Article 87 (7) of the Act are exercised and the details thereof (where the voting rights are not exercised, including the reasons therefor);
6. Matters on the details of transactions of securities issued by an affiliate under Article 86 (1) of this Decree; and
7. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(4) A collective investment manager shall, when it provides asset management reports to investors, provide the reports in person or by mail within two months of the reference date through a broker or dealer who has sold the collective investment securities: Provided, That when an investor presents his/her intention to receive such reports by e-mail, the collective investment manager may provide them in such a way. (5) The cost for preparing and providing asset management reports shall be imposed on a collective investment manager.
(6) The form of asset management reports, the preparation thereof, and other necessary matters shall be prescribed and publicized by the Financial Services Commission. Article 93 (Methods of Ongoing Disclosure)
(1) The term "conditions prescribed by the Presidential Decree" under Article 89 of the Act other than each subparagraph shall mean those falling under any of the following subparagraphs:
1. Making a disclosure through the Internet websites, etc. of a collective investment manager, a broker or dealer who has sold collective investment securities, and the Association;
2. Making a publication at the head office, branches or other business offices of a collective investment manager and a broker or dealer who has sold collective investment securities; or
3. Notifying investors via e-mail. (2) The term "non-performing asset prescribed by the Presidential Decree" under subparagraph 3 of Article 89 of the Act shall mean assets prescribed and publicized by the Financial Services Commission as non-performing assets incurred from causes including bankruptcy of issuers and the application for workout process under the Debtor Rehabilitation and Bankruptcy Act.
(3) The term "matters prescribed by the Presidential Decree" under subparagraph 5 of Article 89 of the Act shall mean those falling under any of the following subparagraphs:
1. Changes in a prospectus: Provided, That cases falling under any of the following items are excluded:
(a) Where the prospectus is changed upon the amendment of the Act and this Decree, or the order from the Financial Services Commission; (b) Where the prospectus is changed upon the change of a collective investment agreement; or
(c) Where there are minor changes in the prospectus such as correction of simple words and phrases;
2. Merger, split-off and split-and-merger, or transfer and acquisition of business of a collective investment manager;
3. Where a collective investment manager or a general fund administrator corrects any calculation error of base price, the details thereof (limited to cases where a public notice or a publication is made pursuant to the latter part of Article 262 (1) of this Decree); or
4. Others prescribed and publicized by the Financial Services Commission as materially affecting investment decisions of investors.
The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 94 (Report and Disclosure on Collective Investment Property) (1) A collective investment manager (referring to the collective investment manager under Article 90 (1) of the Act; hereafter in this Article, the same shall apply) shall prepare a business report on collective investment properties (limited to the properties of an investment trust or investment undisclosed association; hereafter in this Article, the same shall apply) pursuant to Article 90 (1) of the Act after classifying the report into the documents falling under each of the following subparagraphs under the conditions prescribed and publicized by the Financial Services Commission:
1. Current status of the establishment of the investment trust and current status of changes in contributions to the investment undisclosed association;
2. Current status of management of collective investment properties and the list of base prices of collective investment securities (limited to the beneficiary certificates of an investment trust and equity securities of an investment undisclosed association);
3. Documents indicating whether the voting rights to a corporation subject to the disclosure of voting rights under Article 87 (7) of the Act are exercised, and the details thereof (where the voting rights are not exercised, including the reasons therefor); and
4. Turnover rate of trading (referring to the turnover rate of trading under Article 88 (2) 4 of the Act) of stocks which are the assets belonging to collective investment properties and traded amount, commissions and weights related to the consigned purchase and sale of the assets by each broker.
(2) The Association shall compare the management performances of each collective investment property and disclose the results thereof pursuant to Article 90 (4) of the Act under the conditions prescribed and publicized by the Financial Services Commission after classifying the performances into the matters falling under each of the following subparagraphs:
1. Collective investment managers;
2. Brokers or dealers;
3. Type of collective investment scheme;
4. Major investment assets (hereinafter referred to as "major investment asset") prescribed and publicized by the Financial Services Commission;
5. Bonus;
6. Sales commissions and fees; and
7. Others prescribed and publicized by the Financial Services Commission. (3) The Association may request that a collective investment manager of an investment trust or undisclosed investment association, or an investment company, etc. under Article 182 (1) of the Act (hereinafter referred to as "investment company, etc.") submit data on the collective investment agreement, prospectus, reference price, etc. of each collective investment scheme to the extent that it is necessary to compare and disclose the management performances of collective investment schemes.
Article 95 (Access and Disclosure of Books and Documents) (1) The term "reasonable grounds prescribed by the Presidential Decree" under the latter part of Article 91 (1) of the Act shall mean those falling under any of the following subparagraphs. In such a case, a collective investment manager (referring to the collective investment manager under Article 91 (1) of the Act) shall notify the investors in writing of the fact that the access to and distribution of the books and documents are unavailable, and the reasons therefor:
1. Where it is likely that a person who is provided with the books and documents containing the details of transaction orders of collective investment properties will use such information in transactions or business or provide such information to another person;
2. Where it is clearly recognized that providing the books and documents containing details of transaction orders of collective investment properties causes damages to other investors; or
3. Where it is impractical to meet the request of investors for access to the books and documents on a terminated or dissolved collective investment scheme for reasons, including the expiration of the period to keep the books and documents under Article 62 (1) of this Decree.
(2) Books and documents that an investor is entitled to request for access to and distribution of certified copies or abridged copies thereof pursuant to Article 91 (1) of the Act shall be as follows:
1. List of collective investment properties;
2. Ledger of collective investment securities;
3. Financial statements and the addenda thereof; and
4. Details of the management of collective investment properties. The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 96 (Special Cases for Management of Derivatives) (1) The term "limit prescribed by the Presidential Decree" under the former part of Article 93 (1) of the Act shall be 10/100 of the total amount of assets of a collective investment scheme. (2) The term "risk-related indices prescribed by the Presidential Decree" under the former part of Article 93 (1) of the Act shall be as follows: Provided, That subparagraph 2 shall not apply to the derivatives prescribed and publicized by the Financial Services Commission as difficult to calculate the indices because of insufficient data for calculating risk-related indices:
1. Structure of profits and losses in transactions of derivatives at maturity;
2. Where the structure of profits and losses of collective investment properties is changed in the wake of changes in the market situation, or the fluctuation of market prices adversely affects the collective investment scheme within a certain confidence interval during a certain holding period, the maximum amount of estimated losses incurred from the transactions of derivatives; or
3. Other indices prescribed and publicized by the Financial Services Commission as important standards for investment decision of investors. (3) Specific methods of calculating risk-related indices under paragraph (2) and other necessary matters shall be prescribed and publicized by the Financial Services Commission. (4) The term "limit prescribed by the Presidential Decree" under Article 93 (2) of the Act shall be 10/100 of the total amount of assets of a collective investment scheme. Article 97 (Special Cases for Management of Real Estate) (1) The term "conditions prescribed by the Presidential Decree" under Article 94 (1) of the Act shall mean that a collective investment manager borrows money by providing real estate as collateral to financial institutions falling under any of the following subparagraphs, or through other methods prescribed and publicized by the Financial Services Commission: Provided, That where a general meeting of collective investors resolves to adopt other conditions, the collective investment manager may borrow money in accordance with such resolution:
1. Financial institutions falling under each item of Article 79 (2) 5 of this Decree;
2. Insurance companies;
3. Funds under the Finance Act;
4. Other collective investment schemes of real estate; or
5. Foreign financial institutions, etc. equivalent to those referred to under subparagraphs 1 through 4.
(2) The term "others prescribed by the Presidential Decree" under Article 94 (2) of the Act shall mean real estate investment companies under the Real Estate Investment Company Act or other collective investment schemes.
(3) The term "conditions prescribed by the Presidential Decree" under Article 94 (2) of the Act shall mean those satisfying both of the following requirements:
1. Matters on lending money shall be prescribed by a collective investment agreement; and
2. A collective investment manager shall secure appropriate measures to collect loans, including the creation of collateral rights to real estate or the payment guarantee from a constructor.
(4) Where a collective investment manager lends money pursuant to Article 94 (2) of the Act, the limits of loan shall be 100/100 of the value calculated by deducting the total amount of liabilities from the total amount of assets of the collective investment scheme concerned. (5) The term "matters prescribed by the Presidential Decree" under Article 94 (3) of the Act shall be as follows:
1. Transaction costs of real estate;
2. Financial materials related to real estate;
3. Matters affecting profits of real estate; and
4. Others prescribed and publicized by the Financial Services Commission as necessary for a decision on transactions of real estate.
(6) The term "others prescribed by the Presidential Decree" under Article 94 (4) of the Act shall be as follows:
1. Matters on business plan containing construction schedules, etc.;
2. Matters on raising, investing and collecting funds;
3. Matters on estimated profit and loss;
4. Matters on risks of business;
5. Matters on outsourcing, such as construction, etc.; and
6. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
The Enforcement Decree of the Financial Investment Services and Capital Market Act (7) Where a collective investment manager borrows money pursuant to Article 94 (1) of the Act, the limits of the borrowed money shall be as follows:
1. Where money is borrowed for the account of a collective investment scheme of real estate, 200/100 of the value calculated by deducting the total amount of liabilities from the total amount of assets of the collective investment scheme of real estate: Provided, That where a general meetings of collective investors resolves otherwise, the resolved limits thereof;
2. Where money is borrowed for the account of a collective investment scheme other than a collective investment scheme of real estate, the ratio prescribed and publicized by the Financial Services Commission within the scope of 100/100 of the value of the real estate belonging to the collective investment scheme concerned. In such a case, the appraisal of the value of real estate shall be the value determined by the appraisal committee under Article 238 (2) of the Act (hereinafter referred to as "collective investment property appraisal committee") in accordance with the standards for appraising collective investment property under Article 238 (3) of the Act.
(8) A collective investment manager shall not manage the money borrowed pursuant to Article 94 (1) of the Act by methods other than investing in real estate: Provided, That the same shall not apply to cases prescribed and publicized by the Financial Services Commission when taking into account the type of collective investment schemes. (9) Notwithstanding item (c) of subparagraph 2 of Article 45 of this Decree, a collective investment manager of a collective investment scheme of real estate may delegate a third party with the businesses falling under Articles 240 (4) 1 through 240 (4) 3 of this Decree and other businesses incidental thereto.
Subsection 3 Conduct of Business Regulations of Discretionary Investment Advisory Company and Non-discretionary Investment Advisory Company Article 98 (Making Contract)
The term "matters prescribed by the Presidential Decree" under Article 97 (1) 8 of the Act shall be as follows:
1. Matters on officers and major shareholders;
2. In the case of contracts for discretionary investment advisory service, the type of discretionary investment properties to be held by investors at the time of commencing the contracts and the type of the discretionary investment properties to be held by the investors at the time of terminating the contracts;
3. Matters on investment methods applied in managing discretionary investment properties;
4. Period for the preparation of a discretionary investment advisory report under Article 99 (1) of the Act (hereinafter referred to as "discretionary investment advisory report"); and
5. Others prescribed and publicized by the Financial Services Commission as important standards for determining whether an investor enters into a contract. Article 99 (Prohibition of Unfair Business Practice) (1) The term "cases prescribed by the Presidential Decree" under the proviso of Article 98 (1) of the Act other than each subparagraph shall mean cases, in the application of Article 98 (1) 1 and 98 (1) 2 of the Act, where a discretionary investment advisory company or non- discretionary investment advisory company provides other financial investment services or other financial services concurrently and the relevant Acts and subordinate statutes thereof do not prohibit activities falling under Articles 98 (1) 1 and 98 (1) 2 of the Act. (2) The term "cases prescribed by the Presidential Decree" under the proviso of Article 98 (2) of the Act other than each subparagraph shall be as follows:
1. In the application of Article 98 (2) 1 of the Act, cases falling under either of the following items:
(a) Where it is proven that any information on the management of discretionary investment properties is not used; or
(b) Where it is objectively clear that the information on the management of discretionary investment properties, including arbitrage transactions, etc. is intentionally not used.
2. In the application of Article 98 (2) 2 of the Act, cases where securities, etc. are purchased three months from the date of underwriting;
3. In the application of Article 98 (2) 6 of the Act, cases falling under any of the following items:
(a) Transactions under a contract that has been entered into six months before the counter-party becomes an interested person;
The Enforcement Decree of the Financial Investment Services and Capital Market Act (b) Transactions on the open market including the securities market which is open to the public;
(c) Transactions which are in favor of collective investment schemes when taking into account common transaction conditions;
(d) Purchase and sale with repurchase agreement;
(e) Purchase and sale of discretionary investment properties with persons other than discretionary investment advisory companies or interested persons under the conditions prescribed and publicized by the Financial Services Commission through a discretionary investment advisory company or an interested person who arranges for or intermediates such transactions, or acts as an agent for that purpose; (f) Purchase and sale of debt securities, certificates of deposit denominated in Korean won or notes (excluding commercial papers) with interested persons through brokerage service (referring to the brokerage in the form of transactions prescribed and publicized by the Financial Services Commission) by the interested person concerned; (g) Transactions to sell collective investment securities of an exchange-traded fund in order to avoid risks associated with the investment after borrowing them with discretionary investment properties; or
(h) Others recognized by the Financial Services Commission as unlikely to undermine the interests of investors;
4. In the application of Article 98 (2) 8 of the Act, where transaction orders of investment assets are collectively executed and the results of the execution are distributed in a fair manner based on the predetermined details of the asset distribution for each discretionary investment property in order to effectively manage each discretionary investment property; and
5. In the application of Article 98 (2) 9 (c) of the Act, cases falling under any of the following items:
(a) Exercising the rights to make claims for the purchase of stocks; (b) Making a tender offer;
(c) Subscribing for capital increase with consideration; (d) Exercising the conversion rights of convertible bonds; (e) Exercising the preemptive rights of bonds with warrant;
(f) Requesting an exchange of exchangeable bonds; (g) Exercising the rights of derivative-linked securities; or (h) Exercising the rights under Article 5 (1) 2 of the Act. (3) The term "underwriting business prescribed by the Presidential Decree" under Article 98 (2) 3 of the Act shall mean the business that determines the conditions of underwriting upon the request for underwriting securities directly from issuers or secondary distributors. (4) The term "activities prescribed by the Presidential Decree" under Article 98 (2) 10 of the Act shall mean those falling under any of the following subparagraphs:
1. Disagreeing with the request of a professional investor (excluding persons falling under each subparagraph of Article 10 (1) of this Decree), without any justifiable cause, that he/she should be treated as a non-professional investor pursuant to the proviso of Article 9 (5) of the Act;
2. Managing discretionary investment properties in violation of a contract for discretionary investment advisory service;
3. Purchasing or selling financial investment products too frequently using discretionary investment properties without taking into account the scope of discretionary investment, the purpose of investment, etc.;
4. Providing an investor (where an investor is a corporation or other organization, including officers and employees thereof) or a counter party (where a counter party is a corporation or other organization, including officers and employees thereof) with benefit which has a property value or receiving such benefit from an investor or counter party directly or indirectly from investors in violation of the standards prescribed and publicized by the Financial Services Commission with respect to the business;
5. Using over-the-counter derivative transactions, trust contracts, linked transactions, etc. for the purpose of avoiding any prohibition or restriction under Articles 55 and 98 of the Act;
6. Receiving any blank check or blank bill in order to secure the rights as a creditor; or
7. Others prescribed and publicized by the Financial Services Commission as likely to undermine the protection of investors or sound trade practice. Article 100 (Distribution of Discretionary Investment Advisory Report) The Enforcement Decree of the Financial Investment Services and Capital Market Act (1) A discretionary investment advisory report under Article 99 (1) of the Act shall include the matters falling under each of the following subparagraphs during the period for the preparation of the discretionary investment advisory report:
1. Outline of management performance and current status of profits and losses;
2. Current management status of discretionary investment properties such as trading dates, traded prices, consignment commissions, various taxes, etc.;
3. Current status of balance, acquisition value, market value, and appraised profit and loss by type of assets belonging to discretionary investment properties;
4. Where commissions for discretionary investment advisory service are charged, the time and amount thereof; and
5. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(2) A discretionary investment advisory company shall distribute a discretionary investment advisory report to investors in person, by mail, etc. within two months after the period for the preparation of the discretionary investment advisory report: Provided, That when a non- professional investor presents his/her intention that he/she receive a discretionary investment advisory report by e-mail, the discretionary investment advisory report may be distributed in such a way.
(3) The form of a discretionary investment advisory report, the preparation and distribution thereof, and other necessary matters shall be prescribed and publicized by the Financial Services Commission.
Article 101 (Special Cases for Offshore Non-discretionary Investment Advisory Company) (1) An offshore discretionary investment advisory company under Article 100 (1) (hereafter in this Article, referred to as "discretionary investment advisory company") of the Act or an offshore non-discretionary investment advisory company under Article 100 (1) of the Act (hereafter in this Article, referred to as "non-discretionary investment advisory company") shall prepare each business report pursuant to Article 100 (5) of the Act for three months, six months, nine months and twelve months, respectively, from the date of the commencement of every business year in accordance with the standards prescribed and publicized by the
Financial Services Commission and file such business reports with the Financial Services Commission within the period up to one month after the expiration of each reporting period. (2) The term "person who is designated by the Presidential Decree" under Article 100 (6) of the Act shall mean those falling under any of the following subparagraphs:
1. Government;
2. The Bank of Korea;
3. A person falling under any of Articles 10 (2) 1 through 10 (2) 17 of this Decree; or
4. A person falling under Articles 10 (3) 1 through 10 (3) 14 of this Decree; (3) The term "foreign custodian designated by the Presidential Decree" under Article 100 (7) of the Act shall mean foreign custodians specified in each subparagraph of Article 63 (2) of this Decree.
(4) An offshore discretionary investment advisory company shall distribute discretionary investment advisory reports prepared pursuant to the standards prescribed and publicized by the Financial Services Commission to its investors in person or by mail at least once a month: Provided, That when an investor presents his/her intention to receive the discretionary investment advisory reports by e-mail, the reports concerned may be distributed in such a way. (5) In addition to the matters prescribed in paragraphs (1) through (4), other necessary matters on the business methods and procedures of offshore discretionary investment advisory companies or offshore non-discretionary investment advisory companies shall be prescribed and publicized by the Financial Services Commission. Article 102 (Report of Like-kind Services of Non-discretionary Investment Advisory) The term "business prescribed by the Presidential Decree" under Article 101 (1) of the Act shall mean an investment advisory service to be provided by a person other than non- discretionary investment advisory companies in return for a certain compensation using periodicals, publications, correspondence, or broadcasting that are available for the public to purchase or receive at any time.
Subsection 4 Conduct of Business Regulations of Trust Company Article 103 (Type of Trust)
The Enforcement Decree of the Financial Investment Services and Capital Market Act A money trust shall be classified as each of the following subparagraphs pursuant to Article 103 (3) of the Act:
1. A money trust whose management is ordered by an entruster and whose property is money (hereinafter referred to as "specified money trust"); and
2. A money trust whose management is not ordered by an entruster and whose property is money (hereinafter referred to as "unspecified money trust"). Article 104 (Methods of Providing Trust Service)
(1) A trust company shall not compensate any loss or guarantee any profit with respect to the property entrusted: Provided, That the same shall not apply to the trust service for paying pension or retirement benefits prescribed and publicized by the Financial Services Commission. (2) Where any loss is compensated or any profit is guaranteed pursuant to the proviso of paragraph (1) with respect to the entrusted property and the management performance falls short of those prescribed in a trust contract, a trust company shall compensate for such shortage in the order of special reserve (referring to the amount deposited for compensation or guarantee of trust with agreements of compensation for damage or guarantee of profit), trust fees and proprietary property.
(3) A trust company shall, when the period of a trust contract is terminated, return the trust property based on the management performances except for cases where any loss is compensated or any profit is guaranteed pursuant to the proviso of paragraph (1). (4) Where an entruster cancels a trust contract before the termination of the contract period, a trust company shall return the amount calculated by deducting cancellation commissions provided for in the trust contract from the management performance under paragraph (3): Provided, That the trust company shall not deduct cancellation commission in cases prescribed and publicized by the Financial Services Commission. (5) A trust company may receive trust fees as provided for in a trust contract. (6) The term "project funds prescribed by the Presidential Decree" under Article 103 (4) of the Act shall mean the amount calculated by deducting the acquisition value of the real estate, registration cost, and other incidental expenses related to the acquisition of the real estate from the entire costs for real estate development projects such as construction costs, advertisement costs, distribution costs, etc.
Article 105 (Acquisition of Trust Property Using Proprietary Property) The term "cases prescribed by the Presidential Decree" under Article 104 (2) 2 of the Act shall mean cases recognized by the Financial Services Commission as meeting all the requirements falling under the following subparagraphs:
1. The remaining period until the termination of a trust contract shall be not more than three months;
2. Trust property shall be difficult to dispose of by methods other than acquiring the trust property as its own property; and
3. The acquisition value shall be calculated in a fair manner. Article 106 (Methods of Managing Trust Property)
(1) The term "securities prescribed by the Presidential Decree" under Article 105 (1) 1 of the Act shall mean securities falling under any of the following subparagraphs:
1. Debt securities;
2. Equity securities;
3. Beneficiary certificates;
4. Investment contract securities;
5. Derivative-linked securities; or
6. Securities deposit receipts. (2) The term "financial institutions prescribed by the Presidential Decree" under Article 105 (1) 3 of the Act shall mean institutions falling under any of the following subparagraphs:
1. Banks;
2. The Korea Development Bank under the Korea Development Bank Act;
3. The Industrial Bank of Korea under the Industrial Bank of Korea Act;
4. Securities finance company;
5. Merchant banks;
6. Mutual savings banks under the Mutual Savings Banks Act;
7. Agricultural cooperatives under the Agricultural Cooperatives Act;
8. Fisheries cooperatives under the Fisheries Cooperatives Act;
9. Credit union cooperatives under the Credit Union Cooperatives Act; The Enforcement Decree of the Financial Investment Services and Capital Market Act
10. Postal service office under the Postal Savings and Insurance Act; or
11. Foreign financial institutions equivalent to those falling under subparagraphs 1 through
10. (3) The term "methods prescribed by the Presidential Decree" under Article 105 (1) 10 of the Act shall mean methods falling under any of the following subparagraphs:
1. Purchase of certificates of deposit denominated in Korean won;
2. Management of surface rights, chonsegwon (rights to registered lease on a deposit basis), leasehold rights, rights to claim the registration of transfer of real estate, and other rights related to real estate;
3. Purchase with repurchase agreement;
4. Borrowing or lending of securities;
5. Where retirement pension fund reserves are invested in accordance with a trust contract under Article 16 (2) of the Guarantee of Workers' Retirement Benefits Act, investment in the rights to claim insurance benefits under Article 16 (2) of the same Act; or
6. Others prescribed and publicized by the Financial Services Commission after taking into account the stability and profitability of trust property. (4) The term "cases prescribed by the Presidential Decree" under Article 105 (2) of the Act shall mean cases falling under either of the following subparagraphs; 1.Where a trust contract for real estate development is entered into pursuant to Article 103 (4) of the Act and a trust company is entrusted with money within 15/100 of the project funds of each real estate development project (referring to the project funds under Article 104 (6) of this Decree) in accordance with the trust contract; or
2. Cases recognized by the Financial Services Commission as satisfying both of the following requirements:
(a) Where it is difficult to dispose of part of the trust property when the partial cancellation of a trust contract is requested; and (b) Where the borrowing interest rate is reasonable. (5) A trust company shall, when it manages money belonging to the trust property, comply with the standards falling under each of the following subparagraphs:
1. In the case of specified money trust (limited to acquisition and disposal of treasury stocks issued by the entruster concerned using the trust property):
(a) The trust company shall acquire treasury stocks through the securities market or tender offer under Article 133 of the Act;
(b) The trust company shall not dispose of the treasury stocks within one month after it has acquired them, or shall not acquire the stocks within one month after it has disposed of them; and
(c) The trust company shall not manage surplus funds remaining after acquiring the treasury stocks through the methods other than those prescribed and publicized by the Financial Services Commission;
2. In the case of unspecified money trust: (a) The trust company shall not exceed 3/100 of each trust property when investing in private bonds (excluding private bonds and secured bonds whose payments of principal and interest are guaranteed by the person prescribed and publicized by the Financial Services Commission);
(b) The trust company shall not exceed 50/100 of each trust property when investing in equity securities (including securities deposit receipts related thereto) and exchange- traded derivatives. In such a case, the trust company shall calculate the scope based on the risk-assessed amount (referring to the risk-assessed amount under Article 81 (2) of the Act; hereafter in this Article, the same shall apply) incurred from the transactions thereof;
(c) The trust company shall not invest in over-the-counter derivatives to the extent that the risk-assessed amount incurred from the transactions exceeds 10/100 of each trust property;
(d) The trust company shall not exceed 15/100 of the total number of outstanding equity securities when investing in equity securities (including securities deposit receipts related thereto) issued by the same corporation, etc.; and (e) The trust company shall comply with other management methods for trust property as prescribed and publicized by the Financial Services Commission; and
3. The trust other than subparagraphs 1 and 2 shall meet the conditions prescribed and publicized by the Financial Services Commission in order to protect beneficiaries or to maintain sound trade practice.
Article 107 (Management of Surplus Fund)
The Enforcement Decree of the Financial Investment Services and Capital Market Act (1) The term "financial institutions designated by the Presidential Decree" under subparagraphs 1 and 3 of Article 106 of the Act shall mean those falling under each subparagraph of Article 106 (2) of this Decree.
(2) The term "methods prescribed by the Presidential Decree" under subparagraph 4 of Article 106 of the Act shall mean those falling under any of the following subparagraphs:
1. Short-term loans under Article 83 (4) of the Act;
2. Purchase of bonds (excluding special bonds) issued by the financial institutions falling under each subparagraph of Article 106 (2) of this Decree; or
3. Other methods prescribed and publicized by the Financial Services Commission as unlikely to undermine the stability and profitability of trust property. Article 108 (Duty to Deposit)
(1) The term "trust company prescribed by the Presidential Decree" under the proviso of Article 107 (1) of the Act shall mean a trust company whose capital is not less than 100 billion won as of the end of the latest business year.
(2) A trust company shall deposit the larger amount between the amount equivalent to 1/100 of capital and the amount equivalent to 10/100 of net profit within 20 days of the date of a regular general meeting of shareholders to the extent that the deposited amount under Article 107 (1) of the Act reaches the limit under Article 107 (1) of the Act: Provided, That the trust company under paragraph (1) shall deposit the amount equivalent to 1/5,000 of its capital. (3) A trust company shall deposit the amount under paragraph (2) at the location of its head office.
(4) Where securities other than money are deposited, the methods of calculating the value thereof shall be prescribed and publicized by the Financial Services Commission. (5) A trust company shall, when it deposits the amount under paragraph (2), file the documents indicating the details of the deposit and the ratio to the capital with the Financial Services Commission accompanying the copies of deposit receipts. Article 109 (Prohibition of Unfair Business Practice)
(1) The term "cases prescribed by the Presidential Decree" under the proviso of Article 108 of the Act other than each subparagraph shall mean those falling under either of the following subparagraphs:
1. In the application of subparagraph 1 of Article 108 of the Act, cases falling under any of the following items:
(a) Where it is proven that any information on the management of trust property is not used; or
(b) Where arbitrage transactions taking advantage of the price differences between the securities market and the derivatives market and other transactions equivalent thereto are conducted and where it is objectively clear that the information on the management of trust property is intentionally not used;
2. In the application of subparagraph 2 of Article 108 of the Act, cases where securities are purchased three months after the underwriting date;
3. In the application of subparagraph 5 of Article 108 of the Act, cases falling under either of the following subparagraphs where one party sells assets among the trust property managed by the same trust company and another party purchases the same assets at the same time. In such a case, the trading prices, the methods and procedures of the transactions, and other necessary matters shall be prescribed and publicized by the Financial Services Commission: (a) Where it is inevitable to pay the termination commissions caused by the termination (including partial terminations) of trust contracts; or (b) Other cases recognized by the Financial Services Commission as unlikely to undermine the interests of beneficiaries;
4. In the application of subparagraph 6 of Article 108 of the Act, cases falling under any of the following items:
(a) Transactions under a contract which has been entered into not more than six months before the counter-party becomes an interested person; (b) Transactions through the open market including the securities market which is open to the public;
(c) Transactions which are in favor of a trust property when taking into account common transaction conditions;
(d) Transactions with repurchase agreement;
The Enforcement Decree of the Financial Investment Services and Capital Market Act (e) Purchase and sale of investment assets with trust companies and persons other than interested persons under the conditions prescribed and publicized by the Financial Services Commission through a trust company or an interested person who arranges for or intermediates such transactions or act as an agent for that purpose; or (f) Purchase and sale of debt securities, certificates of deposit denominated in Korean won, or notes (excluding commercial papers) with trust companies and interested persons through brokerage (referring to the brokerage in the form of transactions as prescribed and publicized by the Financial Services Commission) by a trust company and its interested person;
(g) Transactions under Article 104 (2) or 105 (2) of the Act; (h) Deposit transactions (in the case of specified money trusts whose entrusted amount is not less than 300 million won or specified money trusts under the Act on Guarantee of Retirement Pay for Workers, limited to cases where it is necessary to guarantee the payment of principal and interest);
(i) Temporary lending of funds (limited to cases where funds are lent to the trust company which manages the trust property) where other management methods are unavailable due to the restriction of time or the size of the amount; or (j) Other transactions recognized by the Financial Services Commission as unlikely to be in a conflict of interests with the trust property when taking into account of the type, condition, and method of transaction; or
5. In the application of subparagraph 5 of paragraph (3), where, in order to manage each trust property effectively, the transaction orders of investment assets are collectively executed and the results of the execution are distributed in a fair manner based on the predetermined details of the asset distribution.
(2) The term "underwriting business prescribed by the Presidential Decree" under subparagraph 3 of Article 108 the Act shall mean the business that determines the conditions of underwriting upon the request for underwriting directly from issuers or secondary distributors. (3) The term "activities prescribed by the Presidential Decree" under subparagraph 9 of Article 108 of the Act shall mean those falling under any of the following subparagraphs:
1. Disagreeing with the request of a professional investor (excluding persons falling under each subparagraphs of Article 10 (1) of this Decree), without any justifiable cause, that
he/she be treated as a non-professional investor pursuant to the proviso of Article 9 (5) of the Act other than each subparagraph;
2. Managing trust property in violation of a trust contract;
3. Purchasing or selling financial investment products too frequently using trust property without taking into account the management instruction or strategies of a trust contract;
4. Providing beneficiaries (where a beneficiary is a corporation and other groups, etc., including the officers and employees thereof) or counter-parties (where a counter-party is a corporation and other groups, etc., including the officers and employees thereof) with benefit that has a property value or to receive such benefit from beneficiaries or counter- parties directly or indirectly in violation of the standards prescribed and publicized by the Financial Services Commission;
5. Managing trust property by collecting assets under several trust contracts, rather than managing them for each trust in accordance with each trust contract: Provided, That the same shall not apply to cases falling under Article 6 (4) 2 of this Decree;
6. Carrying out investment solicitation or running investment advertisement on the completion of trust contracts after informing that several trust property are collectively managed;
7. Making a cross-investment in specific assets using trust property through a contract with a third party or collusion, etc.;
8. Using over-the-counter derivative transactions, trust contracts, linked transactions, etc. for the purpose of avoiding any prohibition or restriction under Articles 55, 105, 106, 108 of the Act, and Article 104 (1) of this Decree;
9. Receiving any blank check or blank bill in order to secure the rights as a creditor; or
10. Others prescribed and publicized by the Financial Services Commission as likely to undermine the protection of beneficiaries or sound trade practice. Article 110 (Trust Contract)
The term "matters prescribed by the Presidential Decree" under subparagraph 10 of Article 109 shall be as follows:
1. Where a beneficiary is not decided, matters on the scope and qualifications of the person to be a beneficiary and other matters necessary for determining a beneficiary; The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. Where a beneficiary is required to indicate its intention to receive the benefits of trust, the details thereof;
3. Matters on the record and registration under Article 3 (1) of the Trust Act or the presentation and indication of the trust property under Article 3 (2) of the same Act;
4. Type of the trust property to be allocated to a beneficiary and methods and time of the allocation;
5. Matters on utility bills, repair costs and other expenses necessary for managing trust property;
6. Matters on the final calculation at the termination of a trust contract; and
7. Others prescribed and publicized by the Financial Services Commission as necessary for maintaining sound trade practice.
Article 111 (Report on Issuance of Beneficiary Certificates) (1) The term "documents prescribed by the Presidential Decree" under Article 110 (2) of the Act shall be as follows:
1. Issuance plan of beneficiary certificates;
2. Fund management plan; and
3. Trust agreement or trust deed. (2) The term "others prescribed by the Presidential Decree" under Article 110 (5) 9 of the Act shall be as follows:
1. Issuance date of beneficiary certificates; and
2. Symbol and number of beneficiary certificates. Article 112 (Purchase of Beneficiary Certificates) A trust company shall, when it purchases beneficiary certificates with its own properties pursuant to Article 111 of the Act, purchase them at the value calculated pursuant to Article 104 (2) of the Act.
Article 113 (Restrictions on Exercising Voting Rights)
(1) The term "person prescribed by the Presidential Decree as specially related to the trust company" under Article 112 (2) 1 (a) of the Act shall mean a specially-related person and co- holder under Article 141 (2) of this Decree.
(2) The term "person prescribed by the Presidential Decree" under Article 112 (2) 1 (b) of the Act shall mean a major shareholder (including a shareholder who is a specially-related person of the largest shareholder; hereafter in this Article, the same shall apply) of a trust company. (3) The term "relation prescribed by the Presidential Decree" under Article 112 (2) 2 (b) of the Act shall mean the relation as a major shareholder of a trust company. Article 114 (Disclosure of Exercise of Voting Rights) (1) Disclosure of exercise of voting rights under Article 112 (7) of the Act shall be made through methods falling under either of the following subparagraphs:
1. A trust company shall, when it intends to exercise voting rights of the stocks issued by a corporation that is a stock-listed corporation, disclose the exercise of voting rights through the securities market five days preceeding the date of a general meeting of shareholders; or
2. A trust company shall, when it intends to exercise voting rights of the stocks issued by a corporation that is not a stock-listed corporation, disclose the exercise of voting rights through the methods falling under each subparagraph of Article 93 (1) of this Decree in order to make it available to the public.
(2) Where it is difficult to make a disclosure under paragraph (1) five days preceding the date of a general meeting of shareholders, including cases where specific contents of subject matter at a general meeting of shareholders are not determined five days preceding the date of a general meeting of shareholders, a trust company shall disclose such circumstance preceding the date of a general meeting of shareholders and disclose the exercise of voting rights at the general meeting of shareholders within five days of the date of the general meeting of shareholders through the methods under paragraph (1). Article 115 (Access to and Disclosure of Books and Documents) (1) The term "reasonable ground to do so as prescribed by the Presidential Decree" under the latter part of Article 113 (1) of the Act shall mean those falling under any of the following subparagraphs. In this case, a trust company shall notify its beneficiaries in writing of the fact The Enforcement Decree of the Financial Investment Services and Capital Market Act that the access to and disclosure of books and documents are unavailable, and the reasons therefor:
1. Where it is likely that a person who is provided with the books and documents containing details of the management of trust property will use such information in transactions or business, or provide such information to another person;
2. Where it is clearly recognized that providing the books and documents containing details of the management of trust property causes damages to other beneficiaries; or
3. Where it is impractical to meet the request of beneficiaries for accessing the books and documents on the trust property under a trust contract due to causes such as the expiration of the period to keep the books and documents under Article 62 (1) of this Decree. (2) A beneficiary may request access to or receipt of the certified or abridged copies of the books and documents falling under each of the following subparagraphs:
1. List of trust properties;
2. Financial statements and the addenda thereof; and
3. Details of the management of trust property. Article 116 (Delegation of Establishing Accounting Standards) The term "civilian corporation or group as prescribed by the Presidential Decree" under the former part of Article 114 (2) of the Act shall be the Korea Accounting Institute (hereinafter referred to as "Korea Accounting Institute") under Article 7-2 (1) of the Enforcement Decree of the Act on External Audit of Stock Companies, which is an incorporated association. Article 117 (Exemption from Accounting Audit)
The term "cases prescribed by the Presidential Decree" under the proviso of Article 114 (3) of the Act shall mean those falling under either of the following subparagraphs:
1. A money trust falling under any of the following items: (a) A specified money trust;
(b) A money trust guaranteeing profits (excluding money trusts guaranteeing only the compensation for losses); or
(c) A money trust whose entrusted principal is not more than 30 billion won as of the reference date of accounting audit; or
2. A trust of the properties falling under Articles 103 (1) 2 through 103 (1) 7 of the Act. Article 118 (Appointment of Accounting Auditor)
(1) A trust company shall, when it intends to appoint or dismiss an accounting auditor, obtain an approval (where an audit committee is established, referring to the resolution made by the audit committee) from an auditor.
(2) Accounting principles for trust property shall be prescribed and publicized by the Financial Services Commission after the consultation of the Securities and Futures Commission. (3) The authority of accounting auditors with respect to the accounting audit of trust property shall be as provided for in the Act and in the Act on External Audit of Stock Companies. (4) An accounting auditor shall, when it completes an accounting audit of a trust property, prepare accounting audit reports containing the matters falling under each of the following subparagraphs, and submit them to the trust company without delay:
1. Balance sheet of the trust property;
2. Income statement of the trust property;
3. Profit calculation sheet of the trust property; and
4. Details of transactions between the trust company and its specially-related persons. (5) A trust company shall, when it receives accounting audit reports from an accounting auditor, file them with the Financial Services Commission without delay. (6) A trust company shall allow beneficiaries to access accounting audit reports through the methods prescribed and publicized by the Financial Services Commission. (7) Costs of accounting audit shall be paid from the trust property subject to the accounting audit.
Part 3 Issuance and Distribution of Securities
Chapter 1 Registration Statement
Article 119 (Securities Exempted from Application of Chapter 1 of Part 3 of the Act) (1) The term "Acts prescribed by the Presidential Decree" under Article 118 of the Act shall mean those falling under each of the following subparagraphs:
1. The Bank of Korea Act; The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. The Korea Development Bank Act;
3. The Industrial Bank of Korea Act;
4. The Export-Import Bank of Korea Act;
5. The Agricultural Cooperative Federation Act (limited to the National Agricultural Cooperative Federation);
6. The Fisheries Cooperatives Act (limited to the National Federation of Fisheries Cooperatives);
7. The Depositor Protection Act;
8. The Act on the Efficient Disposal of Non-performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation;
9. The Korea Land Corporation Act;
10. The Korea Highway Corporation Act;
11. The Korea Housing Finance Corporation Act;
12. The Korea National Housing Corporation Act;
13. The Korea Electric Power Corporation Act;
14. The Korea Petroleum Development Corporation Act;
15. The Korea Gas Corporation Act;
16. The Korea Coal Corporation Act;
17. The Korea Water Resources Corporation Act;
18. The Korea Agricultural and Rural Infrastructure Corporation and Farmland Management Fund Act;
19. The Agricultural and Fishery Marketing Corporation Act;
20. The Korea Airports Corporation Act;
21. The Incheon International Airport Corporation Act;
22. The Port Authority Act;
23. The Korea Container Terminal Authority;
24. The Korea National Tourism Organization Act;
25. The Korea Railroad Corporation Act;
26. The Korea Rail Network Authority Act;
27. The Korea Environmental and Resources Corporation Act;
28. The Environmental Management Corporation Act;
29. The Act on the Establishment and Management of Sudokwon Landfill Site Management Corporation; and
30. The Promotion of Small and Medium Enterprises and Encouragement of Purchase of Their Products Act.
(2) The term "securities recognized by the Presidential Decree" under Article 118 of the Act shall mean those falling under each of the following subparagraphs:
1. Debt securities whose payments of principal and interest are guaranteed by the Government or municipal governments;
2. Where the Government or municipal governments sell the securities held through secondary distribution after consulting with the Financial Services Commission in advance, the securities thereof; and
3. Bonds issued by local public enterprises established for the purpose of building and operating an urban railway and developing houses among the bonds issued pursuant to Articles 68 (1) through 68 (6) of the Local Public Enterprises Act. Article 120 (Regulated Activities on Public Offering or Secondary Distribution) (1) A registration statement of public offering or secondary distribution shall be filed in cases falling under each of the following subparagraphs pursuant to Article 119 (1) of the Act:
1. Where the aggregate amount of the value of securities subject to a public offering and the value of the same type of securities subject to public offerings which have been made without filing any registration statement for the past one year (where reports for the public offering or secondary distribution of the same type of securities have been made during the same period, referring to the period after such reports have been made) or the aggregate amount of the value of securities subject to a secondary distribution and the value of the same type of securities subject to the secondary distributions [where a minority contributor (excluding the issuer or underwriter of such securities) makes a secondary distribution through over-the-counter transactions under Article 178 of this Decree, excluding the value of such secondary distribution] which have been made without filing any registration statement for the last one year is not less than one billion won, respectively; and
2. Where the aggregate amount of each offer is not less than one billion won when the amount is calculated pursuant to Article 11 (1) of this Decree. The Enforcement Decree of the Financial Investment Services and Capital Market Act (2) The term "minority contributor" under subparagraph 1 of paragraph (1) shall mean a person who holds the smaller amount of equity securities between the amount equivalent to 1/100 of the total number of equity securities issued by the corporation concerned and 300 million won: Provided, That the largest shareholder of the corporation and his/her specially- related persons shall not be regarded as a minority contributor. Article 121 (Shelf Registration Statement)
(1) The securities that are subject to filling a shelf registration statement (hereinafter referred to as "shelf registration statement") under Article 119 (2) of the Act shall mean those falling under each of the following subparagraphs:
1. Corporate bonds (excluding convertible bonds, bonds with warrants, participating bonds and exchangeable bonds which are entitled to claim for the exchange with stock certificates);
2. Derivative-linked securities; and
3. Collective investment securities (hereafter in this Chapter, referred to as "open-end collective investment securities") falling under either of the following items: (a) Collective investment securities of a collective investment scheme which is not a closed-end collective investment scheme; or
(b) Foreign collective investment securities under Article 279 (1) of the Act as equivalent to those falling under item (a).
(2) The prospective period for the issuance of a shelf registration statement shall be not less than two months and up to one year from the date when the shelf registration statement has taken effect: Provided, That in the case of open-end collective investment securities, the existence period prescribed in the collective investment agreement concerned (where an existence period is not prescribed in the collective investment agreement, the period shall be indefinite) shall be regarded as the prospective period for the issuance. (3) A person who has filed a shelf registration statement shall issue the securities at least three times during a prospective period.
(4) A person who is permitted to file a shelf registration statement shall be a person meeting all the requirements falling under either of the following subparagraphs: Provided, That the same shall not apply to the issuance of open-end collective investment securities:
1. A person falling under any of the following items shall have the record of making a public offering or secondary distribution for the securities belonging to the same type among the securities under subparagraph 1 or 2 of paragraph (1) during the last one year: (a) A person who has filed annual reports or semi-annual reports under Article 160 of the Act (hereinafter referred to as "semi-annual report") during the last one year; or (b) A financial investment firm who has filed business reports under Article 33 (1) of the Act during the last one year;
2. The auditor's opinion on the financial statements of the latest business year shall be a qualified or unqualified opinion; and
3. A person shall not have any record of being subject to the measures to restrict issuance of securities taken by the Financial Services Commission during the last one year. (5) Notwithstanding paragraph (4), a corporation established or surviving as a result of a split- off or split-and-merger may file a shelf registration statement when it meets both of the following requirements:
1. A corporation before the split-off or split-and-merger shall meet the requirements under paragraph (4); and
2. The auditor's opinion on the financial statements of a corporation established as a result of split-off or split-and-merger shall be a qualified or unqualified opinion during the latest business year.
Article 122 (Additional Documents of Shelf Registration Statement) (1) The term "securities prescribed by the Presidential Decree" under the latter part of Article 119 (2) of the Act shall be open-end collective investment securities. (2) Additional documents of shelf registration statement under the latter part of Article 119 (2) of the Act (hereinafter referred to as "additional documents of shelf registration statement") shall include the matters falling under each of the following subparagraphs:
1. Signatures of the representative director and directors in charge of the registration under Article 119 (5) of the Act on the matters falling under each of the subparagraphs of Article 124 of this Decree: Provided, That the signatures may be omitted in cases prescribed by the Financial Services Commission as unlikely to undermine the protection of investors;
2. Outline of the public offering or secondary distribution;
3. Prospective period and amount for issuance on the shelf registration statement; The Enforcement Decree of the Financial Investment Services and Capital Market Act
4. The records of the public offering or secondary distribution during the prospective period for issuance;
5. Underwriter's opinion (limited to cases where there is any underwriter) on securities subject to the public offering or secondary distribution; and
6. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(3) Indication on additional documents of shelf registration statement shall not change any indication on the main documents of shelf registration statement (including the amendment statement under Article 122 (1) of the Act).
(4) In addition to the matters prescribed in paragraphs (1) through (3), others necessary for the form of additional documents of shelf registration statement, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission. Article 123 (Scope of Forward-looking Information) The term "others prescribed by the Presidential Decree" under Article 119 (3) 4 of the Act shall mean the evaluation on the suitability of forward-looking information by a person who receives the request for assessing the forward-looking information under Articles 119 (3) 1 through 119 (3) 3 of the Act.
Article 124 (Confirmation and Review by Representative Director on Registration Statement)
The term "matters prescribed by the Presidential Decree" under Article 119 (5) of the Act shall be as follows:
1. The fact that a registration statement under Article 119 (3) of the Act (hereinafter referred to as "registration statement") does not contain any misstatement or omission of material matters;
2. The fact that any registration statement is not made to mislead a person who uses information in the registration statement;
3. The fact that the information in the registration statement is confirmed and reviewed with due diligence; and
4. In the case of a company subject to external audit under Article 2 of the Act on External Audit of Stock Companies, the fact that the internal accounting management system is operated pursuant to Articles 2-2 and 2-3 of the same Act. Article 125 (Entries and Accompanying Documents of Registration Statement) (1) A registration statement (excluding collective investment securities and asset-backed securities) under Article 119 (1) of the Act shall include the matters falling under each of the following subparagraphs:
1. Signatures of the representative director and directors in charge of the registration under Article 119 (5) of the Act on the matters of each subparagraph of Article 124 of this Decree;
2. Matters on the public offering or secondary distribution: (a) General matters on the public offering or secondary distribution; (b) Matters on the rights of the securities subject to the public offering or secondary distribution;
(c) Matters on the investment risks accompanied by the securities subject to the public offering or secondary distribution;
(d) Matters on the underlying assets of the securities (limited to derivative-linked securities) subject to the public offering or secondary distribution; (e) Opinions of the underwriters (limited to cases where any underwriter exists) on the securities subject to the public offering or secondary distribution; (f) Assessment opinion prepared by analysis institutions (hereafter in this Article, referred to as "securities analysis institutions") that meet the requirements prescribed and publicized by the Financial Services Commission in the case where a stock-unlisted corporation (including those in the process of establishment) files a registration statement on public offering or secondary distribution (hereinafter referred to as "direct public offering") of equity securities (including securities deposit receipts related thereto) without going through underwriting conducted by an underwriter: Provided, That the assessment opinion may be excluded in cases prescribed and publicized by the Financial Services Commission;
(g) Purpose of funds; and
The Enforcement Decree of the Financial Investment Services and Capital Market Act (h) Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors; and
3. Matters on the issuer (in the case of a corporation in the process of establishment, referring to the matters prescribed and publicized by the Financial Services Commission): (a) Outline of corporations;
(b) Contents of business;
(c) Matters on the financial status;
(d) Auditor's opinion prepared by an accounting auditor; (e) Matters on the affiliates and organizations of the corporation, such as board of directors, etc.;
(f) Matters on shareholders;
(g) Matters on officers and employees;
(h) Matters on the contents of transactions with interested persons; and (i) Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(2) The registration statement under paragraph (1) shall accompany documents falling under each of the following subparagraphs: Provided, That where the information of the accompanying documents can be verified through administrative data matching under Article 21 (1) or 22-2 (1) of the E-Government Act, the accompanying documents may be replaced with such verification:
1. Articles of incorporation or those equivalent thereto, which provide for the operation of organization and the rights and obligations of investors;
2. Copies of minutes (where the securities are issued in accordance with Article 418 (2) of the Commercial Act, including specific managerial purpose with respect to the issuance of securities, relations between an underwriter and persons other than the shareholders, and grounds for selecting persons other than the shareholders) from a general meeting of shareholders (referring to general meetings of promoters in the case of a corporation in the process of establishment) or a board of directors meeting that resolves to issue securities, or other documents proving the resolution on issuance;
3. Certified copies of corporate register or those equivalent thereto, proving the establishment of the corporation concerned;
4. Where it is necessary to obtain any permission, authorization, or approval from an administrative agency with respect to the issuance of securities, documents proving that such permission, authorization, or approval has been obtained;
5. Where any underwriting contract of securities is entered into, copies of the contract;
6. Where the issuer intends to list securities falling under any of the following items on the securities market, results from the Exchange of the preliminary listing review that such securities meet listing standards:
(a) Equity securities (excluding collective investment securities); (b) Securities deposit receipts (limited to those related to equity securities); and (c) Derivative-linked securities (limited to those indicating the right to make transactions of purchasing or selling securities under item (a) or (b) or giving and receiving money in accordance with the predetermined methods by linking with the prices of the securities under item (a) or (b) traded on the securities market or foreign securities markets, or the fluctuation of the index based thereon);
7. Where the issuer intends to use a preliminary prospectus (hereinafter referred to as "preliminary prospectus") under Article 124 (2) 2 of the Act, the preliminary prospectus;
8. Where the issuer intends to use a simple prospectus (hereinafter referred to as "simple prospectus") under Article 124 (2) 3 of the Act, the simple prospectus;
9. In the case of direct public offering, documents falling under each of the following items: (a) Assessment opinion prepared by securities analysis institutions; (b) A memorandum from the representative of the securities analysis institutions stating that he/she shall not divulge any secret regarding the assessment under item (a); and (c) Copies of bankbooks of brokers or dealers to receive deposits for subscription; and
10. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(3) In addition to the matters prescribed in paragraphs (1) and (2), other necessary matters on the form of a registration statement, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 126 (Entries and Accompanying Documents of Shelf Registration Statement) The Enforcement Decree of the Financial Investment Services and Capital Market Act (1) A shelf registration statement (excluding collective investment securities) shall include the matters falling under each of the following subparagraphs:
1. Signatures of the representative director and directors in charge of the registration under Article 119 (5) of the Act on the matters falling under each of the subparagraphs of Article 124 of this Decree;
2. Prospective period for the issuance;
3. Prospective amount of the issuance;
4. Matters on the issuer under Article 125 (1) 3 of this Decree; and
5. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(2) The shelf registration statement under paragraph (1) shall accompany the documents falling under each of the following subparagraphs: Provided, That where the information of the accompanying documents can be verified through administrative data matching under Article 21 (1) or 22-2 (1) of the E-Government Act, the accompanying documents may be replaced with such verification:
1. Articles of incorporation or those equivalent thereto, which prescribe the operation of the organization and the rights and obligations of investors;
2. Minutes from a board of directors meeting that resolves to report securities using a shelf registration statement, or copies of the documents proving such resolution;
3. Certified copies of corporate register, or those equivalent thereto, which prove the establishment of the corporation concerned;
4. Audit reports prepared by an accounting auditor;
5. Where there is an obligation to prepare consolidated financial statements under subparagraph 2 of Article 1-2 of the Act on External Audit of Stock Companies (hereinafter referred to as "consolidated financial statements"), audit reports on the consolidated financial statements prepared by an accounting auditor; and
6. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(3) In addition to the matters prescribed in paragraphs (1) and (2), other matters necessary for the form of a shelf registration statement, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 127 (Entry of Registration Statement of Collective Investment Securities) (1) A registration statement of collective investment securities shall include the matters falling under each of the following subparagraphs pursuant to Article 119 (6) of the Act:
1. Signatures of representative director and directors in charge of the registration under Article 119 (5) of the Act on the matters falling under each subparagraph of Article 124 of this Decree;
2. Matters falling under each of the following subparagraphs with respect to the public offering or secondary distribution:
(a) General matters on the public offering or secondary distribution; (b) Matters on the rights of the collective investment securities subject to the public offering or secondary distribution;
(c) Matters on the investment risks incurred from the acquisition of the collective investment securities subject to the public offering or secondary distribution; (d) Opinions of underwriters (limited to cases where any underwriter exists) on the collective investment securities subject to the public offering or secondary distribution; and
(e) Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors; and
3. Matters on collective investment scheme: (a) Name of the collective investment scheme;
(b) Matters on the objective, direction and strategy of investment; (c) Matters on bonuses, sales commissions, sales fees and other costs; (d) Matters on contributions (excluding investment trusts); (e) Matters on financial status;
(f) Matters on the collective investment manager (in the case of investment companies, including the matters on promoters and supervisory directors); (g) Matters on fund managers;
(h) Matters on the management of collective investment properties; (i) Matters on the sale and redemption of collective investment securities; (j) Matters on the appraisal and disclosure of collective investment properties; (k) Matters on the distribution of profit and loss and the taxation; The Enforcement Decree of the Financial Investment Services and Capital Market Act (l) Matters on the trust company and general fund administrator (limited to cases where a general fund administrator exists);
(m) Matters on the delegation under Article 42 of the Act (limited to cases where any delegation is made); and
(n) Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(2) The registration statement of collective investment securities under paragraph (1) shall accompany documents falling under each of the following subparagraphs: Provided, That where the information of the accompanying documents can be verified through administrative data matching under Article 21 (1) or 22-2 (1) of the E-Government Act, the accompanying documents may be replaced with such verification:
1. A collective investment agreement (including the addenda thereof);
2. Certified copies of corporation register, or those equivalent thereto, which prove the establishment of the corporation concerned (excluding investment trusts, investment limited partnerships and investment undisclosed associations);
3. Copies of documents proving the payment of contributions (excluding investment trusts);
4. Copies of the delegation contract (including the addenda thereof) that is entered into with a person falling under each of the following items: (a) A collective investment manager (excluding investment trusts and investment undisclosed association);
(b) A trust company;
(c) A general fund administrator (limited to cases where delegation contracts are entered into with a general fund administrator); and
(d) A delegatee under Article 42 of the Act (limited to cases where a delegation contract is entered into with the delegatee);
5. Where any sales contract or entrustment sales contract is entered into with a broker or dealer, the copies thereof (including the addenda thereof);
6. Where any underwriting contract for collective investment securities is entered into, the copies thereof; and
7. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(2) In addition to the matters prescribed in paragraphs (1) and (2), other necessary matters on the form of a registration statement of collective investment securities, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission. Article 128 (Entry and Accompanying Document of Registration Statement of Asset- backed Securities)
(1) A registration statement of asset-backed securities shall include the matters falling under each of the following subparagraphs pursuant to Article 119 (6) of the Act:
1. Signatures of the representative director and directors under Article 119 (5) of the Act on the matters falling under each of the subparagraphs of Article 124 of this Decree;
2. Matters falling under each of the following items with respect to the public offering or secondary distribution:
(a) General matters on the public offering or secondary distribution; (b) Contents of the rights of asset-backed securities subject to the public offering or secondary distribution;
(c) Investment risks incurred from the acquisition of asset-backed securities subject to the public offering or secondary distribution;
(d) Opinions of the issuers (limited to cases where there is any issuer) on the asset- backed securities subject to the public offering or secondary distribution); and (e) Purpose of funds;
3. Matters falling under each of the following items with respect to the issuer: (a) Outline of the company;
(b) Matters on officers; and
(c) Matters on delegation;
4. Matters falling under each of the following items with respect to originators under subparagraph 2 of Article 2 of the Asset-Backed Securitization Act (hereinafter referred to as "originator"):
(a) Outline of originators;
(b) Contents of the business;
(c) Matters on financial status; and
(d) Matters on officers;
The Enforcement Decree of the Financial Investment Services and Capital Market Act
5. Matters falling under each of the following subparagraphs with respect to securitization assets:
(a) Detailed list of securitization assets by type; (b) Assessment of securitization assets; and
(c) Methods and detailed plans including transferring securitization assets, etc.;
6. Matters falling under each of the following subparagraphs with respect to the asset- backed securitization plans under Article 3 of the Asset-Backed Securitization Act (hereinafter referred to as "asset-backed securitization plan"): (a) Specific structure of asset-backed securitization plans; (b) Plans, etc. to issue and repay asset-backed securities; (c) Caretaker under Article 10 of the Asset-Backed Securitization Act (hereinafter referred to as "caretaker") and methods of managing assets; and (d) Plans to borrow and manage funds; and
7. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(2) The registration statement of asset-backed securities under paragraph (1) shall include the documents falling under each of the following subparagraphs. Provided, That where the information of the accompanying documents can be verified through administrative data matching under Article 21 (1) or 22-2 (1) of the E-Government Act, the accompanying documents may be replaced with such verification:
1. Documents falling under Articles 125 (2) 1 through 125 (2) 4 of this Decree;
2. Copies of the delegation contract of asset management;
3. Copies of delegation contract; and
4. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(3) In addition to the matters prescribed in paragraphs (1) through (2), others necessary for the form of a registration statement of asset-backed securities, the preparation thereof, etc. shall prescribed and publicized by the Financial Services Commission. Article 129 (Entry of Registration Statement of Securities and Special Rules Governing Accompanying Document)
Notwithstanding Articles 125 through 128 of this Decree, the Financial Services Commission may, when it recognizes that it is necessary for the protection of investors, prescribe and publicize different entries of a registration statement and accompanying documents after taking into account the nature of the issuers including foreign corporations, etc. and the classification and type of securities falling under each subparagraph of Article 4 (2) of the Act. Article 130 (Amendment of Entries of Registration Statement) (1) The term "material matters prescribed by the Presidential Decree" under the latter part of Article 122 (3) of the Act shall mean matters falling under either of the following subparagraphs:
1. In the case of securities other than collective investment securities, matters falling under any of the following items:
(a) Conditions for issuance including value of public offering or secondary distribution and issue rate, etc.;
(b) Reference date of allocation, subscription period or date of payment; (c) Purpose of funds;
(d) Underwriter, guarantee institution, or trustee company; or (e) Others prescribed and publicized by the Financial Services Commission as likely to significantly affect reasonable investment decisions of investors or the value of the securities concerned, etc.;
2. In the case of collective investment securities, matters falling under any of the following items:
(a) Conditions for issuance including value of public offering or secondary distribution, prospective period and amount for issuance, etc.; (b) Underwriter (limited to cases where there is any underwriter); (c) Where any matter registered pursuant to Article 182 (1) of the Act is changed; or (d) Others prescribed and publicized by the Financial Services Commission as likely to significantly affect reasonable investment decisions of investors or the value of the securities concerned, etc.
(2) The term "cases prescribed by the Presidential Decree" under the latter part of Article 122 (3) of the Act shall mean those falling under any of the following subparagraphs: The Enforcement Decree of the Financial Investment Services and Capital Market Act
1. Where any entry or indication of a registration statement is unclear and therefore likely to materially mislead any person who uses such entry or indication;
2. Where any entry or indication is exaggerated by omitting information which is unfavorable to the issuer (in the case of beneficiary certificates of an investment trust and equity securities of an investment undisclosed association, referring to the investment trust and the investment undisclosed association) or emphasizing information which is favorable to the issuer;
3. In the case of securities other than collective investment securities, cases where a fact falling under any of the following items occurs:
(a) Where financial statements or semi-annual reports and quarterly reports under Article 160 of the Act (hereinafter referred to as "quarterly reports") are established; (b) Where any business objective of the issuer is changed; (c) Where any contract for the transfer, takeover or merger of business is entered into; (d) Where an issuer becomes a party to any lawsuit that has a significant impact on the management or properties, etc. of the issuer;
(e) Where any outstanding note or check is dishonored or any current account transaction with a bank is suspended or prohibited;
(f) Where all or an important part of business operation is suspended; (g) Where the workout process is applied for in accordance with the Debtor Rehabilitation and Bankruptcy Act; or
(h) Where any reason for dissolution in accordance with this Act, the Commercial Act, and other Acts occurs; or
4. In the case of collective investment securities, cases where a fact falling under any of the following items occurs:
(a) Where the financial statements of the latest fiscal year are established; (b) Where any contract for merger between collective investment schemes is entered into; or
(c) Where any claim that significantly affects collective investment properties, etc. is made.
(3) The term "securities prescribed by the Presidential Decree" under the latter part of Article 122 (4) of the Act shall mean open-end collective investment securities.
Article 131 (Preparation and Disclosure of Prospectus) (1) A prospectus (hereinafter referred to as "prospectus") under Article 123 (1) of the Act shall be prepared with title and text, respectively. (2) The title of a prospectus shall contain matters falling under each of the following subparagraphs:
1. Effective date of the registration of securities under Articles 119 (1) and 119 (2) of the Act (hereinafter referred to as "registration of securities");
2. Amount of public offering or secondary distribution;
3. Subscription period;
4. Payment period;
5. Place to access copies of the registration statement of securities and the prospectus;
6. Where the stabilization under Article 176 (3) 1 of the Act (hereinafter referred to as "stabilization") or the market making under Article 176 (3) 2 of the Act (hereinafter referred to as "market making") is conducted, the effect that such stabilization or the market making may be conducted on the securities market;
7. The effect that part of the entries in the registration statement of securities may be altered until a date preceding the subscription date (in the case of open-end collective investment securities, such alteration is permitted even after the subscription date);
8. The effect that the Government does not recognize the entries in a registration statement of securities as true or correct, or does not guarantee or approve the value of the securities concerned; and
9. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(3) The text of a prospectus shall contain matters falling under each of the following subparagraphs:
1. Where a registration statement is filed pursuant to Article 125 (1) of this Decree, the matters falling under each subparagraph of Article 125 (1) of this Decree;
2. Where additional documents of a shelf registration statement are filed pursuant to the latter part of Article 119 (2) of the Act, the matters falling under each subparagraph of Article 122 (2) and Article 126 (1) 4 of this Decree; The Enforcement Decree of the Financial Investment Services and Capital Market Act
3. Where a registration statement is filed pursuant to Article 127 (1) of this Decree, the matters falling under each subparagraph of Article 127 (1) of this Decree;
4. Where a registration statement is filed pursuant to Article 128 (1) of this Decree, the matters falling under each subparagraph of Article 128 (1) of this Decree; and
5. Where a registration statement is filed pursuant to Article 129 of this Decree, the matters prescribed and publicized by the Financial Services Commission. (4) Where any entry of a registration statement is not amended until the registration of securities takes effect, a preliminary prospectus filed pursuant to Article 125 (2) 7 of this Decree may be substituted for a prospectus after the registration of securities comes into effect. In such a case, the title of the preliminary prospectus shall be changed to the title of the prospectus containing the matters specified in each subparagraph of paragraph (2). (5) The term "entries prescribed by the Presidential Decree" under the proviso of Article 123 (2) of the Act shall mean those falling under either of the following subparagraphs:
1. Matters on a military secret under Article 2 of the Military Secrets Protection Act; or
2. Matters confirmed by the Financial Services Commission as related to the business and operation of an issuer.
(6) The term "collective investment securities prescribed by the Presidential Decree" under the main sentence of Article 123 (3) of the Act other than each subparagraph shall mean open- end collective investment securities.
(7) In addition to the matters prescribed in paragraphs (1) through (6), other necessary matters on the form of a prospectus, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 132 (Person Exempted from Distributing Prospectus) The term "others prescribed by the Presidential Decree" under the former part of Article 124 (1) of the Act other than each subparagraph shall mean persons falling under either of the following subparagraphs:
1. A person falling under Articles 11 (1) 1 (c) through 11 (1) 1 (f) of this Decree and each item of Article 11 (1) 2 of this Decree; or
2. A person who gives notice, in writing, that he/she refuses to receive a prospectus. Article 133 (Preparation of Preliminary Prospectus)
(1) The title of a preliminary prospectus shall contain the matters falling under each of the following subparagraphs pursuant to Article 124 (2) 2 of the Act:
1. Matters falling under Articles 131 (2) 2 through 131 (2) 6 of this Decree;
2. The effect that the registration statement of securities filed with the Financial Services Commission has yet to take effect, and that part of the entries of the statement may be altered by the date when the registration comes into force; and
3. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(2) Article 123 (2) of the Act and Articles 131 (1) and 131 (3) of this Decree shall apply to preparation of a preliminary prospectus. In such a case, a "prospectus" shall be deemed a "preliminary prospectus."
(3) In addition to the matters prescribed in paragraphs (1) and (2), other necessary matters on the form of a preliminary prospectus, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 134 (Preparation of Simple Prospectus)
(1) A simple prospectus shall enter or indicate the matters under the classifications falling under each of the following subparagraphs pursuant to Article 124 (2) 3 of the Act:
1. Where a registration statement has yet to come into force, matters falling under each of the following items:
(a) Matters falling under Articles 131 (2) 2 through 131 (2) 6 of this Decree; (b) The effect that the registration statement filed with the Financial Services Commission has yet to take effect, and that part of the entries may be changed by the date when the registration comes into force;
(c) Where an issuer intends to list securities falling under each item of Article 125 (2) 6 of this Decree, results from the Exchange of the preliminary listing review that such securities meet listing standards;
(d) Matters to be indicated in the text of a prospectus pursuant to Article 131 (3) of this Decree, which are prescribed and publicized by the Financial Services Commission as necessary for the protection of investors; and
The Enforcement Decree of the Financial Investment Services and Capital Market Act (e) The effect that a prospectus or simple prospectus provides the specific matters on the issuer (in the case of beneficiary certificates of an investment trust and equity securities of an investment undisclosed association, referring to the investment trust and the investment undisclosed association) and the public offering or secondary distribution as reference; and
2. After a registration statement comes into force, matters falling under both of the following items:
(a) Matters falling under Articles 131 (2) 1 through 131 (2) 8 of this Decree; and (b) Matters falling under items (c) through (e) of subparagraph 1. (2) An issuer (in the case of beneficiary certificates of an investment trust and equity securities of an investment undisclosed association, referring to the investment trust and the investment undisclosed association) shall not, when it enters or indicates the matters falling under each subparagraph of paragraph (1), omit any information unfavorable to the issuer or shall not extract only information favorable to the issuer. (3) In addition to the matters prescribed in paragraphs (1) and (2), other necessary matters on the form of a simple prospectus, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 135 (Persons Liable for Damages Incurred from Misstatement) (1) The term "person prescribed by the Presidential Decree" under Article 125 (1) 3 of the Act shall mean a person who holds a certificate of qualification (including any organization to which he/she belongs) such as a certified public accountant, appraiser, credit-rating specialist, attorney-at-law, patent attorney, tax accountant, etc. (2) The term "person prescribed by the Presidential Decree" under Article 125 (1) 5 of the Act shall mean an underwriter who determines the conditions, etc. of underwriting, etc. upon the request for underwriting of securities directly from issuers or secondary distributors. Article 136 (Exemption from Disclosure)
The term "details prescribed by the Presidential Decree" under the latter part of Article 129 of the Act other than each subparagraph shall mean those falling under either of the following subparagraphs:
1. Matters on a military secret under Article 2 of the Military Secret Protection Act; or
2. Matters confirmed by the Financial Services Commission as related to the business or operation of an issuer.
Article 137 (Public Offering and Secondary Distribution without Filing Registration Statement)
(1) The term "measures prescribed by the Presidential Decree" under Article 130 of the Act shall mean those falling under each of the following subparagraphs:
1. An issuer (in the case of beneficiary certificates of an investment trust and equity securities of an investment undisclosed association, referring to the investment trust and the investment undisclosed association) shall submit documents indicating its financial status and business performance to the Financial Services Commission prior to the public offering or secondary distribution. In such a case, such documents (excluding collective investment securities) shall be audited by an accounting audit or shall receive confirmation and indication of opinion by a certified public accountant under the conditions prescribed and publicized by the Financial Services Commission;
2. In the case of soliciting an offer, an issuer shall enter or indicate the matters falling under both of the following items in printed materials, etc. In such a case, the issuer shall not enter or indicate any false statement or any matter that is inconsistent with the contents of documents submitted pursuant to paragraph (1) with respect to the financial status and business performance:
(a) Matters falling under Articles 125 (1) 2 and 125 (1) 3 of this Decree (in the case of collective investment securities, referring to the matters falling under Articles 127 (1) 2 and 127 (1) 3 of this Decree, and in the case of asset-backed securities, referring to the matters falling under Articles 128 (1) 2 through 128 (1) 7 of this Decree); and (b) Matters falling under Articles 131 (2) 2 through 131 (2) 4 of this Decree;
3. An issuer shall, when it commences a public offering or secondary distribution, submit the method of soliciting an offer and matters entered or indicated in printed materials, etc. pursuant to paragraph (2) to the Financial Services Commission without delay. The same shall apply to cases where any method of soliciting an offer or any entry or indication on the The Enforcement Decree of the Financial Investment Services and Capital Market Act printed materials, etc. is changed after the commencement of the public offering or secondary distribution; and
4. An issuer shall, when the public offering or secondary distribution is completed, notify the Financial Services Commission of the results without delay. (2) Where an issuer (in the case of beneficiary certificates of an investment trust and equity securities of undisclosed association, referring to the investment trust and the investment undisclosed association; hereafter in this paragraph, the same shall apply) is required to submit documents on its financial status and business performance to the Financial Services Commission pursuant to subparagraph 1 of paragraph (1) and the issuer has submitted documents for a previous public offering or secondary distribution, the documents on its financial status and business performance may be replaced with a written document specifying the reference when the contents of the documents already submitted have not changed. (3) Where a secondary distribution of securities meets all the requirements falling under the following subparagraphs, an issuer of the securities shall be deemed to have complied with the measures under paragraph (1):
1. The secondary distribution of the securities concerned shall be carried out through over- the-counter transactions under Article 178 of this Decree;
2. The secondary distribution shall be made by minority contributors (excluding the issuer and underwriter of the securities concerned) under Article 120 (2) of this Decree; and
3. The issuer of the securities concerned shall disclose matters falling under both of the following items under the conditions prescribed and publicized by the Financial Services Commission:
(a) Matters on the issuer; and
(b) Documents indicating the matters related to the financial status and business performance of the issuer.
(4) The Financial Services Commission may prescribe and publicize specific standards for measures under paragraph (1).
Article 138 (Measures of Financial Services Commission)
The term "measures as prescribed by the Presidential Decree" under the former part of Article 132 of the Act other than each subparagraph shall mean measures falling under any of the following subparagraphs:
1. Restricting the issuance of securities up to one year;
2. Recommending the dismissal of officers;
3. Where there is any violation of the Act, reporting it or notifying investigating authorities;
4. Where there is any violation of other Acts, notifying investigating authorities or relevant institutions; or
5. Warning or caution. Chapter 2 Corporate Merger and Acquisition
Section 1 Tender Offer
Article 139 (Securities Subject to Tender Offer)
The term "stocks with voting rights or other securities prescribed by the Presidential Decree" under Article 133 (1) of the Act shall mean securities (hereinafter referred to as "stocks, etc.") falling under any of the following subparagraphs, which are related to stocks with voting rights:
1. Securities falling under any of the following items, which are issued by a stock-listed corporation:
(a) Stock certificates;
(b) Instruments representing preemptive rights;
(c) Convertible bonds;
(d) Bonds with warrants;
(e) Exchangeable bonds which are entitled to claim the exchange with the securities falling under items (a) through (d); or
(f) Derivative-linked securities whose underlying assets are the securities falling under items (a) through (e) (limited to securities which are entitled to acquire the underlying assets by exercising rights); or
The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. Securities falling under any of the following items, which are issued by a person other than stock-listed corporations under subparagraph 1: (a) Securities deposit receipts related to securities under subparagraph 1; (b) Exchangeable bonds which are entitled to claim the exchange with the securities under subparagraph 1 or securities under item (a); or (c) Derivative-linked securities (limited to securities which are entitled to acquire underlying assets by exercising rights) whose underlying assets are securities falling under subparagraph 1, or securities under item (a) or (b). Article 140 (Criteria for Calculating Number of Counter-parties of Tender Offer) (1) The term "period prescribed by the Presidential Decree" under the main sentence of Article 133 (3) of the Act shall mean the six months prior to the date on which the stocks, etc. concerned are purchased, etc. (referring to the purchase, etc. under Article 133 (2) of the Act; hereafter in this Section, the same shall apply). (2) The term "persons in excess of the number prescribed by the Presidential Decree" under the main sentence of Article 133 (3) of the Act shall mean not less than ten persons, to be calculated by adding the number of the counter-parties who purchase, etc. the stocks concerned and the number of the counter-parties who purchase, etc. the stocks concerned during the period under paragraph (1).
Article 141 (Scope of Specially-related Persons)
(1) The term "person who has a special relation prescribed by the Presidential Decree" under the main sentence of Article 133 (3) of the Act shall mean specially-related persons and joint holders.
(2) The term "joint holder" under paragraph (1) shall mean a person who agrees to conduct activities falling under any of the following subparagraphs in accordance with an agreement or contract with the principal:
1. Jointly acquiring or disposing of stocks, etc.;
2. Mutually transferring or take over stocks, etc. after acquiring such stocks, etc. jointly or separately; or
3. Jointly exercising voting rights (the rights to instruct the exercise of the voting rights).
(3) Where a specially-related person proves that the specially-related person holds less than 1,000 stocks, etc. or does not fall under paragraph (2), the specially-related person shall not be regarded as a specially-related person in the application of this Section and Section 2 of chapter 2 of Part 3.
Article 142 (Holding Equivalent to Owning)
The term "cases prescribed by the Presidential Decree as owning or its equivalent" under the main sentence of Article 133 (3) of the Act shall mean cases falling under any of the following subparagraphs:
1. Where stocks, etc. are owned for their own account regardless of the title;
2. Where any claim for the delivery of the stocks, etc. is granted in accordance with the provisions of Acts or contracts for the purchase, sale and other transactions;
3. Where voting rights (including the rights to instruct the exercise of the voting rights) of the stocks, etc. are held in accordance with the provisions of Acts or trust contracts of money, collateral contracts, and other contracts;
4. Where any right to acquire or dispose of the stocks, etc. is granted in accordance with the provisions of Acts or trust contracts of money, collateral contracts, contracts for discretionary investment advisory and other contracts;
5. Where any right to complete the purchase and sale of the stocks, etc. is obtained by entering into a unilateral promise and qualification as a purchaser is granted upon the exercise of the right;
6. Where any right whose underlying assets are stocks, etc. is obtained under the contracts under Article 5 (1) 2 of the Act and qualification as a purchaser is granted upon the exercise of the right; or
7. Where stock options are granted and the stock options grant a right to become a purchaser upon the exercise of such stock options.
Article 143 (Purchase Not Requiring Tender Offer) The term "purchase, etc. prescribed by the Presidential Decree" under the proviso of Article 133 (3) of the Act shall mean those falling under any of the following subparagraphs:
1. Purchase, etc. of stocks, etc. for the purpose of retirement; The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. Purchase of stocks upon the claims for the purchase of stocks;
3. Purchase of stocks, etc. upon the exercise of the rights of instruments representing preemptive rights, convertible bonds, bonds with warrants, or exchangeable bonds;
4. Purchase of stocks, etc. upon the exercise of the rights of derivative-linked securities;
5. Purchase of stocks, etc. from specially-related persons;
6. Purchase of stocks using the method of intermediating securities transactions in accordance with Article 78 (1) of the Act; or
7. Other purchases, etc. of stocks, etc. prescribed and publicized by the Financial Services Commission as unlikely to undermine the interest of other investors. Article 144 (Purchase Not Deemed as Purchase on Securities Market) The term "purchase prescribed by the Presidential Decree" under Article 133 (4) of the Act shall mean the purchase of stocks, etc. through the method of executing purchase or sale and settlement via the securities market after determining the item, price and quantity thereof in accordance with a contract and other agreements between a purchaser and seller. Article 145 (Publication of Tender Offer)
(1) A person shall, when it intends to publish its tender offer (hereinafter referred to as "publication of tender offer") under Article 134 (1) of the Act, make a public notice thereon in two or more nationwide newspapers among the general daily newspapers or daily newspapers specialized in economy under the Act on the Freedom of Newspapers, etc. and Guarantee of Their Functions under the conditions prescribed and publicized by the Financial Services Commission.
(2) The term "stocks, etc. prescribed by the Presidential Decree" under Article 134 (1) 2 of the Act shall mean exchangeable bonds and derivative-linked securities. (3) The term "person designated by the Presidential Decree" under Article 134 (1) 2 of the Act shall mean those falling under each of the following subparagraphs:
1. In the case of securities deposit receipts, the issuer of stocks, etc. which are the underlying assets thereof;
2. In the case of exchangeable bonds, the issuer of stocks, etc. which are subject to the exchange; and
3. In the case of derivative-linked securities, the issuer of stocks, etc. which are the underlying assets thereof.
(4) The term "others prescribed by the Presidential Decree" under Article 134 (1) 6 of the Act shall mean those falling under each of the following subparagraphs:
1. Current status of a tender offeror (hereinafter referred to as "tender offeror") under Article 134 (2) of the Act and the specially-related persons thereof (referring to the specially-related persons under Article 133 (3) of the Act; hereinafter the same shall apply);
2. Matters on a person handling tender offer affairs (hereinafter referred to as "person handling tender offer affairs") under Article 133 (2) of the Act;
3. Methods of tender offer;
4. Whether there has been any prior consultation with the officers or the largest shareholder of the issuer (referring to the issuer of stocks, etc. subject to tender offer under Article 134 (1) 2 of the Act; hereinafter referred to as "company subject to tender offer") of the stocks, etc. subject to tender offer and, if any, the details thereof;
5. Future plan for the company subject to tender offer after the completion of tender offer;
6. Where any contract for the purchase, etc. of the stocks, etc. concerned is concluded prior to the publication of tender offer, the fact and the contents thereof; and
7. Place to access tender offer statements (hereinafter referred to as "tender offer statement") under Article 134 (2) of the Act and tender offer prospectus (hereinafter referred to as "tender offer prospectus") under Article 137 (1) of the Act. Article 146 (Tender Offer Statement)
(1) A tender offer statement shall not contain any matter which is different from the entries in the publication of tender offer, or shall not omit any entry indicated in the publication of tender offer.
(2) The term "others prescribed by the Presidential Decree" under Article 134 (2) 7 of the Act shall be as follows:
1. Matters on the persons handling tender offer affairs;
2. Current status of the company subject to tender offer;
3. Methods of tender offer; The Enforcement Decree of the Financial Investment Services and Capital Market Act
4. Details of raising funds necessary for tender offer or collecting securities for exchange (in the case of borrowings, including details of creditors);
5. Status of holding and trading the stocks, etc. of the company subject to tender offer by the tender offeror and the specially-related person thereof for the last one year;
6. Whether there has been any pre-agreement with officers of the company subject to tender offer or the largest shareholder, and, if any, the contents of the agreement;
7. Future plan for the company subject to tender offer after the completion of the tender offer;
8. Where there is any broker or intermediary for tender offer, the details thereof; and
9. Place to access the tender offer statement and tender offer prospectus. (3) The term "period prescribed by the Presidential Decree" under Article 134 (3) of the Act shall be not less than 20 days and not more than 60 days. (4) A tender offer statement shall accompany the documents falling under each of the following subparagraphs: Provided, That where the information of the accompanying documents can be verified through administrative data matching under Article 21 (1) or 22-2 (1) of the E-Government Act, the accompanying documents may be replaced with such verification:
1. Where a tender offeror is an individual, the certified copies of resident registration (in the case of foreigners, documents equivalent thereto);
2. Where a tender offeror is a corporation or other group, articles of incorporation and certified copies of corporation register or documents equivalent thereto;
3. Copies of the contract for the affairs related to the tender offer;
4. Balance of the account of a financial institution which is not less than the amount necessary for tender offer and other documents to prove the secured funds;
5. Where a tender offer is made through the exchange with other securities, documents to prove that the tender offeror secures the securities to be transferred in return for the exchange: Provided, That where a tender offer is made to receive contributions in kind for the purpose of not falling under the standards under Article 8-2 (2) 2 of the Monopoly Regulation and Fair Trade Act, documents to prove the issuance of new stocks;
6. Where any registration statement under Article 119 (1) or 119 (2) of the Act is required to be filed with respect to the tender offer made by the exchange with other securities, documents indicating the contents that are the same as those in the registration statement;
7. Where it is necessary to obtain a permission, authorization or approval from the administrative authorities on the purchase, etc. of stocks, etc., documents to prove that such permission, authorization, or approval has been obtained;
8. Contents of the publication of tender offer;
9. Where any contract for the purchase of stocks, etc. is concluded prior to the publication of the tender offer, copies of the contract; and
10. Others prescribed and publicized by the Financial Services Commission as necessary for confirmation of the entries of the tender offer statement. (5) In addition to the matters prescribed in paragraphs (1) through (4), other necessary matters on the form of a tender offer statement, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 147 (Prohibition on Modification of Tender Offer Conditions) The term "tender offer conditions prescribed by the Presidential Decree" under the proviso of Article 136 (3) of the Act shall mean those falling under any of the following subparagraphs:
1. Reduction of tender offer period;
2. Alteration of the type of compensation to be paid to tendering shareholders (hereafter in this subparagraph, referred to as "tendering shareholder") under Article 139 (4) of the Act: Provided, That the same shall not apply to cases where any type of compensation is added which the tendering shareholders are able to select; or
3. Modification of tender offer conditions leading to an extension of the payment period of purchase amount: Provided, That the same shall not apply to cases falling under any of the following items:
(a) Where the arithmetic average of prices (based on closing prices) of the specific stocks, etc. formed in the securities markets for three days before the submission of the amendment statements under Article 136 (1) of the Act exceeds 90/100 of tender offer prices, or where there is a competing tender offer (hereinafter referred to as "competing tender offer") under Article 139 (1) of the Act, the increase of purchase price; The Enforcement Decree of the Financial Investment Services and Capital Market Act (b) Where there is any change in the total number of stocks, etc. concerned after the publication of tender offer, or where there is a competing tender offer, the increase of the number of stocks, etc. to be purchased; or
(c) Where there is a competing tender offer, the extension of tender offer period (limited to the date on which the competing tender offer period expires). Article 148 (Preparation of Tender Offer Prospectus) (1) A tender offer prospectus shall contain the matters falling under each subparagraph of Article 134 (2) of the Act pursuant to Article 137 (1) of the Act: Provided, That where the tender offeror is a stock-listed corporation, the matters prescribed and publicized by the Financial Services Commission may be excluded.
Article 149 (Presentation of Opinion on Tender Offer) (1) An issuer of stocks, etc. whose tender offer statement is filed shall, when it presents its opinion on the tender offer pursuant to Article 138 (1) of the Act, present its opinion by means of advertisements, letters (including e-mail messages) and other documents. (2) The presentation of opinion under paragraph (1) shall contain the position of an issuer such as proposition, opposition or neutrality to a tender offer and the reasons therefor, and where there is any material change in the opinion after presenting the opinion, the issuer shall publish the fact under the conditions prescribed in paragraph (1) without delay. Article 150 (Exceptional Withdrawal of Tender Offer) The term "cases prescribed by the Presidential Decree" under the proviso of Article 139 (1) of the Act shall mean those falling under either of the following subparagraphs:
1. Where any bill or check issued by a tender offeror is dishonored, or any current account transaction with a bank is suspended or prohibited; or
2. Where, as a condition in the tender offer registration statement, it is publicly announced at the time of the publication of the tender offer that the tender offer may be withdrawn when any cause falling under the following subparagraphs occurs to the company subject to the tender offer, and where such cause occurs:
(a) Merger, split-off, split-and-merger, comprehensive transfer or exchange of stocks;
(b) Transfer or takeover of important business or assets falling under any of the subparagraphs of Article 171 (1) of this Decree;
(c) Dissolution;
(d) Bankruptcy;
(e) Dishonor of bills or checks issued;
(f) Suspension or prohibition of current account transaction with a bank; (g) De-listing of stocks, etc; or
(h) Where damages equivalent to not less than 10/100 of the total assets in the latest business year occur due to natural disasters, calamities, wars, accidents, fire or others disasters.
Article 151 (Acquisition of Stocks through Methods Other Than Tender Offer) The term "cases prescribed by the Presidential Decree" under the proviso of Article 140 of the Act shall mean those falling under either of the following subparagraphs:
1. Where a contract to the purchase, etc. of the stocks, etc. concerned is concluded prior to the publication of tender offer and the contract is not subject to tender offer under Article 133 (1) of the Act when concluding the contract, and the content of the contract is indicated in the publication of tender offer and tender offer statement; or
2. Where a person handling tender offer affairs is delegated with the purchase, etc. of stocks, etc. by a person other than the tender offeror and the specially-related persons thereof. Article 152 (Measures of Financial Services Commission) The term "measures prescribed by the Presidential Decree" under the former part of Article 146 (2) of the Act other than each subparagraph shall mean those falling under any of the following subparagraphs:
1. Restricting tender offer up to one year (limited to tender offeror or the specially-related persons thereof);
2. Restricting the handling of tender offer affairs up to one year (limited to persons handling tender offer affairs);
3. Recommending the dismissal of officers;
4. Where there is any violation of the Act, reporting it or notifying investigating authorities; The Enforcement Decree of the Financial Investment Services and Capital Market Act
5. Where there is any violation of other Acts, notifying investigating authorities or relevant institutions; or
6. Warning or caution. Section 2 Reports on Substantial Shareholding of Stocks Article 153 (Report on Substantial Shareholding of Stocks) (1) The term "days prescribed by the Presidential Decree" under the former part of Article 147 (1) of the Act shall mean those falling under any of the following subparagraphs:
1. Holidays;
2. Workers' days under the Designation of Workers' Day Act; and
3. Saturdays. (2) The term "matters prescribed by the Presidential Decree" under the former part of Article 147 (1) of the Act shall mean those falling under any of the following subparagraphs:
1. Matters on a person (hereinafter referred to as "holder of a substantial number of stocks") who comes to hold substantial number of stocks, etc. (referring to substantial shareholding under Article 147 (1) of the Act) and the specially-related persons thereof;
2. Matters on the issuer (referring to the issuer under Article 148 of the Act) of the stocks, etc. held;
3. Reasons for changes;
4. Date, price and method of acquisition or disposal;
5. Type of holding;
6. Details of raising money or materials subject to exchange necessary for the acquisition (in the case of borrowings, including creditors); and
7. Others prescribed and publicized by the Financial Services Commission as details with respect to the matters falling under subparagraphs 1 through 6. (3) Where a holder of a substantial number of stocks, etc. is required to report the current status or changes in shareholdings, the reference date for reporting shall be a date falling under any of the following subparagraphs:
1.Where stock certificates issued by a stock-unlisted corporation are listed on the securities market, the date of listing;
2. In the case of merger by absorption, the date of merger, and in the case of consolidation, the date of listing;
3. Where the holder of a substantial number of stocks, etc. purchases or sells stocks, etc. on the securities market, the date of entering into the contract;
4. Where the holder of a substantial number of stocks, etc. acquires stocks, etc. outside the securities market, the date of entering into the contract;
5. Where the holder of a substantial number of stocks, etc. disposes of stocks, etc. outside the securities market, the earlier date between the date of payment and the date on which the stocks, etc. are delivered;
6. Where the holder of a substantial number of stocks, etc. acquires the new stocks allocated through the issuance of new shares, the day following the date on which the subscription payment is made;
7. Where the holder of a substantial number of stocks, etc. borrows stocks, etc., the date when a borrowing contract is entered into, and where the holder of a substantial number of stocks, etc. repays stocks, etc., the date when the stocks, etc. are delivered;
8. Where the holder of a substantial number of stocks, etc. receives stocks, etc. as gift, the effective date under the Civil Act, and where the holder of a substantial number of stocks, etc. gives stocks, etc. as donation, the date when the stocks, etc. are delivered;
9. Where the holder of a substantial number of stocks, etc. acquires stocks, etc. through succession, the date on which the succession is confirmed in accordance with absolute acceptance or limited acceptance in succession when the successor is one person, or the date on which the distribution of property related to the stocks, etc. is completed when the successors are not less than two persons; or
10. Where any report is made due to reasons other than those under subparagraphs 1 through 9, the date on which the legal activities concerned take effect in accordance with relevant Acts including the Civil Act and the Commercial Act. (4) Where a person himself/herself and the specially-related persons thereof jointly submit a report under Article 147 (1) of the Act, the report may be made under the joint names thereof after designating the person who holds the largest number of stocks, etc. as a representative. (5) The term "cases prescribed by the Presidential Decree" under the former part of Article 147 (1) of the Act shall mean those falling under any of the following subparagraphs: The Enforcement Decree of the Financial Investment Services and Capital Market Act
1. Where shareholders acquire only the allocated stocks when new stocks are issued and allocated in proportion to the number of stocks held by shareholders;
2. Where there is any increase in the number of stocks held only by acquiring deeds representing preemptive rights issued based on preemptive rights which are allocated in proportion to the number of stocks held by shareholders;
3. Where there is any change in the ratio of stocks, etc. due to the acquisition or disposal of treasury stocks;
4. Where there is any change in the ratio of stocks, etc. as a result of the decrease in capital; or
5. Where there is any increase in the number of stocks, etc. only by adjusting issue price or exchange price of the stocks, etc. issued or exchanged by the exercise of rights granted to instruments representing preemptive rights (excluding deeds representing preemptive rights), bonds with warrants, convertible bonds, or exchangeable bonds. (6) Other necessary matters on the form of the report, the preparation thereof, etc. under Articles 147 (1) and 147 (4) of the Act shall be prescribed and publicized by the Financial Services Commission.
Article 154 (Special Cases of Report on Substantial Shareholding) (1) The term "cases prescribed by the Presidential Decree" under the latter part of Article 147 (1) of the Act shall mean cases of exerting a substantial influence (including cases of exercising rights prescribed in Article 363-2 and 366 of the Commercial Act in accordance with the Commercial Act and other Acts or having a third party exercise them) over the company or the officers thereof for the cases falling under any of the following subparagraphs:
1. Appointment and dismissal of officers and the suspension of their duties;
2. Changes in the articles of incorporation related to institutions of the company, such as the board of directors;
3. Change in the capital of the company;
4. Decision on dividend of the company;
5. Merger, split-off or split-and-merger of the company;
6. Comprehensive transfers or exchanges of stocks;
7. Transfer or takeover of the entire business or an important part of business prescribed and publicized by the Financial Services Commission;
8. Disposal of all or an important part of the assets prescribed and publicized by the Financial Services Commission;
9. Conclusion, modification or cancellation of a contract regarding the lease of the entire business or delegation of management, a contract under which profits and losses are shared with other parties, and others equivalent thereto; or
10. Dissolution of the company. (2) The term "professional investor prescribed by the Presidential Decree" under the latter part of Article 147 (1) of the Act shall mean those falling under any of the following subparagraphs:
1. Government;
2. Municipal governments;
3. The Bank of Korea; and
4. Others whose content and time of reports need to be set separately as prescribed and publicized by the Financial Services Commission.
(3) Where the shareholding is not intended to affect the management of an issuer (referring to the issuer under Article 148 of the Act) pursuant to the latter part of Article 147 (1) of the Act and where the person is a professional investor under paragraph (2), the report containing the matters falling under each of the following subparagraphs may replace the reports on the status and changes of shareholding under Article 147 (1) of the Act or the reports under Article 147 (4) of the Act:
1. Status of shareholding;
2. Matters under Articles 153 (2) 1, 153 (2) 2, and 153 (2) 4 of this Decree; and
3. Confirmation (limited to cases where a person falling under any of the subparagraphs of paragraph (2) makes a report) that any activity to affect the management under paragraph (1) shall not be conducted while holding stocks, etc. (4) A person who has an obligation to make a report pursuant to paragraph (3) may report by the 10th day of the month following the shareholding or the changes pursuant to the latter part of Article 147 (1) of the Act.
The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 155 (Report on Changes of Material Matter) The term "changes prescribed by the Presidential Decree including the purpose of substantial shareholding and the key contents of the contract" under Article 147 (4) of the Act shall mean those falling under any of the following subparagraphs:
1. Purpose of substantial shareholding;
2. Contents of trust contracts, collateral contracts, and other material contracts on the stocks, etc. held; or
3. Type of shareholding (limited to cases where there is any change between holding and owning other than holding).
Article 156 (Delivery of Report on Substantial Shareholding to Issuer) The term "person prescribed by the Presidential Decree in the case of the stocks, etc. prescribed by the Presidential Decree" under Article 148 of the Act shall mean those falling under each of the following subparagraphs:
1. In the case of exchangeable bonds, the issuer of stocks, etc. that are subject to the exchange;
2. In the case of derivative-linked securities, the issuer of stocks, etc. that are the underlying assets; and
3. In the case of securities deposit receipts, the issuer of underlying stocks, etc. Article 157 (Scope of Material Matters)
The term "material matters prescribed by the Presidential Decree" under Article 150 (1) of the Act shall mean those falling under any of the following subparagraphs:
1. Matters on holders of a substantial number of stocks, etc. and the specially-related persons thereof;
2. Purposes of shareholding;
3. Type and number of stocks, etc. held or changed;
4. Date of acquisition or disposal; or
5. Contents of trust contracts, collateral contracts, and other material contracts on the stocks, etc. held.
Article 158 (Period for Restriction on Exercising Voting Rights) The term "period prescribed by the Presidential Decree" under Article 150 (1) of the Act shall mean the period falling under any of the following subparagraphs:
1. Where a report under Article 147 (1), 147 (3), or 147 (4) of the Act is purposely not made or is made with gross negligence, or where any misstatement or omission on the matters falling under each subparagraph of Article 157 of the Act is made, the period from the date on which the stocks, etc. have been purchased, etc. to the date on which six months have passed since the report (including reports on an amendment thereof; hereafter in this paragraph, the same shall apply) has been made; or
2. Where the status of substantial shareholding of the stocks, etc. or the changes therein have already been reported to the Financial Services Commission and the Exchange in accordance with the Act, this Decree, or other Acts and subordinate statutes or where the report under Article 147 (1), 147 (3), or 147 (4) of the Act has been delayed by some mistake caused by acquisition or disposal pursuant to the approval, guidance, and recommendation, etc. of the Government, the period from the date on which the stocks, etc. have been purchased, etc. to the date on which the report has been made. Article 159 (Measures of the Financial Services Commission) The term "measures prescribed by the Presidential Decree" in Article 151 (2) of the Act shall mean those falling under any of the following subparagraphs:
1. Recommending the dismissal of officers;
2. Where there is any violation of the Act, reporting it or notifying investigating authorities;
3. Where there is any violation of other Acts, notifying investigating authorities or relevant institutions; or
4. Warning or caution. Section 3 Proxy Solicitation
Article 160 (Distribution of Form of Proxy)
A solicitor under Article 152 (1) of the Act (hereinafter referred to as "solicitor") shall distribute the form of proxy and materials to a person solicited under the same paragraph The Enforcement Decree of the Financial Investment Services and Capital Market Act (hereinafter referred to as "person solicited") before or when the solicitation is made in a way falling under any of the following subparagraphs:
1. Distribution in person by the solicitor to the person solicited;
2. Distribution by mail or FAX;
3. Distribution by e-mail (limited to cases where the person solicited notifies its intention to receive the form of proxy and material by e-mail); or
4. Distribution with the notice of the convocation of a general meeting of shareholders [limited to cases where the solicitor is the issuer of the listed stock certificates concerned (including securities deposit receipts related thereto; hereafter in this Section, the same shall apply)].
Article 161 (Case Exempted from Proxy Solicitation) The term "cases prescribed by the Presidential Decree" under the proviso of Article 152 (2) of the Act other than each subparagraph shall mean those falling under any of the following subparagraphs:
1. Where a person (including his/her specially-related persons) other than the issuer of the listed stock certificates concerned and the officers thereof (including his/her specially- related persons) solicits a proxy to less than ten persons;
2. Where a person who holds stocks under the name of another person in accordance with trust and other legal relations solicits a proxy relating to the stocks to the other person; or
3. Where an activity falling under any of the subparagraphs of Article 152 (2) of the Act is conducted using advertisements to the public including newspapers, broadcasts, magazines, etc., and where the advertisements contain only the name of the issuer of the listed stock certificates concerned, the reasons for the advertisements, the subject matter of a general meeting of shareholders, and the place distributing a form of proxy and materials. Article 162 (Scope of Public Service Corporation) A public service corporation under Article 152 (3) of the Act (hereinafter referred to as "public service corporation") shall mean a corporation designated by the Financial Services Commission after consulting with relevant ministers and reporting to the State Council among corporations that meet the requirements falling under each of the following subparagraphs:
1. The corporation shall have a firm management foundation and the possibility of sustainable development;
2. The corporation shall have a sound financial structure and the possibility of high profit; and
3. The corporation shall have a large amount of capital to the extent that permits the public to broadly hold the stocks of the corporation concerned. Article 163 (Entries of Form of Proxy and Materials) (1) The form of proxy shall be prepared in a format that enables a person solicited to clearly state the matters falling under each of the following subparagraphs pursuant to Article 152 (6) of the Act:
1.The effect that voting rights are delegated for proxy;
2. A person delegated with voting rights, including a solicitor, etc.;
3. Number of stocks with voting rights held by the persons solicited;
4. Number of stocks to be entrusted;
5. Each subject of the general meeting of shareholders and the approval or disapproval thereof;
6. Whether the proxy is exercised on a newly-raised agenda or changed or amended agenda at a general meeting of shareholders, and the details of the proxy;
7. Date and time of delegation; and
8. Name and resident registration number of a delegator (in the case of a corporation, referring to the trade name and business registration number of the corporation). (2) Materials under Article 152 (1) of the Act shall contain the matters falling under each of the following subparagraphs:
1. Matters falling under each of the following items on proxy solicitation: (a) Name or title of a solicitor, the type and number of stocks held by the solicitor and his/her specially-related persons thereof;
(b) Name or title of an agent of a solicitor, the type and number of stocks held by the agent (limited to cases where there is any agent); and (c) Relations between a solicitor or the agent thereof, and the stock-listed corporation concerned;
2. Subject matter of a general meeting of shareholders; and The Enforcement Decree of the Financial Investment Services and Capital Market Act
3. Intention to solicit a proxy. (3) Necessary matters on the specific entries, form, the preparation of a form of proxy, etc. under paragraph (1) and the materials under paragraph (2) shall be prescribed and publicized by the Financial Services Commission.
Article 164 (Date of Submission of Form of Proxy and Materials) The term "days prescribed by the Presidential Decree" under Article 153 of the Act shall mean days falling under each subparagraph of Article 153 (1) of this Decree. Article 165 (Requirements for Amendment)
(1) The term "days prescribed by the Presidential Decree" under the former part of Article 156 (3) of the Act shall mean those falling under each subparagraph of Article 153 (1) of this Decree.
(2) The term "material matters prescribed by the Presidential Decree" under the latter part of Article 156 (3) of the Act shall mean those falling under either of the following subparagraphs:
1. Matters falling under Article 163 (1) 2 of this Decree; or
2. Matters falling under Article 163 (2) 1 (excluding the name or title of solicitors among the matters referred to under item (a)) or Article 163 (2) 2 of this Decree. (3) The term "cases prescribed by the Presidential Decree" under the latter part of Article 156 (3) of the Act shall mean cases where the entries under Article 163 (2) 3 of this Decree fall under either of the following subparagraphs:
1. Where any unclear entry or indication is likely to materially mislead a person solicited; or
2. Where any entry or indication is exaggerated by omitting information that is unfavorable to the solicitor or emphasizing information that is favorable to the solicitor. Article 166 (Measures of the Financial Services Commission) The term "measures prescribed by the Presidential Decree" under the former part of Article 158 (2) of the Act other than each subparagraph shall mean measures falling under any of the following subparagraphs:
1. Restricting proxy solicitation up to one year;
2. Recommending the dismissal of officers;
3. Where there is any violation of the Act, reporting it or notifying investigating authorities;
4. Where there is any violation of other Acts, notifying investigating authorities or relevant institutions; or
5. Warning or caution. Chapter 3 Annual Report of Stock-listed Corporations Article 167 (Corporations Subject to Submission of Annual Report) (1) The term "corporations prescribed by the Presidential Decree" under the main sentence of Article 159 (1) of the Act shall mean those falling under any of the following subparagraphs:
1. An issuer who lists securities falling under any of the following items on the securities market:
(a) Equity securities other than stock certificates [excluding collective investment securities and invested equity issued by special purpose companies, etc. (referring to a special purpose company under Article 3 of the Asset-Backed Securitization Act) in accordance with asset-backed securitization plans]; (b) Debentures (referring to corporate bonds excluding secured bonds and guaranteed bonds pursuant to Article 362 (8) of this Decree); (c) Convertible bonds, bonds with warrants, participating bonds, or exchangeable bonds; (d) Instruments representing preemptive rights;
(e) Securities deposit receipts (limited to stock certificates or securities deposit receipts related to the securities falling under items (a) through (d)); or (f) Derivative-linked securities;
2. An issuer (including stock-listed corporations and the issuer under subparagraph 1 whose securities are delisted) who makes a public offering or secondary distribution (excluding the public offering or secondary distribution under Article 130 of the Act) falling under either of the following items other than subparagraph 1:
(a) Stock certificates; or
(b) Securities falling under any of the items of subparagraph 1; or
3. An issuer (including the issuers that do not fall under subparagraph 5 of paragraph 2 when the number of securities holders has decreased from not less than 500 to less than 500) which is a corporation subject to external audit under Article 2 of the Act on External Audit The Enforcement Decree of the Financial Investment Services and Capital Market Act of Stock Companies other than those under subparagraphs 1 and 2 and has not less than 500 securities holders (referring to the number calculated under the conditions prescribed and publicized by the Financial Services Commission; hereafter in this Article, the same shall apply) for each security falling under the items of subparagraph 2. (2) The term "cases prescribed by the Presidential Decree" under the proviso of Article 159 (1) of the Act shall mean cases falling under any of the following subparagraphs:
1. Where it is impractical to submit an annual report due to bankruptcy;
2. Where it is impractical to submit an annual report of the latest business year when any reason for dissolution occurs to a corporation in accordance with Article 517 of the Commercial Act and other Acts;
3. Where a stock-listed corporation or an issuer under subparagraph 1 of paragraph (1) falls under the de-listing requirements and has obtained a confirmation from the Financial Services Commission that it is impractical to file an annual report due to causes that the corporation concerned is not responsible for;
4. Where an issuer under subparagraph 2 of paragraph (1) has been recognized by the Financial Services Commission as having less than 25 holders for each security which falls under the items of subparagraph 2 of paragraph (1): Provided, That the issuer shall submit an annual report for the business year which includes the date on which the number of the holders decreases to not more than 25; or
5. Where an issuer under subparagraph 3 of paragraph (1) has been recognized by the Financial Services Commission as having less than 300 holders for each security which falls under the items of subparagraph 3 of paragraph (1): Provided, That the issuer shall submit an annual report for the business year which includes the date on which the number of the holders decreases to less than 300.
Article 168 (Entries and Accompanying Documents in Annual Reports) (1) The term "those prescribed by the Presidential Decree" under Article 159 (2) of the Act shall mean the total amount of remunerations paid to all officers during the business year. (2) The term "those prescribed by the Presidential Decree" under Article 159 (2) of the Act shall mean matters falling under each of the following subparagraphs:
1. Signatures of the representative director and directors under Article 159 (7) of the Act on the matters provided for in each subparagraph of Article 169 of this Decree;
2. Outline of the company;
3. Matters on organizations including the board of directors and affiliates of the company;
4. Matters on shareholders;
5. Matters on officers and employees;
6. Contents of transactions with major shareholder (including the specially-related persons thereof) or officers and employees of the company;
7. Matters on the financial status and the addenda thereof;
8. Audit opinions prepared by an accounting auditor; and 9 Matters prescribed and publicized by the Financial Services Commission as necessary for notifying investors of.
(3) Matters on the business and financial status among the entries in an annual report shall follow standards falling under each of the following subparagraphs:
1. Where the turnover, profit and loss, or assets of a specific business sector is not less than 10/100 of the total turnover, profit and loss, or assets, the specific business sector shall be classified separately; and
or assets, respectively, the specific area shall be classified separately. (4) A corporation (hereinafter referred to as "reporting corporation of consolidated financial statements") which has a subsidiary company under Article 1-3 (1) of the Enforcement Decree of the Act on External Audit of Stock Companies among the corporations that are required to submit an annual report shall enter matters on the financial status referred to in subparagraph 7 of paragraph (2) and the addenda thereof and others prescribed and publicized by the Financial Services Commission based on the consolidated financial statements while accompanying the financial statements of the corporation, and the audit opinions under subparagraph 8 of paragraph (2) prepared by an accounting auditor shall indicate audit opinions in the consolidated financial statements and financial statements of the corporation. (5) Notwithstanding paragraph (4), among corporations whose total amount of assets is less than two trillion won at the end of the latest business year, a corporation which does not adopt the standards set forth by International Accounting Standards as established by the Korea The Enforcement Decree of the Financial Investment Services and Capital Market Act Accounting Institute (hereinafter referred to as "Korean International Financial Reporting Standards") pursuant to Article 7 (2) 1 of the Enforcement Decree of the Act on External Audit of Stock Companies may disclose the matters on the financial status, and the addenda thereof based on the financial statements of the corporation and the matters prescribed and publicized by the Financial Services Commission, and may submit its annual report including the audit opinions on the financial statements of the corporation prepared by an accounting auditor by the deadline under Article 159 (1) of the Act. In such a case, the corporation shall supplement the matters on the financial status and the addenda thereof based on the consolidated financial statements, and others prescribed and publicized by the Financial Services Commission as well as audit opinions on the consolidated financial statements prepared by an accounting auditor and submit them within 30 days of the date when 90 days have passed since the end of the business year.
(6) An annual report shall accompany documents falling under each of the following subparagraphs pursuant to Article 159 (2) of the Act: Provided, That an audit report on the consolidated financial statements under subparagraph 1 may be submitted within the period prescribed by paragraph (5) (limited to corporations that submit annual reports pursuant to paragraph (5)), and documents under subparagraph 4 may be submitted within the period prescribed by Article 159 (5) of the Act:
1. Audit reports (referring to audit reports on the financial statement and consolidated financial statements of the corporation) prepared by an accounting auditor;
2. Audit reports prepared by an auditor (referring to the audit report under Article 447-4 of the Commercial Act);
3. Assessment opinions prepared by an auditor on the current status of the operation of the internal monitoring system [referring to the authority to supervise the performance of directors of the board of directors, the authority of an auditor (where the audit committee is established, referring to the audit committee; hereafter in this subparagraph, the same shall apply) and other internal monitoring systems of the corporation] of the corporation;
4. Consolidated financial statements under Article 159 (5) of the Act (hereinafter referred to as "consolidated financial statements"); and
5. Other documents prescribed and publicized by the Financial Services Commission.
Article 169 (Confirmation and Review of Annual Reports by Representative Director) The term "matters prescribed by the Presidential Decree" under Article 159 (7) of the Act shall mean those falling under each of the following subparagraphs:
1. The fact that an annual report does not contain any misstatement or omission of material matters;
2. The fact that an annual report does not contain any entry or indication that materially misleads a person who uses the entries or indications in the annual report;
3. The fact that entries of an annual report are confirmed and reviewed with due diligence; and
4. In the case of a company subject to external audit under Article 2 of the Act on External Audit of Stock Companies, the fact that an internal accounting control system is under operation pursuant to Articles 2-2 and 2-3 of the same Act. Article 170 (Contents and Accompanying Documents of Semi-annual and Quarterly Reports)
(1) Articles 168 (1) through 168 (4) of this Decree (in the case of paragraph (4), limited to reporting corporations of consolidated financial statements which adopt Korean International Financial Reporting Standards) shall apply to the matters to be indicated in semi-annual and quarterly reports. In such a case, the same shall not apply to the addenda under Article 168 (2) 7 of this Decree, and audit opinions prepared by an accounting auditor pursuant to Article 168 (2) 8 of this Decree shall comply with the standards falling under both of the following subparagraphs:
1. In the case of semi-annual reports, the audit opinions prepared by an accounting auditor may be replaced with the accounting auditor's verification and opinion falling under both of the following items:
(a) In the case of reporting corporations of consolidated financial statements adopting Korean International Financial Reporting Standards: the accounting auditor's verification or opinion about the financial statements and consolidated financial statements of the corporation; and
(b) Corporations other than those under item (a): the accounting auditor's verification or opinion about the financial statements of the corporation; and The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. In the case of quarterly reports, the audit opinions prepared by the accounting auditor may be omitted: Provided, That subparagraph 1 shall apply to quarterly reports of financial institutions (referring to the institution subject to examination under Article 38 of the Act on the establishment, etc. of the Financial Services Commission) or stock-listed corporations whose total amount of assets is not less than 500 billion won as of the end of the latest business year.
(2) Semi-annual and quarterly reports shall accompany documents falling under both of the following subparagraphs:
1. In the case of semi-annual reports, semi-annual audit reports or semi-annual reviews prepared by an accounting auditor: Provided, That a reporting corporation of consolidated financial statements adopting Korean International Financial Reporting Standards shall accompany semi-annual audit reports or semi-annual reviews on the consolidated financial statements prepared by an accounting auditor at the same time; and
2. In the case of quarterly reports, quarterly audit reports or quarterly reviews (limited to corporations under the proviso of subparagraph 2 of paragraph (1)) prepared by an accounting auditor: Provided, That a reporting corporation of consolidated financial statements adopting Korean International Financial Reporting Standards shall accompany quarterly audit reports or quarterly reviews on the consolidated financial statements prepared by an accounting auditor at the same time.
Article 171 (Reasons for Submission of Report on Material Change) (1) The term "where any transfer or takeover of material businesses or assets prescribed by the Presidential Decree is resolved" under Article 161 (1) 7 of the Act shall mean cases where those falling under any of the following subparagraphs are resolved:
1. Transfer or takeover of a business sector whose amount of assets is not less than 10/100 of the total amount of the assets at the end of the latest business year;
2. Transfer or takeover of a business sector whose amount of sales is not less than 10/100 of the amount of sales as of the end of the latest business year;
3. Takeover where the liability to be transferred after the takeover is not less than 10/100 of the total amount of liabilities as of the end of the latest business year;
4. Transfer of the entire business; or
5. Transfer or takeover of a business sector whose amount of assets is not less than 10/100 of the total amount of the assets at the end of the latest business year: Provided, That the transfer or takeover of assets prescribed and publicized by the Financial Services Commission as ordinary business operation, including purchase and sale of commodities, products, and raw materials, is excluded.
(2) The term "where any case prescribed by the Presidential Decree occurs" under Article 161 (1) 9 of the Act shall mean those falling under any of the following subparagraphs:
1. Where any measure under Article 7 (1) or 7 (2) of the Corporate Restructuring Promotion Act is taken by a principal creditor bank (hereinafter referred to as "principal creditor bank") under subparagraph 3 of Article 2 of the same Act;
2. Where any lawsuit that is likely to have a material impact on the securities falling under any of the items of Article 167 (1) 2 of this Decree is filed;
3. Where stock certificates are, or are decided to be, listed or de-listed on foreign securities markets, or where de-listing of stock certificates, suspension of transactions and other measures are taken by foreign financial supervisory agencies (hereinafter referred to as "foreign financial supervisory agency") under Article 437 (1) of the Act or foreign exchanges (hereinafter referred to as "foreign exchanges") under Article 406 (1) 2 of the Act; or
4. Where other cases prescribed by the Presidential Decree as materially affecting the management and properties of the corporation occur. (3) The term "documents prescribed by the Presidential Decree" under Article 161 (2) of the Act shall mean the documents falling under each of the following subparagraphs or the copies thereof:
1. Where any bill or check is dishonored under Article 161 (1) 1 of the Act, documents proving such fact including a bankruptcy certificate issued by a bank;
2. Where any current account transaction with a bank is suspended or prohibited under Article 161 (1) 1 of the Act, documents proving such fact including a certificate of the suspension of current account transaction issued by a bank;
3. In the case of subparagraph 2 of Article 161 of the Act, documents proving the suspension of business including minutes from the board of directors and an order for business suspension issued by an administrative agency;
The Enforcement Decree of the Financial Investment Services and Capital Market Act
4. In the case of subparagraph 3 of Article 161 of the Act, documents proving such case including an application for the initiation of workout process submitted to the court;
5. In the case of subparagraph 4 of Article 161 of the Act, documents proving such case including minutes from the board of directors and a decision of bankruptcy;
6. In the case of subparagraphs 5 through 8 of Article 161 of the Act, documents proving such case including minutes from the board of directors; and
7. In the case of subparagraph 9 of Article 161 of the Act, documents proving such fact including a notice and a petition, etc.
Article 172 (Agency subject to Providing Information) The Financial Services Commission may request that agencies falling under each of the following subparagraphs provide necessary information pursuant to Article 161 (4) of the Act by mailing documents containing the reason for requesting such information (including electronic documents) or by FAX:
1. With respect to the matters in Article 161 (1) 1 of the Act, agencies designated as clearing house under Article 38 of the Bills of Exchange and Promissory Notes Act or Article 31 of the Check Act;
2. With respect to the matters in Articles 161 (1) 3, 161 (1) 4, and 171 (2) 2 of the Act, competent courts;
3. With respect to the matters in Article 171 (2) 1 of this Decree, principal creditor banks; and
4. With respect to other matters, administrative agencies or other related agencies that have the information concerned.
Article 173 (Scope of Securities Liable for Damage) (1) The term "securities prescribed by the Presidential Decree" under the main sentence of Article 162 (1) of the Act other than each subparagraph shall mean those falling under each of the following subparagraphs:
1. Exchangeable bonds which are entitled to claim for the exchange with the securities concerned (including securities deposit receipts related thereto; hereafter in this paragraph, the same shall apply); and
2. Derivative-linked securities whose underlying assets are only the securities concerned and exchangeable bonds under subparagraph 1.
(2) The term "person designated by the Presidential Decree" under Article 162 (1) 3 of the Act shall mean a person who holds a certificate of qualification (including any organization to which each of them belongs) such as a certified public accountant, appraiser, credit-rating specialist, attorney-at-law, patent attorney, or tax accountant. Article 174 (Exemption from Disclosing Annual Report) The term "cases prescribed by the Presidential Decree" under the latter part of the Article 163 of the Act shall mean cases falling under either of the following subparagraphs:
1. Matters on a military secret under Article 2 of the Military Secrets Protection Act; or
2. Matters confirmed by the Financial Services Commission as related to the business and operation of a reporting corporation under Article 159 (1) of the Act (hereinafter referred to as "reporting corporation").
Article 175 (Measures of the Financial Services Commission) The term "measures prescribed by the Presidential Decree" under the former part of Article 164 (2) of the Act other than each subparagraph shall mean those falling under any of the following subparagraphs;
1. Restricting the issuance of securities within the period up to one year;
2. Recommending the dismissal of officers;
3. Where there is any violation of the Act, reporting it or notifying investigating authorities;
4. Where there is any violation of other Acts, notifying investigating authorities or relevant institutions; or
5. Warning or caution. Article 176 (Special Cases for Foreign Corporation) (1) Articles 159 through 161 of the Act shall not apply to foreign corporations falling under any of the following subparagraphs:
1. Foreign governments;
2. Foreign municipal governments; The Enforcement Decree of the Financial Investment Services and Capital Market Act
3. Foreign public organizations whose equity is held by a foreign government or foreign municipal governments which are established in accordance with foreign Acts and subordinate statutes in order to carry out public business; or
4. International financial institutions falling under any of the subparagraphs of Article 2 (1) of the Act on the Measures for the Admission to International Financial Institutions. (2) Foreign corporations, etc. (excluding foreign corporations, etc. falling under any of the subparagraphs of paragraph (1); hereafter in this Article, the same shall apply) may submit annual reports within 30 days after the period prescribed by the main sentence of Article 159 (1) of the Act, and may submit semi-annual and quarterly reports within 15 days after the period prescribed by the former part of Article 160 of the Act. (3) Notwithstanding paragraph (2), where foreign corporations, etc. have submitted documents equivalent to annual reports, etc. under Article 162 (1) of the Act (hereinafter referred to as "annual reports, etc.") to their countries, such foreign corporations, etc. may submit annual reports, etc. or documents equivalent to annual reports, etc. with the summary thereto translated into Korean prescribed and publicized by the Financial Services Commission within ten days (in the case of material change reports, referring to five days) from the date when such documents have been submitted in the foreign countries. (4) Notwithstanding Articles 168 and 170 of this Decree, where foreign corporations, etc. subject to annual, semi-annual and quarterly reports pursuant to paragraph (2) or (3) submit documents equivalent to consolidated financial statements, such foreign corporations, etc. may omit their financial statements when causes prescribed and publicized by the Financial Services Commission occur. In such a case, the foreign corporations, etc. may omit the matters falling under both of the following subparagraphs in their annual, semi-annual and quarterly reports:
1. In the case of annual reports, matters falling under both of the following items: (a) Matters on the financial status based on the financial statements of the foreign corporations, etc. and the addenda thereof; and
(b) Audit opinions prepared by an accounting auditor on the financial statements of the foreign corporations, etc.; and
2. In the case of semi-annual or quarterly reports, matters falling under both of the following subparagraphs:
(a) Matters on the financial status based on the financial statements of the foreign corporations, etc. and the addenda thereof; and
(b) Audit opinions, confirmation or opinions prepared by an accounting auditor on the financial statements of the foreign corporations, etc. (5) Foreign corporations, etc. which have listed equity securities on the securities market shall submit a report on material change to the Financial Services Commission by the date prescribed and publicized by the Financial Services Commission when they fall under any of the following subparagraphs [in the case of a foreign holding company (referring to a company established in accordance with foreign Acts and subordinate statutes, whose main business is to control other company's business through the ownership of equity securities; hereinafter the same shall apply), including the cases where affiliates (referring to a company which is subject to consolidated financial statements in accordance with accounting standards adopted by the foreign holding company) of the foreign holing company fall under any of the following subparagraphs] other than the cases falling under any of the subparagraphs of Article 161 (1) of the Act:
1. When any foreign Acts and subordinate statutes that have material effects on the foreign corporations, etc. or the contributors thereof are changed, including restriction on the transfer of equity securities and nationalization of a foreign corporation, etc.;
2. When tender offer, stabilization, or market making is made in foreign countries with respect to the stocks, etc. of the foreign corporations, etc.;
3. When any measure is taken by foreign financial supervisory agencies or foreign exchanges due to the violation of relevant laws; or
4. When suspension of transactions and the revocation thereof or de-listing is taken by foreign exchanges.
(6) The Financial Services Commission shall prescribe and publicize specific entries, accompanying documents and forms of annual reports, etc. of foreign corporations, etc. when taking into account the type, nature of the foreign corporations, etc., foreign Acts, subordinate statutes, etc.
Chapter 4 Over-the-counter Transactions
Article 177 (Methods of Over-the-counter Transactions) The Enforcement Decree of the Financial Investment Services and Capital Market Act Where securities or over-the-counter derivatives are traded outside the securities market or the derivatives market pursuant to Article 166 of the Act, such transactions shall be conducted between a single purchaser and a single seller excluding transactions under Articles 178 (1) and 179 of this Decree.
Article 178 (Over-the-counter Transactions through the Association) (1) The Association shall comply with the standards falling under each of the following subparagraphs when it carries on business with respect to over-the-counter transactions of stock certificates which are not listed on the securities market pursuant to Article 286 (1) 4 of the Act:
1. The Association shall publish items, prices declared for purchase (hereinafter referred to as "bid price") or prices declared for sale (hereinafter referred to as "asked price") and the quantity thereof with respect to the stock certificates that a party intends to trade with the public at the same time;
2. Where a single price prescribed and publicized by the Financial Services Commission or an asked price between parties is the same as the bid price for each item of stock certificates, the Association shall conclude the transactions at such price;
3. The Association shall establish business standards related to the standards for the designation of stock certificates for transactions and the revocation thereof, the methods of transactions and settlement, etc., and shall report them to the Financial Services Commission and make them available to the public; and
4. The Association shall disclose the current status of the issuer, including financial status, business performance, or changes in capital, etc. as prescribed and publicized by the Financial Services Commission.
(2) A person other than the Association shall not carry on brokerage transactions of stock certificates following the method under paragraph (1) outside the securities market. Article 179 (Over-the-counter Transactions through Bond Broker) A broker (hereinafter referred to as "bond broker") who obtains an authorization of 2i-11-2i among the authorized business units under Appendix 1 of this Decree shall, when he/she conducts the brokerage business of purchasing and selling debt securities outside the securities
market pursuant to Article 166 of the Act, comply with the standards falling under each of the following subparagraphs:
1. The bond broker shall conduct brokerage of purchasing and selling debt securities among persons falling under any of the following subparagraphs: (a) Persons falling under Articles 10 (2) 1 through 10 (2) 17 of this Decree and persons falling under Articles 10 (3) 1 through 10 (3) 13 of this Decree; (b) Communications office under the Postal Savings and Insurance Act; or (c) Others prescribed and publicized by the Financial Services Commission;
2. The bond broker shall publish items, bid prices or asked prices, and the quantity thereof with respect to the debt securities that a party intends to trade with the public at the same time;
3. The bond broker shall conclude transactions for each item of debt securities at the price where the bid price is identical to the asked price; and
4. The bond broker shall comply with the standards prescribed and publicized by the Financial Services Commission, including business methods, etc. Article 180 (Over-the-counter Transaction through Specialized Bond Dealers) (1) With respect to bonds held by a person who carries on dealing of bonds in accordance with Article 160 of the Act, a person (hereafter in this Article, referred to as "specialized bond dealer") designated by the Financial Services Commission as capable of facilitating the transactions of the bonds concerned by offering bid price and asked price at the same time shall execute transaction orders within the limit prescribed by the specialized bond dealer for each investor when he/she receives transactions orders for bonds falling under either of the following subparagraphs from investors:
1. Bonds whose bid price and asked price are offered at the same time; or
2. Bonds that the specialized bond dealer has sold to the investors. (2) Standards for the designation of specialized bond dealers and the revocation thereof, the obligations of and supports for specialized bond dealers, and other necessary matters on specialized bond dealers shall be prescribed and publicized by the Financial Services Commission.
The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 181 (Repurchase Agreement)
(1) A dealer shall comply with the standards falling under the following subparagraphs when he/she conducts transactions with a repurchase agreement with a person (hereafter in this Article, referred to as "non-professional investor, etc.") who does not fall under any item of Article 7 (3) 3 of this Decree pursuant to Article 166 of the Act:
1. The securities to be purchased or sold shall be government bonds, municipal bonds, special bonds and other securities prescribed and publicized by the Financial Services Commission;
2. The dealer shall conduct the transactions at transaction prices prescribed and publicized by the Financial Services Commission;
3. The dealer shall specify the dates for the repurchase or resale. In such a case, when a dealer intends to resell the securities purchased with the repurchase agreement, the date of repurchasing securities sold with the repurchase agreement shall precede the date of reselling securities purchased with the repurchase agreement; and
4. The dealer shall comply with the standards prescribed and publicized by the Financial Services Commission with respect to the custody and replacement of securities purchased with repurchase agreement.
(2) An integrated financial investment firm (excluding those prescribed and publicized by the Financial Services Commission) who has obtained an authorization of 11r-1r-1 among the authorized business units under Appendix 1 of this Decree shall not conduct transactions with repurchase agreements with non-professional investors, etc. (3) A person falling under any item of Article 7 (3) 3 of this Decree shall, when he/she conducts transactions with repurchase agreements through a broker, settle the payment of the securities to be traded at the same time under the conditions prescribed and publicized by the Financial Services Commission: Provided, That the same shall not apply to cases prescribed and publicized by the Financial Services Commission. Article 182 (Loan Transactions of Securities)
(1) A broker or dealer shall comply with the standards falling under each of the following subparagraphs when he/she conducts loan transactions of securities, arranges for or
intermediates the loan transactions, or acts as an agent for that purpose pursuant to Article 166 of the Act:
1. The broker or dealer shall receive collateral from a borrower under the conditions prescribed and publicized by the Financial Services Commission;
2. The broker or dealer shall deliver the securities concerned and receive collateral at the same time under the conditions prescribed and publicized by the Financial Services Commission: Provided, That the same shall not apply to the loan transactions between foreigners; and
3. The broker or dealer shall disclose the details of loan transactions of securities through the Association on the day when the transactions are made. (2) A broker or dealer may arrange for loan transactions through brokerage of loan transactions (referring to the brokerage in the form of loan transactions as prescribed and publicized by the Financial Services Commission).
(3) Necessary matters on the rate and management of collateral and the method of disclosing loan transaction, etc. shall be prescribed and publicized by the Financial Services Commission. (4) Paragraphs (1) through (3) shall apply to cases where a person other than brokers or dealers who is established or authorized in accordance with the Act conducts loan transactions of securities, arranges for or intermediates the loan transactions, or acts as an agent for that purpose.
Article 183 (Over-the-counter Transactions of Commercial Paper) (1) A broker or dealer shall comply with the standards falling under each of the following subparagraphs when he/she purchases or sells commercial papers, arranges for or intermediates such transactions, or acts as an agent for that purpose pursuant to Article 166 of the Act:
1. The commercial papers shall be assessed by not less than two credit-rating agencies; and
2. The broker or dealer shall not guarantee any payment of the commercial papers directly or indirectly.
(2) Necessary matters on the methods of trading commercial papers or evaluating credit rating shall be prescribed and publicized by the Financial Services Commission. Article 184 (Transactions on Foreign markets)
The Enforcement Decree of the Financial Investment Services and Capital Market Act (1) A non-professional investor (including professional investors prescribed and publicized by the Financial Services Commission) shall make transactions through a broker pursuant to Article 166 of the Act when he/she intends to trade securities denominated in foreign currencies and exchange-traded derivatives on foreign securities markets or foreign derivatives markets (hereinafter referred to as "foreign derivatives market") under Article 5 (2) of the Act. (2) A broker shall, when he/she is entrusted with transactions on foreign securities markets or foreign derivatives markets from non-professional investors under paragraph (1), open a transaction account at a foreign broker, etc., separated from the transaction account under the name of the broker.
(3) Necessary matters on the notification of the entrustment, settlement and conclusion of purchasing or selling orders and the exercise of rights on foreign securities markets or foreign derivatives markets, and the exchange and other domestic transactions of securities denominated in foreign currencies or exchange-traded derivatives by a broker or dealer shall be prescribed and publicized by the Financial Services Commission. Article 185 (Other Over-the-counter Transactions of Securities) (1) A person other than a dealer may not sell bonds that are not held by the person himself/herself outside the securities market pursuant to Article 166 of the Act. (2) Where a dealer receives transaction orders of listed stock certificates less than the minimum trading unit of the securities markets from investors outside the securities market, the dealer shall accept them: Provided, That the same shall not apply to cases where the dealer receives purchasing orders of listed stock certificates which are not held by the dealer. (3) In addition to the matters prescribed in paragraphs (1) and (2), methods of transaction and settlement of securities, etc. outside the securities market and other necessary matters shall be prescribed and publicized by the Financial Services Commission based on kind of securities and type of purchase, sale and other transactions. Article 186 (Transactions of Over-the-counter Derivatives) (1) A broker or dealer shall comply with the standards falling under each of the following subparagraphs pursuant to Article 166 of the Act when he/she carries on brokerage or dealing of over-the-counter derivatives:
1. Where a counter-party of the broker or dealer is a non-professional investor when the broker or dealer purchases or sells over-the-counter derivatives, arranges for or intermediates such transactions, or acts as an agent for that purpose, such activities shall be conducted for the sole purpose of avoiding risks by the non-professional investor;
2. The risk amount (referring to the risk amount prescribed and publicized by the Financial Services Commission) incurred from transactions of over-the-counter derivatives shall not exceed the limit prescribed and publicized by the Financial Services Commission;
3. Where the net operating capital under Article 30 (1) of the Act (hereinafter referred to as "net operating capital") is less than the twofold of the total risk amount (hereinafter referred to as "total risk amount") in Article 30 (1) of the Act (in the case of integrated financial investment firms, referring to the cases prescribed and publicized by the Financial Services Commission), the broker or dealer shall suspend the transactions of new over-the-counter derivatives, and settle outstanding transactions or carry out only the business related to risk avoidance until such shortage is resolved;
4. The broker or dealer shall obtain an approval from a full-time officer in charge of the business concerned in every transaction of over-the-counter derivatives: Provided, That the same shall not apply to transactions of over-the-counter derivatives conducted in accordance with pre-determined conditions of the contract meeting the standards prescribed and publicized by the Financial Services Commission between parties; and
5. The broker or dealer shall report the details of transactions of over-the-counter derivatives or the arrangement or intermediary thereof, or acting as an agent to the Financial Services Commission on a monthly basis beginning by the tenth day of the following month. (2) The management of the risks incurred from the transactions of over-the-counter derivatives and other matters necessary for the protection of investors shall be prescribed and publicized by the Financial Services Commission.
Article 187 (Limits on Acquisition of Securities or Exchange-traded Derivatives by Foreigners)
(1) Foreigners under Article 168 (1) of the Act (hereafter in this Chapter, referred to as "foreigner") or foreign corporations, etc. shall not acquire equity securities issued by public corporations in excess of the acquisition limit prescribed in both of the following The Enforcement Decree of the Financial Investment Services and Capital Market Act subparagraphs for their own accounts, regardless of the title, excluding the cases prescribed and publicized by the Financial Services Commission. In such a case, necessary matters on the disposal of the excessive portion, the standards for calculating the acquisition limit and the management thereof, etc. shall be prescribed and publicized by the Financial Services Commission:
1. The acquisition limit per person by item on foreigners or foreign corporations, etc.: the limit prescribed in the articles of incorporation of the public corporation concerned; and
2. The acquisition limit on all the foreigners or foreign corporations, etc. by item: 40/100 of the total number of equity securities of the item concerned. (2) The Financial Services Commission may prescribe and publicize acquisition limits by industry, type, kind or item of securities or exchange-traded derivatives (limited to those traded on the derivatives market) in addition to the acquisition limits under paragraph (1) when it is necessary for the stability of the securities market and the derivatives market or for the protection of investors.
(3) Where a foreign securities depository (hereinafter referred to as "foreign securities depository") under subparagraph 5 of Article 296 of the Act intends to acquire equity securities issued by a corporation in the Republic of Korea for the purpose of issuing securities deposit receipts in foreign countries, the foreign securities depository shall obtain an approval in advance from the local corporation which has issued the securities concerned: Provided, That the same shall not apply to cases where the equity securities are newly issued or other cases prescribed and publicized by the Financial Services Commission. Article 188 (Investment Registration by Foreigners) (1) Foreigners or foreign corporations, etc. shall register their personal details with the Financial Services Commission (hereinafter referred to as "investment registration") in advance when they intend to acquire or dispose of securities listed on the securities market (hereinafter referred to as "listed securities") or securities to be listed, including the securities subject to a public offering or secondary distribution for the listing on the securities market. In such a case, necessary matters on the requirements, methods, and procedures of the investment registration, and the revocation thereof shall be prescribed and publicized by the Financial Services Commission.
(2) Foreigners or foreign corporations, etc. shall comply with the standards falling under each of the following subparagraphs when they intend to trade listed securities or exchange-traded derivatives (limited to those traded on the derivatives market; hereafter in this paragraph, the same shall apply):
1. In the case of trading listed securities: (a) The listed securities shall be traded through the securities market except for cases prescribed and publicized by the Financial Services Commission; and (b) The foreigners or foreign corporations, etc. shall meet the standards prescribed and publicized by the Financial Services Commission with respect to the opening of transaction accounts, the custody of purchased securities, the appointment of an agent in the Republic of Korea, and the reports on the details of transactions, etc.; and
2. In the case of trading exchange-trade derivatives, the foreigner or foreign corporation, etc. shall meet the standards prescribed and publicized by the Financial Services Commission with respect to the opening of transaction accounts and the reports on the details of transactions, etc.
Article 189 (Attestation by Accounting Auditor)
(1) The term "person prescribed by the Presidential Decree" under the main sentence of Article 169 (1) of the Act shall mean those falling under either of the following subparagraphs:
1. A reporting corporation; or
2. A corporation which makes a public offering or secondary distribution without filing a registration statement pursuant to Article 130 of the Act with respect to the securities falling under any of the items of Article 167 (1) 2 of this Decree. (2) The term "cases prescribed by the Presidential Decree" under the proviso of Article 169 (1) of the Act shall mean those falling under either of the following subparagraphs:
1. Documents indicating the matters falling under any of the subparagraphs of Article 131 (5) of this Decree among the documents related to the financial status; or
2. Documents related to the financial status in semi-annual reports and quarterly reports: Provided, That in the case of semi-annual reports and quarterly reports submitted by a corporation falling under the proviso of Article 170 (1) 2 of this Decree, the documents shall be limited to those with the confirmation and opinions of an accounting auditor. The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 190 (Special Cases of Accounting Audit of Foreign Corporation) Foreign corporations, etc. shall, when they fall under either of the following subparagraphs, be deemed to have been audited pursuant to the main sentence of Article 169 (1) of the Act in accordance with the former part of Article 169 (3) of the Act:
1. Where a foreign corporation, etc. falling under any of the subparagraphs of Article 176 (1) of this Decree has been audited in accordance with foreign Acts and subordinate statutes or treaties, articles of incorporation, rules, etc. which are the basis of the incorporation; or
2. Where a foreign company which is established in accordance with foreign Acts and subordinate statutes has been audited by an external auditor in accordance with foreign Acts and subordinate statutes: Provided, That where the accounting standards adopted by the foreign company are inconsistent with the accounting standards under the Act on External Audit of Stock Companies, the foreign company shall submit the audit report concerned accompanying the documents prescribed and publicized by the Financial Services Commission.
Article 191 (Scope of Securities Liable for Damages) The term "securities prescribed by the Presidential Decree" under Article 170 (2) of the Act other than each subparagraph shall be as follows:
1. Exchangeable bonds which are entitled to claim the exchange with the securities (including securities deposit receipts related thereto; hereafter in this Article, the same shall apply) issued by a corporation that is audited by an accounting auditor; and
2. Derivative-linked securities whose underlying assets are only the securities issued by a corporation that is audited by an accounting auditor and the exchangeable bonds under paragraph (1).
Article 192 (Payment of Deposit by Listed Securities) (1) The term "deposit or deposit money prescribed by the Presidential Decree" under Article 171 (1) of the Act shall mean the deposit or deposit money falling under each of the following subparagraphs:
1. Bid deposit;
2. Contract deposit;
3. Deposit for repair of defect; and
4. Deposit money under Acts and subordinate statutes. (2) Listed securities which are eligible for the payment of deposit or deposited money pursuant to the Article 171 (1) of the Act shall be as follows:
1. Debt securities (excluding commercial papers); and
2. Equity securities. (3) The value of listed securities which are eligible for the payment of deposit or deposited money shall be the price of substitute securities prescribed by the Exchange. Article 193 (Deposit Certificates)
(1) The Depository shall, when it issues deposit certificates (hereafter in this Article, referred to as "deposit certificates") under Article 171 (4) of the Act, issue deposit certificates for the portion owned by a depositor (hereinafter referred to as "depositor") under Article 171 (5) of the Act based on the depository account book and issue deposit certificates for the portion deposited by an investor based on the investor account book for which notice is given to the Depository by the depositor concerned.
(2) The deposit certificate under paragraph (1) shall contain the matters falling under each of the following subparagraphs:
1. Name or title and address of the beneficial owner of the depositor account book or investor account book;
2. Type and number of deposited securities, etc. (hereinafter referred to as "deposited securities, etc.") under Article 309 (3) 2 of the Act;
3. Purposes of deposit certificates;
4. The effect that deposit certificates shall be used only for the payment of deposit or deposit money under Article 192 (1) of this Decree;
5. The effect that a person who has received deposit certificates instead of the deposit or deposit money under Article 192 (1) of this Decree may apply for replacing the deposited securities, etc. with his/her own account on the investor account book or depositor account book;
6. The effect that the person under subparagraph 5 shall, when he/she applies for an account replacement pursuant to subparagraph 5, return the deposit certificates concerned to the The Enforcement Decree of the Financial Investment Services and Capital Market Act Depository or the depositor, and in such a case, the Depository or the depositor shall lift the restriction on the disposal under Article 171 (5) of the Act; and
7. The effect that the depositor shall, when he/she receives the deposit certificates pursuant to subparagraph 6, return the deposit certificates to the Depository without delay. Part 4 Regulation on Unfair Trade
Chapter 1 Insider Trading
Article 194 (Scope of Employees Subject to Disgorgement of Short-term Sales Margin) The term "person prescribed by the Presidential Decree" under the former part of Article 172 (1) of the Act other than each subparagraph shall mean a person falling under either of the following subparagraphs who is recognized by the Securities and Futures Commission as having access to undisclosed material information under Article 174 (1) of the Act (hereinafter referred to as "undisclosed material information"):
1. Employees engaging in the establishment, modification, promotion and disclosure of the matters falling any of the subparagraphs of Article 161 (1) of the Act and others related thereto in the corporation; or
2. Employees engaging in the business related to finance, accounting, planning and research and development in the corporation.
Article 195 (Calculation Methods of Short-term Sales Margin) (1) The profit under Article 172 (1) of the Act shall be calculated under the methods falling under each of the following subparagraphs:
1. Where any sale or purchase is made within six months (including the first day; hereafter in this Article, the same shall apply) after such purchase [including the sale of specific securities, etc. (referring to the specific securities, etc. under the former part of Article 172 (1) of the Act; hereinafter, the same shall apply) which gives a position as purchaser while becoming a counter party in exercising rights; hereafter in this Article to Article 199 of this Decree, the same shall apply] or sale (including the purchase of specific securities, etc. which gives a position as seller while granting exercise of rights; hereinafter to Article 199 of the Decree, the same shall apply), a method of calculating profits by subtracting the
trading commissions and securities transaction tax and special tax for agricultural districts and fishing villages from the amount calculated by multiplying the amount deducting the unit price of purchase from the unit price of sale by the smaller quantity between the quantity of purchase and the quantity of sale (hereafter in this Article, referred to as the "matching quantity.") In such a case, when the amount is not more than zero, the profits shall be deemed not to exist; and
2. Where any sale or purchase is made two times or more within six months of such purchase or sale, a method of calculating profits by the method under subparagraph 1 using the portion of the earliest purchase and the portion of the earliest sale and, with respect to the remaining portions of the purchase and sale, using the same corresponding method until the corresponding portion of sale or purchase ceases to exist. In such a case, the excess of matching quantity in the corresponding portion of purchase or sale shall render the object of such correspondence regarded as purchase or sale separated from such purchase or sale. (2) In the case of calculating profits pursuant to subparagraphs 1 and 2 of paragraph (1), the purchase price and sale price shall be those prescribed under both of the following subparagraphs by type and item of specific securities, etc.:
1. Where specific securities, etc. purchased and sold are the same in class but different in type, if a profit is realized by sale after purchase, the closing price of the purchased specific securities, etc. at the date of sale shall be regarded as the sale price of specific securities, etc., and if a profit is realized by purchase after sale, the closing price of the sold specific securities, etc. at the date of purchase shall be regarded as the purchase price of specific securities, etc.; and
2. Where specific securities, etc. purchased and sold are different in class, the price of specific securities, etc. other than equity securities shall be the price calculated by converting those into equity securities under the conditions prescribed and publicized by the Financial Services Commission after consultation with the Securities and Futures Commission.
(3) Where specific securities, etc. purchased and sold are different in class, the quantity thereof shall be calculated under the conditions prescribed and publicized by the Financial Services Commission after consultation with the Securities and Futures Commission. The Enforcement Decree of the Financial Investment Services and Capital Market Act (4) In the case of calculating profits pursuant to paragraphs (1) through (3), if there are any ex- rights, ex-dividends, or ex-interests of the specific securities, etc. after purchase or sale, and other grounds that are prescribed by the Financial Services Commission after consultation with the Securities and Futures Commission, the profits shall be calculated based on the price and quantity converted in consideration thereof.
(5) Where a stock-listed corporation is notified of the occurrence of a short-term sales margin (hereinafter referred to as "short-term sales margin") under Article 172 (1) of the Act from the Securities and Futures Commission pursuant to the former part of Article 172 (3) of the Act, the corporation shall report whether such short-term sales margin is returned within two months of the notification date to the Securities and Futures Commission under the conditions prescribed and publicized by the Financial Services Commission after consultation with the Securities and Futures Commission.
(6) In addition to the matters prescribed in paragraphs (1) through (5), other necessary matters on the specific standards and methods, etc. of calculating short-term sales margins shall be prescribed and publicized by the Financial Services commission after consultation with the Securities and Futures Commission.
Article 196 (Securities Exempted from Disgorgement of Short-term Sales Margin) The term "securities prescribed by the Presidential Decree" under Article 172 (1) 1 of the Act shall be as follows:
1. Debt securities: Provided, That the securities falling under any of the following items shall be exempted:
(a) Convertible bonds;
(b) Bonds with warrants;
(c) Participating bonds; or
(d) Equity securities (including securities deposit receipts related thereto) issued by the corporation or exchangeable bonds which are entitled to claim the exchange with the securities (including securities deposit receipts related thereto) under items (a) through (c);
2. Beneficiary certificates; and
3. Derivative-linked securities (excluding the derivative-linked securities falling under Article 172 (1) 4 of the Act).
Article 197 (Disclosure of Short-term Sales Margin) The term "conditions prescribed by the Presidential Decree" under the latter part of Article 172 (3) of the Act shall mean disclosure of the matters falling under each of the following subparagraphs without delay:
1. Position of a person subject to the disgorgement of a short-term sales margin [referring to officers (including persons falling under each subparagraph of Article 401-2 (1) of the Commercial Act; hereafter in this Article, the same shall apply), employees or major shareholders];
2. Amount of the short-term sales margin (referring to the sum of short-term sales margins by officer, employee or major shareholder);
3. Date on which the Securities and Futures Commission gives notice of the occurrence of the short-term sales margin;
4. Plan of the corporation concerned to claim the return of the short-term sales margin; and
5. The effect that a shareholder (including a person who holds equity securities other than stock certificates or securities deposit receipts; hereafter in this subparagraph, the same shall apply) of the corporation concerned may request that the corporation claim that the person who has gained the short-term sales margin return the short-term sales margin, and such shareholder may make the claim by subrogating the corporation unless the corporation makes the claim within two months of the date on which the request is made. Article 198 (Exceptions in Disgorgement of Short-term Sales Margin) The term "cases prescribed by the Presidential Decree" under Article 172 (6) of the Act shall mean those falling any of the following subparagraphs:
1. Where any purchase or sale is conducted inevitably in accordance with Acts and subordinate statutes;
2. Where any purchase or sale is conducted in accordance with the permission, authorization and approval, etc. or the instruction and recommendation in wring by the Government;
3. Where any transaction is made for stabilization or market making; The Enforcement Decree of the Financial Investment Services and Capital Market Act
4. Where specific securities, etc. acquired or underwritten through the underwriting of the specific securities, etc. subject to public offering, secondary distribution, or private placement are disposed of;
5. Where stocks are acquired by the exercise of stock options;
6. Where stocks are acquired by exercising the right of equity securities, instruments representing preemptive rights, convertible bonds or bonds with warrant that have already been owned;
7. Where securities under Article 172 (1) 1 of the Act are acquired in accordance with the termination of the deposit agreement of securities deposit receipts under Article 172 (1) 2 of the Act;
8. Where securities are acquired by exercising the right of the convertible bonds under item (d) of subparagraph 1 of Article 196 of this Decree among the securities under Article 172 (1) 1 of the Act or the convertible bonds under Article 172 (1) 3 of the Act;
9. Where a short-term sales margin is acquired through the subscription of the specific securities, etc. subject to public offering or secondary distribution;
10. Where a short-term sales margin is acquired through the subscription of stocks which are allocated first to the members of the Employee Ownership Association pursuant to Article 32 of the Basic Act for Workers' Welfare;
11. Where stocks are disposed of by exercising claims to request the purchase of stocks;
12. Where stocks, etc are disposed of by subscribing for the tender offer; or
13. Others recognized by the Securities and Futures commission as unlikely to use undisclosed material information.
Article 199 (Applicable Period to Dealers)
The applicable provisions to dealers with respect to the disgorgement of a short-term sales margin by insiders as prescribed in Article 172 (7) of the Act shall apply to cases (excluding the case under subparagraph 4 of Article 198 of this Decree) where a dealer conducts a purchase or sale within three months of the date when an underwriting contract is entered into and then conducts any purchase or sale within six months of the date when the previous purchase or sale has been made: Provided, That when the dealer conducts any purchase or sale for stabilization or market making, such provisions shall apply to cases (excluding the case
under subparagraph 3 of Article 198 of this Decree) where the dealer conducts a purchase or sale during the period for the stabilization or market making and conducts any purchase or sale within six months of the date when the previous purchase or sale has been made. Article 200 (Reporting on Ownership of Specific Securities by Officer) (1) The term "days prescribed by the Presidential Decree" under Article 173 (1) of the Act shall mean the days falling under each subparagraph of Article 153 (1) of this Decree. (2) An officer (including persons falling under each subparagraph of Article 401-2 (1) of the Commercial Act) or major shareholder of a stock-listed corporation shall, when he/she reports the ownership status of specific securities, etc. or the change therein pursuant to Article 173 (1) of the Act, include the matters falling under each of the following subparagraphs in such report:
1. The reporter;
2. The stock-listed corporation concerned; and
3. Matters on the ownership status of specific securities, etc. by kind and the changes therein. (3) Where an officer (including persons falling under each subparagraph of Article 401-2 (1) of the Commercial Act) or major shareholder of a stock-listed corporation reports on the ownership status of specific securities, etc., the reference date of the reporting period shall be as follows:
1. Where a person who has not been an officer of a stock-listed corporation is appointed as an officer at a general meeting of stockholders, the date of such appointment;
2. In the case of a person falling under each subparagraph of Article 401-2 (1) of the Commercial Act, the date on which such position is acquired;
3. Where a person becomes a major shareholder of a stock-listed corporation through the acquisition of the stocks issued by the corporation concerned, the date of such acquisition, etc.;
4. Where stock certificates issued by a stock-unlisted corporation are listed on the securities market, the date on which such stock certificates are listed; and
5. Where an officer (including persons falling under each subparagraph of Article 401-2 (1) of the Commercial Act; hereafter in this Article, the same shall apply) or major shareholder of a stock-unlisted corporation becomes an officer or major shareholder of a stock-listed The Enforcement Decree of the Financial Investment Services and Capital Market Act corporation as a result of a merger, split-and-merger or collective exchange or transfer of stocks, the date of listing the stocks issued as a result of the merger, split-and-merger, or collective exchange or transfer of stocks.
(4) Where an officer or major shareholder of a stock-listed corporation is required to report on changes in the ownership status of the specific securities, etc., the date when such changes are made shall be as follows:
1. Where the officer or major shareholder purchases or sells specific securities, etc. on the securities market or the derivatives market, the date of settlement thereof;
2. Where the officer or major shareholder purchases specific securities, etc. outside the securities market or the derivatives market, the earlier date between the date on which the officer or major shareholder makes a payment and the date on which the specific securities, etc. are delivered;
3. Where the officer or major shareholder sells specific securities, etc. outside the securities market or the derivatives market, the earlier date between the date on which the officer or major shareholder receives a payment and the date on which the specific securities, etc. are delivered;
4. Where the officer or major shareholder acquires new stocks allocated by issuing new stocks, the day following the date on which the subscription money is paid;
5. Where the officer or major shareholder borrows specific securities, etc., the date on which the specific securities, etc. are delivered, and where the specific securities, etc. are repaid, the date on which the specific securities, etc. are delivered;
6. Where the officer or major shareholder receives specific securities, etc. as gift, the date on which the specific securities, etc. are delivered, and where the officer or major shareholder gives specific securities, etc. as donation, the date on which the specific securities, etc. are delivered;
7. Where the officer or major shareholder acquires specific securities, etc. through succession, the date on which the succession is confirmed in accordance with absolute acceptance or limited acceptance in succession when the successor is one person, or the date on which the distribution of property related to the specific securities, etc. is completed when the successors are not less than two persons; and
8. In cases other than those prescribed in subparagraphs 1 through 7, the date on which the legal activities, etc. take effect in accordance with relevant Acts including the Civil Act and the Commercial Act, etc.
(5) In addition to the matters prescribed under paragraph (2) through (4), other necessary matters on the form of a report under paragraph (2), the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission after consultation with the Securities and Futures Commission.
Article 201 (Disclosure of Information)
(1) The term "conditions prescribed by the Presidential Decree" under Article 174 (1) of the Act other than each subparagraph shall mean that the corporation concerned (including a person delegated with the authority of disclosure from the corporation concerned) or its subsidiaries (referring to the subsidiary under Article 342-2 (1) of the Commercial Act, and including a person delegated with the authority of disclosure from the subsidiary concerned) discloses information through the method falling under any of the following subparagraphs and the period or time prescribed under each subparagraph expires:
1. In the case of information which is indicated in the documents that have been registered with or reported to the Financial Services Commission or the Exchange in accordance with Acts and subordinate statutes, one day from the date on which such documents have been placed under the conditions prescribed and publicized by the Financial Services Commission or the Exchange;
2. In the case of information which is publicized through electronically transferable media established and operated by the Financial Services Commission or the Exchange, 24 hours from the time when such information is publicized;
3. In the case of information which is published through not less than two nationwide newspapers among general daily newspapers or daily newspapers specialized in economy under the Act on the Freedom of Newspapers, etc. and Guarantee of Their Functions, one day from the date on which such information is published; or
4. In the case of information which is aired nationwide through terrestrial broadcasting among the broadcast networks under the Broadcasting Act, 12 hours from the time when such information is aired.
The Enforcement Decree of the Financial Investment Services and Capital Market Act (2) The term "conditions prescribed by the Presidential Decree" under Article 174 (2) of the Act other than each subparagraph shall mean that a tender offeror (including a person delegated with the authority of disclosure from the tender offeror) discloses information through the method falling under each subparagraph of paragraph (1) and the period or time prescribed under each subparagraph expires.
(3) The term "acquisition and disposal prescribed by the Presidential Decree" under Article 174 (3) of the Act other than each subparagraph shall mean the acquisition and disposal meeting all the requirements falling under each of the following subparagraphs:
1. The acquisition and disposal shall aim at those falling under Article 154 (1) of this Decree (limited to the case of acquisition);
2. The acquisition and disposal shall be a substantial acquisition and disposal exceeding the ratio prescribed and publicized by the Financial Services Commission; and
3. The acquisition and disposal shall be subject to reporting under Article 147 (1) of the Act. (4) The term "conditions prescribed by the Presidential Decree" under Article 174 (3) of the Act other than each subparagraph shall mean that a person (including a person delegated with the authority of disclosure from the person) who intends to conduct a substantial acquisition and disposal discloses information through the method falling under any of the subparagraphs of paragraph (1) and the period or time prescribed under each subparagraph expires.
Article 202 (Prices Subject to Market Manipulation) The term "prices prescribed by the Presidential Decree" under Article 176 (2) 1 of the Act shall mean the first price formed on the securities market on the securities subject to listing (including the listing prescribed and publicized by the Financial Services Commission). Article 203 (Persons Qualified for Conducting Stabilization and Market-making) The term "dealer prescribed by the Presidential Decree" under Article 176 (3) 1 of the Act shall mean those falling under either of the following subparagraphs:
1. Where a registration statement under Article 119 (1) of the Act is submitted, a dealer who is designated in the registration statement as qualified for conducting stabilization or market making; or
2. Where a registration statement under Article 119 (1) of the Act is not submitted, a dealer who is designated in the underwriting contract as qualified for conducting stabilization or market making.
Article 204 (Methods of Stabilization)
(1) A dealer under Article 203 of this Decree may conduct stabilization only when he/she enters all matters falling under the following subparagraphs in a prospectus of the securities concerned pursuant to Article 176 (3) 1 of the Act: Provided, That in cases falling under subparagraph 2 of Article 203 of this Decree, such matters shall be indicated in the contents of the underwriting contract:
1. The effect that the dealer is permitted to conduct stabilization; and
2. Name of a securities market which permits stabilization. (2) A dealer under Article 203 of this Decree shall not conduct stabilization outside the securities market referred to in a prospectus or an underwriting contract. (3) Where a dealer under Article 203 of this Decree conducts the first stabilization during the period (hereinafter referred to as the "period of stabilization") in which stabilization is permitted, the dealer shall file a statement of stabilization (hereinafter referred to as "statement of stabilization") containing the matters falling under each of the following subparagraphs with the Financial Services Commission and the Exchange without delay:
1. Trade name of the dealer who has conducted stabilization;
2. Where the dealer conducts stabilization jointly with another dealer, the trade name of the other dealer;
3. Items and quotations of the securities subject to stabilization;
4. Starting date and time of stabilization;
5. Period of stabilization;
6. Prices of public offering or secondary distribution of securities through stabilization for facilitating the public offering or secondary distribution, and the total amount thereof; and
7. Name of securities market in which stabilization has been conducted. (4) A dealer under Article 203 of this Decree shall not purchase the securities (hereinafter referred to as "stabilization securities") subject to stabilization at a price that exceeds the prices prescribed in each of the following subparagraphs: The Enforcement Decree of the Financial Investment Services and Capital Market Act
1. In the case of the starting date of stabilization: (a) With respect to the first stabilization, the lower price between the immediately previous transaction price of the securities concerned traded on the securities market before the starting date of stabilization and the average transaction price on the securities market for the 20 days prior to the first day of the period of stabilization. In such a case, the method of calculating the average transaction price shall be prescribed and publicized by the Financial Services Commission; and (b) With respect to the subsequent stabilization after the first stabilization, the starting price of stabilization by the dealer; and
2. In the case of days following the starting date of stabilization, the lower price between the starting price of stabilization (where two or more dealers have participated in stabilization on the same day, the lowest price out of the starting prices of stabilization of the dealers) and the immediately previous transaction price of the securities concerned traded on the securities market before conducting the stabilization. (5) A dealer under Article 203 of this Decree who has conducted stabilization shall file a report on stabilization (hereinafter referred to as "stabilization report") containing the matters falling under the following subparagraphs for each securities market where such stabilization has been conducted with the Financial Services Commission and the Exchange not later than the day following the date on which the purchase and sale concerned have been made with respect to the purchase and sale of stabilization securities during the period from the starting date of stabilization to the termination date thereof:
1. Items of the securities that have been subject to stabilization;
2. Details of transactions; and
3. Trade name of the dealer who has conducted stabilization. (6) The Financial Services Commission and the Exchange shall keep a stabilization statement and a stabilization report for three years from the date set by either of the following subparagraphs and make them available to the public through the Internet website, etc.:
1. In the case of a stabilization statement, the date of receipts of such statement; and
2. In the case of a stabilization report, the day following the date on which the period of stabilization expires.
(7) The term "date prescribed by the Presidential Decree" under Article 176 (3) 1 of the Act shall mean the 20th
day before the date on which a subscription period expires with respect to the securities subject to public offering or secondary distribution: Provided, That where the value of public offering or secondary distribution is confirmed between the 20th day and the
subscription date, such date shall mean the date following the date on which the value is confirmed.
(8) In addition to the matters prescribed under paragraph (1) through paragraph (7), other necessary matters on the form of a stabilization statement and a stabilization report, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 205 (Methods of Market Making)
(1) A dealer under Article 203 of this Decree shall, when it intends to conduct market making pursuant to Article 176 (3) 2 of the Act, file a statement of market making containing the matters falling under each of the following subparagraphs with the Financial Services Commission and the Exchange in advance:
1. Trade name of the dealer who intends to conduct market making;
2. Where the dealer conducts market making jointly with another dealer, trade name of the other dealer;
3. Items of securities subject to market making;
4. Starting date and time of market making;
5. Period of market making; and
6. Name of the securities market in which market making is to be conducted. (2) A dealer under Article 203 of this Decree shall not purchase securities subject to market making in excess of the price of public offering or secondary distribution, or shall not sell them below the price of public offering or secondary distribution: Provided, That where any ex-right, ex-dividend, or ex-interest occurs, the price shall be calculated when taking into account such cause.
(3) Articles 204 (1), 204 (2), 204 (5), and 204 (6) of this Decree shall apply to market making. In such a case, "stabilization" shall be deemed "market making." The Enforcement Decree of the Financial Investment Services and Capital Market Act (4) The term "period prescribed by the Presidential Decree" under Article 176 (3) 2 of the Act shall mean the period from the date on which the securities subject to public offering or secondary distribution are listed to the date prescribed by an underwriting contract from one month up to six months.
(5) In addition to the matters prescribed under paragraphs (1) through (4), other necessary matters on the form of a statement of market making and a market making report, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission.
Article 206 (Persons Entitled to Entrust Stabilization) The term "person designated by the Presidential Decree such as an officer of the issuer" under Article 176 (3) 3 of the Act shall mean those falling any of the following subparagraphs:
1. The director of an issuer of securities subject to public offering or secondary distribution;
2. The owner of securities subject to secondary distribution: Provided, That where securities are transferred under an underwriting contract, the person who transfers the securities shall be deemed as an owner;
3. Where the issuer of securities subject to public offering or secondary distribution is in a relation falling under any of the following subparagraphs with another company, or another company is in such relation with the issuer, the company or the director thereof: (a) In a relation of holding equity securities in excess of 30/100 of the total number of the equity securities; or
(b) In a relation falling under each of the subparagraphs of Article 9 of this Decree as holding equity securities in excess of 10/100 of the total number of the equity securities; or
4. A person who is designated as entitled to entrust stabilization and is reported to the Financial Services Commission and the Exchange in advance by the issuer or the owner of securities subject to public offering or secondary distribution. Article 207 (Scope of Linked Securities)
The term "securities prescribed by the Presidential Decree" under Article 176 (4) 3 of the Act shall be as follows:
1. Where convertible bonds or bonds with warrants are purchased or sold for the purpose of gaining unjust profits or having a third person gain unjust profits, securities falling under any of the following items which are linked to such convertible bonds or bonds with warrants:
(a) Exchangeable bonds which are entitled to claim the exchange with the convertible bonds or bonds with warrants;
(b) Equity securities;
(c) Derivative-linked securities whose underlying assets are the convertible bonds or bonds with warrants; or
(d) Securities deposit receipts related to the convertible bonds or bonds with warrants;
2. Where exchangeable bonds are purchased or sold for the purpose of gaining unjust profits or having a third person gain unjust profits, securities falling under any of the following items which are subject to the exchange with the exchangeable bonds: (a) Convertible bonds or bonds with warrants;
(b) Equity securities;
(c) Derivative-linked securities; or
(d) Securities deposit receipts;
3. Where equity securities are purchased or sold for the purpose of gaining unjust profits or having a third person gain unjust profits, securities falling under any of the following items which are linked to the equity securities:
(a) Convertible bonds or bonds with warrants;
(b) Exchangeable bonds which are entitled to claim the exchange with the equity securities;
(c) Derivative-linked securities whose underlying assets are the equity securities; or (d) Securities deposit receipts related to the equity securities;
4. Where derivative-linked securities are purchased or sold for the purpose of gaining unjust profits or having a third person gain unjust profits, securities falling under any of the following items which are the underlying assets of the derivative-linked securities: (a) Convertible bonds or bonds with warrants;
(b) Exchangeable bonds (limited to those which are entitled to claim the exchange with the securities falling under item (a), (c), or (d)); The Enforcement Decree of the Financial Investment Services and Capital Market Act (c) Equity securities; or
(d) Securities deposit receipts; and
5. Where securities deposit receipts are purchased or sold for the purpose of gaining unjust profits or having a third person gain unjust profits, securities falling under any of the following items which are the basis of the securities deposit receipts: (a) Convertible bonds or bonds with warrants;
(b) Exchangeable bonds (limited to those which are entitled to claim the exchange with the securities falling under item (a), (c), or (d)); (c) Equity securities; or
(d) Derivative-linked securities.
Article 208 (Restrictions on Short Sale)
(1) The term "securities prescribed by the Presidential Decree" under Article 180 (1) of the Act other than each subparagraph shall mean those falling under any of the following subparagraphs:
1. Convertible bonds, bonds with warrants, participating bonds, or exchangeable bonds;
2. Equity securities;
3. Derivative-linked securities; or
4. Securities deposit receipts (limited to the securities deposit receipts related to the securities prescribed under subparagraphs 1 through 4). (2) The term "methods prescribed by the Presidential Decree" under the proviso of Article 180 (1) of the Act other than each subparagraph shall mean conducting activities through the methods falling under each of the following subparagraphs at the price provided for in the Securities Market Business Regulation under Article 393 (1) of the Act with respect to short sale (limited to the short sale under Article 180 (1) 2 of the Act: hereafter in this Article, the same shall apply):
1. Where an investor (including a broker or dealer who is not a member of the Exchange; hereafter in this subparagraph, the same shall apply) entrusts a broker who is a member of the Exchange with placing a selling order:
(a) An investor who entrusts the sales of securities shall notify a broker of whether such sales are short sale. In such a case, when the investor is an officer or employee of the listed corporation, the investor shall give notification of the fact as well; (b) Where an investor entrusts the broker with the sales of securities, the broker shall determine whether such sales are short sale and whether there is any possibility of a settlement as a result of the short sale;
(c) Where the broker recognizes that it is unlikely to be settled as a result of the short sale, the broker shall not be entrusted with the short sale or shall not place any order for short sale on the securities market; and
(d) Where the broker is entrusted with short sale from an investor, the broker shall notify the Exchange of the fact that the sale is short sale; and
2. Where a broker or dealer who is a member of the Exchange places a selling order, the broker or dealer shall notify the Exchange of the fact that the sale is short sale. (3) The term "others prescribed by the Presidential Decree" under Article 180 (2) 3 of the Act shall mean sales falling under any of the following subparagraphs which are likely to be settled by the settlement date:
1. Sales of listed securities that are found to be kept at custodians other than the broker who is entrusted with placing a selling order, or to be owned otherwise;
2. Sales of collective investment securities to be allocated in accordance with the additional issuance of listed collective investment securities;
3. Sales of listed securities to be allocated in accordance with the request for redemption of collective investment securities of an exchange-traded fund under Article 234 of the Act;
4. Sales of listed securities to be acquired as a result of the cancellation of a deposit contract for securities deposit receipts;
5. Sales of securities that are confirmed to be returned among the leased listed securities;
6. Sales of listed securities to be transferred in accordance with transactions outside the securities market and other contracts; or
7. Sales of securities deposit receipts to deposit and acquire the securities under subparagraphs 1 through 4 of paragraph (1).
Part 5 Collective Investment Scheme
The Enforcement Decree of the Financial Investment Services and Capital Market Act Chapter 1 General Provisions
Article 209 (Registration Requirements of Collective Investment Schemes) The term "requirements prescribed by the Presidential Decree" under Article 182 (2) 4 of the Act shall be as follows:
1. In the case of an investment company, requirements falling under both of the following items:
(a) A supervisory director shall not fall under any of the subparagraphs of Article 24 of the Act; and
(b) The capital shall be not less than 100 million won at the time of applying for a registration and shall exceed the minimum amount prescribed and publicized by the Financial Services Commission; and
2. In the case of an investment limited liability company, investment limited partnership company, investment limited partnership, and investment undisclosed association, the capital or contribution shall be not less than 100 million won at the time of applying for a registration and shall exceed the minimum amount prescribed and publicized by the Financial Services Commission.
Article 210 (Exemptions from Registration of Changes) The term "case prescribed by the Presidential Decree" under the former part of Article 182 (8) of the Act shall mean cases falling either of the following subparagraphs:
1. Where any registered matter is changed in accordance with the amendment of the Act and this Decree or the orders issued by the Financial Services Commission; or
2. Where there are minor changes prescribed and publicized by the Financial Services Commission, such as correction of simple wording. Article 211 (Methods and Procedures of Registration) (1) A registration application under Article 182 (3) of the Act shall contain the matters falling under each of the following subparagraphs:
1. Name of the collective investment scheme;
2. Matters on the objective, direction and strategy of the investment;
3. Matters on the contents of rights and investment risks;
4. Matters on bonuses, sales commissions, sales fees and other costs;
5. Matters on contributions (excluding an investment trust);
6. Matters on financial status;
7. Matters on the collective investment manager (in the case of an investment company, including promoters and supervisory directors);
8. Matters on fund managers;
9. Matters on the management of collective investment properties;
10. Matters on the sale and redemption of collective investment securities;
11. Matters on the appraisal, disclosure, etc. of collective investment properties;
12. Matters on the distribution of profit and loss and taxation;
13. Matters on the trust company and general fund administrator (limited to cases where any general fund administrator exists);
14. Matters on the delegation under Article 42 of the Act (limited to cases where any delegation is made); and
15. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(2) The registration application under paragraph (1) shall accompany documents falling under each of the following subparagraphs: Provided, That where the information of the accompanying documents can be verified through administrative data matching under Article 21 (1) or 22-2 (1) of the E-Government Act, the accompanying documents may be replaced with such verification:
1. A collective investment agreement (including the addenda thereof);
2. Certified copies of corporate register or documents (excluding an investment trust, investment limited partnership, and investment undisclosed association) equivalent thereto which prove the establishment of the corporation concerned;
3. Documents to prove the payment of contributions (excluding an investment trust);
4. Copies of a delegation contract (including the addendum thereof) that is entered into with a person falling under each of the following items: (a) A collective investment manager (excluding an investment trust and investment undisclosed association);
The Enforcement Decree of the Financial Investment Services and Capital Market Act (b) A trust company;
(c) A general fund administrator (limited to cases where a delegation contract is concluded with the general fund administrator); and (d) A delegatee under Article 42 of the Act (limited to cases where the delegation contract is concluded with the delegatee);
5. Where any sales contract or delegation contract is entered into with a broker or dealer, the copies of the contract (including the addenda thereof); and
6. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of investors.
(3) A registration amendment under Article 182 (8) of the Act shall contain the reasons for and contents of changes, and shall accompany documents to prove the changes, including the copies of minutes from a general meeting of collective investors or the board of directors at which the resolution for the changes is made, the collective investment agreement, the certified copy of corporate register, and copies of major contracts. (4) The Financial Services Commission shall verify whether the contents of the registration under Article 182 (1) of the Act and the registration of change under Article 182 (8) of the Act are true, and review whether such contents meet the requirements for registration under Article 182 (2) of the Act (including cases applied to Article 182 (8) of the Act) and registration of change.
(5) When a collective investment manager of an investment trust or investment undisclosed association, an investment company, etc. submits a registration application under Article 182 (3) of the Act along with a registration statement of securities, it shall be deemed that the collective investment scheme is registered at the time when the registration statement takes effect.
(6) When a collective investment manager of an investment trust or investment undisclosed association, an investment company, etc. submits an amendment statement under Article 122 (1) of the Act, it shall be deemed that the registration amendment under Article 182 (8) of the Act is submitted. In such a case, it shall be deemed that the change of registration of collective investment scheme concerned is made when the amendment statement takes effect. (7) The entries under paragraph (1) or (3) may be otherwise prescribed and publicized by the Financial Services Commission for the registration of a private equity fund.
(8) In addition to the matters prescribed under paragraphs (1) through (7), other necessary matters on the application and review of a registration, the application form, the preparation thereof, etc. shall be prescribed and publicized by the Financial Services Commission. Article 212 (Business of General Fund Administrators) The term "business prescribed by the Presidential Decree" under Article 184 (6) 5 of the Act shall be as follows:
1. Entrusted businesses pursuant to Article 238 (8) of the Act; and
2. Business of operating an investment company. Article 213 (Disposal of Treasury Collective Investment Securities by Trust Company) A trust company, etc. shall dispose of treasury collective investment securities acquired pursuant to the former part of Article 186 (1) 1 of the Act within one month of the date of acquisition in the methods falling under either of the following subparagraphs:
1. Retirement; or
2. Sales through a broker or dealer. Article 214 (Recordkeeping of Materials by Investment Companies) (1) An investment company, etc. shall keep and maintain the records for a period falling under each of the following subparagraphs pursuant to Article 187 (1) of the Act: Provided, That the Financial Services Commission may shorten the period, and prescribe and publicize such period:
1. List of collective investment properties: ten years;
2. Ledger of base prices of collective investment properties: ten years;
3. Details of the management of collective investment properties: ten years;
4. Minutes from a general meeting of collective investors and a board of directors meeting: ten years; and
5. Books and documents subject to be prepared and kept in accordance with Acts and subordinate statutes: the period prescribed by the Acts and subordinate statutes (where such period is not prescribed, referring to the period prescribed and publicized by the Financial Services Commission when taking into account the keeping period under subparagraphs 1 through 4).
The Enforcement Decree of the Financial Investment Services and Capital Market Act (2) Specific standards for type, classification, etc. of materials under paragraph (1) shall be prescribed and publicized by the Financial Services Commission. Chapter 2 Composition of Collective Investment Schemes Section 1 Investment Trust
Article 215 (Entries of Trust Contract)
The term "others prescribed by the Presidential Decree" under Article 188 (1) 8 of the Act shall be as follows:
1. Type of the investment trust (referring to the type under the classification under Article 229 of the Act);
2. Name of the investment trust;
3. Investment assets (principal investment assets shall be specified separately);
4. Matters on the business of the collective investment manager and the trust company;
5. Matters on the additional issuance and retirement of beneficiary certificates;
6. Where the period of a trust contract is set forth, the period thereof;
7. Matters on the appraisal of investment trust property and the calculation of base price;
8. Matters on the distribution of assets, etc. other than profits;
9. Matters on the change in the collective investment manager or the trust company;
10. Matters on the alteration and termination of the trust contract;
11. Fiscal term of the investment trust; and
12. Other matters prescribed and publicized by the Financial Services Commission as necessary for the protection of beneficiaries.
Article 216 (Reasons for Exemption of General Meetings of Beneficiaries) The term "reason prescribed by the Presidential Decree" under Article 188 (2) 2 of the Act shall mean cases falling under any of the following subparagraphs:
1. Where the entire trust contract is transferred due to a business transfer, etc.;
2. Where a part of the trust contract is transferred inevitably in order to comply with relevant Acts and subordinate statutes, including Articles 184 (4) and 246 (1) of the Act;
3. Where the trust company is changed pursuant to the measures taken by the Financial Services Commission under Articles 420 (3) 1 and 420 (3) 2 of the Act; and
4. Where the trust company is changed pursuant to the orders issued by the Financial Services Commission under Articles 10 (1) 6 through 10 (1) 8 of the Act on the Structural Improvement of the Financial Industry.
Article 217 (Resolution of General Meetings of Beneficiaries) The term "others prescribed by the Presidential Decree" under Article 188 (2) 4 of the Act shall mean those falling under any of the following subparagraphs:
1. Changes in the type (referring to the type under the classification under Article 229 of the Act) of the investment trust: Provided, That the same shall not apply to cases where the conversion into another type of an investment trust is scheduled from the establishment thereof and such condition is indicated in the trust contract:
2. Changes in principal investment assets;
3. Changes of the collective investment manager: Provided, That the same shall not apply to the cases falling under any of the following items: (a) Merger, split-off, or split-and-merger;
(b) Where the collective investment manager is changed pursuant to the measures taken by the Financial Service Commission under Articles 420 (3) 1 and 420 (3) 2 of the Act; and
(c) Where the collective investment manager is changed pursuant to the orders issued by the Financial Service Commission under Articles 10 (1) 6 through 10 (1) 8 of the Act on the Structural Improvement of the Financial Industry;
4. Changes of an investment trust other than a closed-end investment trust (referring to the investment trust whose existence period is prescribed and which has no right to request the redemption of beneficiary certificates; hereinafter the same shall apply) into a closed-end investment trust;
5. Extension of payment period of redemption money; and
6. Other matters prescribed and publicized by the Financial Services Commission for the protection of beneficiaries.
Article 218 (Entries of Beneficiary Certificates) The Enforcement Decree of the Financial Investment Services and Capital Market Act The term "matters prescribed by the Presidential Decree" under Article 189 (5) 5 of the Act shall be as follows:
1. Name of the investment trust;
2. Symbol and number;
3. Timing of distributing profits, etc;
4. Conditions on the redemption of beneficiary certificates (referring to the effect that the redemption is not permitted in the case of beneficiary certificates of a closed-end investment trust);
5. Where a period of a trust contract is set forth, the period thereof; and
6. Name of the broker or dealer who sells the beneficiary certificates concerned. Article 219 (Exceptions from Prohibition on Information Provision) The term "cases prescribed by the Presidential Decree" under the proviso of Article 189 (8) of the Act shall mean cases where information is provided pursuant to the proviso of Article 4 (1) of the Act on Real Name Financial Transactions and Guarantee of Secrecy. Article 220 (Convocation for General Meetings of Beneficiaries) (1) A collective investment manager (including trust companies that convene a general meeting of beneficiaries or beneficiaries holding not less than 5/100 of the total number of accounts of outstanding beneficiary certificates pursuant to the latter part of Article 190 (3) of the Act; hereafter in this Article, the same shall apply) shall entrust the Depository with the convocation notice of a general meeting of beneficiaries.
(2) The Depository shall send the form necessary to exercise voting rights under Article 190 (6) of the Act in writing when it notifies the convocation of a general meeting of beneficiaries pursuant to paragraph (1) or receives requests from beneficiaries. (3) Where the Depository sends the form necessary to exercise voting rights in writing pursuant to paragraph (2), the Depository shall ensure that beneficiaries clearly present their intention by indicating yes or no, and deliver reference data for the exercise of voting rights submitted by a collective investment manager as prescribed by the Ordinance of the Prime Minister. (4) A collective investment manager shall, when it intends to convene a deferred general meeting of beneficiaries under the latter part of Article 190 (7) of the Act (hereafter in this
paragraph, referred to as "deferred general meeting of beneficiaries"), give notification of the deferred general meeting of beneficiaries pursuant to paragraph (1) with a statement containing the matters under Article 190 (8) of the Act at least one week before the date of the deferred general meeting of beneficiaries.
Article 221 (Exercise of Voting Rights in Writing) (1) A beneficiary who intends to exercise voting rights in writing pursuant to Article 190 (6) of the Act shall submit the form under Article 220 (2) of this Decree to the collective investment manager (including a trust company which convenes a general meeting of beneficiaries or the beneficiaries holding not less than 5/100 of the total number of accounts of outstanding beneficiary certificates pursuant to the latter part of Article 190 (3) of the Act) by the day preceding the date of a general meeting of beneficiaries after indicating the exercise of voting rights in writing.
(2) The number of voting rights exercised in writing pursuant to Article 190 (6) of the Act shall be added to the number of voting rights exercised by attending a general meeting of beneficiaries.
(3) A collective investment manager shall keep the forms for the exercise of voting rights submitted by beneficiaries pursuant to paragraph (1) and reference data for the exercise of voting rights at the head office for six months of the date of a general meeting of beneficiaries. (4) A beneficiary may request that the collective investment manager provide access to the forms and reference data under paragraph (3) and the copies thereof at any time during the business hours of the collective investment manager. (5) A chairman of a general meeting of beneficiaries shall be elected among beneficiaries at a general meeting of beneficiaries.
Article 222 (Methods of Purchasing Beneficiary Certificates by Dissident Beneficiaries) Where a collective investment manager purchases beneficiary certificates using the investment trust property pursuant to the main sentence of Article 191 (3) of the Act, the collective investment manager shall be deemed to have filed a redemption claim on the date when the period of requesting the purchase expires, and shall purchase such beneficiary certificates as prescribed in the trust agreement.
The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 223 (Reasons for Termination Exempted from Approval) The term "cases prescribed by the Presidential Decree" under the proviso of Article 192 (1) of the Act shall mean those falling under any of the following subparagraphs. In such a case, the requirements prescribed and publicized by the Financial Services Commission shall be met:
1. Where consent from all the beneficiaries is obtained;
2. Where a collective investment manager intends to terminate a trust contract upon the request for redemption of the entire beneficiary certificates of the investment trust concerned; or
3. Where the principal of the investment trust falls short of the amount prescribed and publicized by the Financial Services Commission for one month continuously. Article 224 (Methods and Procedures for Approval of Termination) (1) A person who intends to apply for an approval of termination of an investment trust pursuant to Article 192 (1) of the Act shall file with the Financial Services Commission an application for termination containing the matters falling under each of the following subparagraphs:
1. Matters on the investment trust subject to termination;
2. Reasons for terminating the investment trust;
3. Matters on the collective investment manager, trust company and broker or dealer of the investment trust subject to termination;
4. Matters on beneficiaries; and
5. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of beneficiaries.
(2) The application for termination under paragraph (1) shall accompany the documents falling under each of the following subparagraphs:
1. Documents to prove the termination decision of the collective investment manager;
2. List of collective investment properties on the day preceding the application date for termination; and
3. Others prescribed and publicized by the Financial Services Commission as necessary for examination of termination.
(3) Where a collective investment manager terminates an investment trust pursuant to Article 192 (1) or 192 (2) of the Act, the collective investment manager shall, when there are accrued receivables, acquire such accrued receivables by transfer at the market price prescribed and publicized by the Financial Services Commission on the termination date of the investment trust: Provided, That if the accrued receivables are traded pursuant to Article 87 (1) 3 of this Decree, such transaction may be replaced with the acquisition by transfer. (4) Where a collective investment manager terminates an investment trust pursuant to Article 192 (1) or 192 (2) of the Act, the collective investment manager shall, when there are bonds payable, acquire such bonds payable by transfer at the market price prescribed and publicized by the Financial Services Commission on the termination date of the investment trust: Provided, That if the bonds payable are traded pursuant to Article 87 (1) 3 of this Decree, such transaction may be replaced with the acquisition by transfer. (5) In addition to the matters prescribed under paragraph (1) through (4), other necessary matters on the termination of an investment trust, including the form of an application for termination, the preparation thereof, etc., shall be prescribed and publicized by the Financial Services Commission.
Article 225 (Reasons for Partial Termination)
The term "cases prescribed by the Presidential Decree" under the proviso of Article 192 (5) of the Act shall mean those falling under any of the following subparagraphs:
1. Where beneficiary certificates issued are not sold;
2. Where a beneficiary files a claim for the redemption of beneficiary certificates; or
3. Where a beneficiary files a claim for purchase of his/her own beneficiary certificates pursuant to Article 191 (1) of the Act.
Article 226 (Merger of Investment Trust)
(1) The term "matters prescribed by the Presidential Decree" under Article 193 (2) 7 of the Act shall be as follows:
1. Where earnings are distributed as a result of a merger of investment trusts, the maximum amount of distribution;
The Enforcement Decree of the Financial Investment Services and Capital Market Act
2. Where the contract period of the investment trust or the fiscal term of the investment trust is amended as a result of a merger of investment trusts, the details thereof;
3. Where remunerations, redemption fees, etc. are changed, the details thereof;
4. Matters on the appraisal of investment trust property for calculating the merger value of beneficiary certificates; and
5. Where beneficiary certificates are issued as a result of a merger, matters on the treatment of an odd lot less than one account.
(2) Where investment trusts are merged, the merger value of beneficiary certificates under Article 193 (8) of the Act shall be calculated based on the amount calculated by subtracting the total liabilities from the total assets appearing on the balance sheet as of the day immediately preceding the date on which the investment trusts are merged. (3) The convocation notice of a general meeting of beneficiaries shall contain material matters on a merger plan.
(4) Where a collective investment manager obtains an approval of the matters specified under Articles 193 (2) 1 through 193 (2) 6 of the Act and the matters falling under each subparagraph of paragraph (1) of this Article from a general meeting of beneficiaries, the collective investment manager shall notify beneficiaries thereof without delay. (5) A collective investment manager shall, when it notifies beneficiaries pursuant to paragraph (4), entrust the notification to the Depository.
(6) In addition to the matters prescribed under paragraphs (1) through (5), other necessary matters on the merger of investment trusts, including the form of a merger plan of investment trusts, the preparation thereof, etc., shall be prescribed and publicized by the Financial Services Commission.
Section 2 Corporate-type Collective Investment Schemes Article 227 (Entries of Articles of Incorporation) (1) The term "matters prescribed by the Presidential Decree" under of Article 194 (2) 11 of the Act shall be as follows:
1. Type of the investment company (referring to the type under the classification under Article 229 of the Act);
2. Investment assets (principal investment assets shall be specified separately);
3. Matters on the additional issuance and retirement of stocks;
4. Where the existence period or reasons for dissolution are set forth, the details thereof;
5. Matters on the appraisal of the properties of the investment company and the calculation of base prices;
6. Matters on the distribution of assets, etc. other than profits;
7. Outline (including the matters on the methods of calculating remunerations and other commissions and the time and methods of payment) of a delegation contract to be entered into with a collective investment manager, trust company, and general fund administrator;
8. Matters on the changes of the collective investment manager or trust company;
9. Matters on the alteration in the articles of incorporation;
10. Standards for the remunerations of supervisory directors;
11. Fiscal term of the investment company;
12. Date on which the articles of incorporation is prepared; and
13. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of shareholders.
(2) The term "amount prescribed by the Presidential Decree" under Article 194 (5) of the Act shall be one billion won.
Article 228 (Accompanying Documents for Registration of Incorporation) The term "documents prescribed by the Presidential Decree" under Article 194 (10) of the Act other than each subparagraph shall be as follows:
1. Articles of incorporation;
2. A written statement to certify the underwriting (referring to the underwriting under Article 293 of the Commercial Act) of stocks;
3. An inspection report prepared by directors;
4. A written statement to certify the consent to the inauguration of directors;
5. A written statement to certify the entrustment of administrative affairs for stock transfer; and
6. Certificates of the payment and custody of such payments for stocks issued by banks and other financial institutions responsible for the receipt of payments for stocks. The Enforcement Decree of the Financial Investment Services and Capital Market Act Article 229 (Alteration of Articles of Incorporation) (1) The term "others prescribed by the Presidential Decree" under Article 195 (1) 4 of the Act shall be as follows:
1. Changes in the type (referring to the type under the classification under Article 229 of the Act) of the investment company: Provided, That the same shall not apply to cases where the investment company is scheduled to be converted into another type of an investment company and such condition is indicated in the articles of incorporation;
2. Changes in principal investment assets;
3. Changes of an open-end investment company (hereinafter referred to as "open-end investment company") under Article 196 (4) of the Act into a closed-end investment company (referring to an investment company whose existence period is prescribed and which has no right to request the redemption of stocks; hereinafter the same shall apply);
4. Extension of payment period of redemption money; and
5. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of shareholders.
(2) The term "reason prescribed by the Presidential Decree" under Article 195 (2) of the Act shall mean those falling under either of the following subparagraphs:
1. In the case of a collective investment manager, cases falling under any of the following items:
(a) Where a collective investment manager is changed pursuant to the measures taken by the Financial Services Commission under Articles 420 (3) 1 and 420 (3) 2 of the Act; or (b) Where a collective investment manager is changed pursuant to the orders issued by the Financial Services Commission under Articles 10 (1) 6 through 10 (1) 8 of the Act on the Structural Improvement of the Financial Industry; or
2. In the case of a trust company, cases falling under any of the following items: (a) Where the entire contract on the custody and management of the property of an investment company is transferred as a result of business transfer, etc.; (b) Where a part of the contract on the custody and management of the property of an investment company is inevitably transferred in order to comply with relevant Acts and subordinate statutes including Articles 184 (4) and 246 (1) of the Act;
(c) Where a trust company is changed pursuant to the measures taken by the Financial Services Commission under Articles 420 (3) 1 and 420 (3) 2 of the Act; or (d) Where a trust company is changed pursuant to the orders issued by the Financial Services Commission under Articles 10 (1) 6 through 10 (1) 8 of the Act on the Structural Improvement of the Financial Industry. Article 230 (Condition for Issuing New Stocks)
The term "conditions prescribed by the Presidential Decree" under the latter part of Article 196 (5) of the Act shall mean the calculation method of base price (hereinafter referred to as "base price") under Article 238 (6) of the Act: Provided, That a closed-end investment company may set forth issue prices of new stocks after taking into account the amount calculated in accordance with the calculation method of base price and the price traded on the securities market.
Article 231 (Reason for Disqualification of Supervisory Director) The term "persons prescribed by the Presidential Decree" under Article 199 (4) 7 of the Act shall mean those falling under any of the following subparagraphs:
1. Officers and employees of a general fund administrator of the investment company concerned;
2. Officers and employees of a collective investment scheme appraisal company that appraises the investment company concerned;
3. Officers and employees of a bond appraisal company that appraises the value of the property of the investment company concerned;
4. Officers and employees of a broker or dealer who sells the stocks of the investment company concerned; or
5. Accounting auditors (where an accounting auditor is a corporation, referring to certified public accountants belonging to the corporation) of the investment company concerned. Article 232 (Registration of Liquidator)
(1) The term "documents prescribed by the Presidential Decree" under Article 202 (2) of the Act other than each subparagraph shall be as follows: The Enforcement Decree of the Financial Investment Services and Capital Market Act
1. Where a corporate director becomes a liquidator, the articles of incorporation;
2. Where a person who is designated by the articles of incorporation becomes a liquidator, the articles of incorporation;
3. Where a liquidator is appointed at a general meeting of shareholders, copies of the minutes from the general meeting of shareholders and a written statement to certify the approval of inauguration; and
4. Where the Financial Services Commission appoints a liquidator, a written statement to certify the appointment.
(2) The term "documents prescribed by the Presidential Decree" under Article 202 (3) of the Act shall be as follows:
1. Where a corporate director becomes a liquidation supervisor, the articles of incorporation;
2. Where a person prescribed by the articles of incorporation becomes a liquidation supervisor, the articles of incorporation;
3. Where a liquidation supervisory is appointed at a general meeting of shareholders, copies of the minutes from the general meeting of shareholders and a written statement to certify the approval of inauguration; and
4. Where the Financial Services Commission appoints a liquidation supervisor, a written statement to certify the appointment.
Article 233 (Omission of Preemptive Notices to Creditor) (1) An investment company shall, when it intends to omit the preemptive notice to the creditors pursuant to the main sentence of Article 203 (4) of the Act, publish its intention and the matters on debts, including the details, repayment methods thereof, etc., through not less than two nationwide newspapers at least twice, and shall report the fact to the Financial Services Commission without delay.
(2) The term "cases prescribed by the Presidential Decree" under the proviso of Article 203 (4) of the Act shall mean those falling under any of the following subparagraphs:
1. Where an investment company is liable to execute the contract for the transaction of exchange-traded derivatives or over-the-counter derivatives;
2. Where any lawsuit likely to materially affect the property of an investment company is pending; or
3. Where there is any residual debt as a result of the borrowings, etc. under the proviso of Article 83 (1) of the Act.
Article 234 (Entry of Articles of Incorporation)
(1) The term "matters prescribed by the Presidential Decree" under Article 207 (1) 8 of the Act shall be as follows:
1. Type of investment limited liability company (referring to the type under the classification under Article 229 of the Act);
2. Investment assets (principal investment assets shall be separately indicated);
3. Matters on additional issuance and retirement of equity securities;
4. Where an existence period or reason for dissolution is set forth, the details thereof;
5. Matters on appraisal of the properties of an investment limited liability company and the calculation of base prices;
6. Matters on distribution of assets, etc. other than profits;
7. Outline (including matters on the calculation methods of remunerations and other commissions, and the payment and time thereof) of the delegation contract to be entered into with a collective investment manager, trust company and general fund administrator;
8. Matters on changes in a collective investment manager and trust company;
9. Matters on changes in articles of incorporation;
10. Fiscal term of an investment limited liability company;
11. Date on which an articles of incorporation are established; and
12. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of partners.
(2) The term "documents prescribed by the Presidential Decree" under Article 207 (3) of the Act other than each subparagraph shall be as follows:
1. Articles of incorporation; and
2. Certificates on the receipt and custody of contributions by banks and other financial institutions that are in charge of the receipt of contributions. Article 235 (Equity Securities)
The Enforcement Decree of the Financial Investment Services and Capital Market Act The term "others prescribed by the Presidential Decree" under Article 208 (2) 5 of the Act shall be as follows:
1. Symbol and number;
2. Time of the distribution of profits, etc.;
3. Conditions on the redemption of equity securities (in the case of the equity securities whose redemption is not permitted, referring to the effect that any claim for redemption shall not be made);
4. Where an existence period is set forth, the period; and
5. Name of the broker or dealer who has sold the equity securities. Article 236 (Entry of Articles of Incorporation)
(1) The term "matters prescribed by the Presidential Decree" under Article 213 (1) 8 of the Act shall be as follows:
1. Type of investment limited partnership company (referring to the type under the classification under Article 229 of the Act);
2. Investment assets (principal investment assets shall be separately indicated);
3. Matters on additional issuance and retirement of equity securities;
4. Where an existence period or reasons for dissolution are set forth, the details;
5. Matters on appraisal of the properties of the investment limited partnership company and the calculation of base prices;
6. Matters on distribution of assets, etc. other than profits;
7. Outline (including matters on the calculation methods of remunerations and other commissions, and the payment and time thereof) of the delegation contract to be entered into with a collective investment manager, trust company, and general fund administrator;
8. Matters on changes in the collective investment manager and trust company;
9. Matters on changes in articles of incorporation;
10. Fiscal term of an investment limited partnership company;
11. Date on which an articles of incorporation are established; and
12. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of partners.
(2) The term "documents prescribed by the Presidential Decree" under Article 213 (3) of the Act other than each subparagraph shall be as follows:
1. Articles of incorporation; and
2. Certificates on the receipt and custody of contributions by banks and other financial institutions that are in charge of the receipt of contributions. Section 3 Partnership-type Collective Investment Scheme Article 237 (Entry in Partnership Contract)
The term "others prescribed by the Presidential Decree" under Article 218 (1) 9 of the Act shall be as follows:
1. Type of investment limited partnership (referring to the type under the classification under Article 229 of the Act);
2. Investment assets (principal investment assets shall be separately indicated);
3. Matters on additional issuance and retirement of equity securities;
4. Matters on appraisal of the properties of investment limited partnership and the calculation of base price;
5. Matters on distribution of assets, etc. other than profits;
6. Outline (including the matters on the methods of calculating remunerations and other commissions, and the time and methods of payment) of a delegation contract to be entered into with a collective investment manager, trust company, and general fund administrator;
7. Matters on change in the collective investment manager and trust company;
8. Matters on alteration of the partnership contract;
9. Fiscal term of an investment limited partnership;
10. Date on which a partnership contract is prepared; and
11. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of partners.
Article 238 (Report on Dissolution)
A liquidator shall report to the Financial Services Commission the matters falling under each of the following subparagraphs within 30 days of the date of dissolution pursuant to the latter part of Article 221 (1) of the Act other than each subparagraph: The Enforcement Decree of the Financial Investment Services and Capital Market Act
1. Reasons for dissolution and the date of dissolution; and
2. Name and resident registration number of the liquidator (where a liquidation is a corporation, the name and business registration number thereof). Article 239 (Entry in Contract for Investment Undisclosed Association) The term "others prescribed by the Presidential Decree" under Article 224 (1) 9 of the Act shall be as follows:
1. Type of investment undisclosed association (referring to the type under the classification under Article 229 of the Act);
2. Investment assets (principal investment assets shall be specified separately);
3. Matters on additional issuance and retirement of equity securities;
4. Matters on appraisal of the properties of the investment undisclosed association and the calculation of base prices;
5. Matters on distribution of assets, etc. other than profits;
6. Outline of the delegation contract to be entered into with a collective investment manager, trust company, and general fund administrator (including the matters on the methods of calculating remunerations and other commissions and the time and methods of payment);
7. Matters on change in the collective investment manager and trust company;
8. Matters on alteration of the contract for investment undisclosed association;
9. Fiscal term of an investment undisclosed association;
10. Date on which a contract for the investment undisclosed association is prepared; and
11. Others prescribed and publicized by the Financial Services Commission as necessary for the protection of partners of undisclosed association. Chapter 3 Form of Collective Investment Scheme
Section 1 Form of Collective Investment Scheme
Article 240 (Minimum Investment Ratio of Collective Investment Scheme by Form) (1) The term "ratio prescribed by the Presidential Decree" under subparagraph 1 of Article 229 of the Act shall be 50/100.
(2) The term "securities prescribed by the Presidential Decree" under subparagraph 1 of Article 229 of the Act shall mean those falling under any of the following subparagraphs:
1. Where the assets falling under any of the following items account for not less than 50/100 of trust properties, collective investment properties or securitization assets, the beneficiary certificates, collective investment securities, or asset-backed securities: (a) Real estate;
(b) Rights related to real estate such as surface rights, easement, chonsegwon (rights to registered lease on a deposit basis), leasehold rights, rights to purchase condominium, etc.;
(c) Money receivables (limited to offering real estate as collateral) whose creditor is a creditor financial institution (including the corporations in the procedure of liquidation or bankruptcy in accordance with the Debtor Rehabilitation and Bankruptcy Act which have been financial institutions under the Act on the Structural Improvement of the Financial Industry) under subparagraph 1 of Article 2 of the Act on the Structural Improvement of the Financial Industry; and
(d) Special assets under subparagraph 3 of Article 229 of the Act (hereinafter referred to as "special assets");
2. Stocks issued by real estate investment companies under the Real Estate Investment and Trust Company Act;
3. Stocks issued by ship investment companies under the Ship Investment Company Act;
4. Stocks and bonds issued by a corporation aimed at carrying out infrastructure projects under the Act on Private Participation in Infrastructure; or
5. Equity securities of a corporation (excluding investment and loan companies for infrastructure under the Act on Private Participation in Infrastructure) established for investment through the methods of acquiring stocks and bonds issued by a corporation aimed at carrying out one infrastructure project under the Act on Private Participation in Infrastructure or acquiring loans extended to such corporation; or
6. Securities falling under items (d) through (g) of subparagraph 1 of Article 80 (1) of this Decree;
(3) The term "ratio prescribed by the Presidential Decree" under subparagraph 2 of Article 229 of the Act shall be 50/100.
The Enforcement Decree of the Financial Investment Services and Capital Market Act (4) The term "conditions prescribed by the Presidential Decree" under subparagraph 2 of Article 229 of the Act shall mean those falling under any of the following subparagraphs:
1. Development of real estate;
2. Management and improvement of real estate;
3. Lease of real estate;
4. Acquisition of the rights related to real estate such as surface rights, easement, chonsegwon (rights to registered lease on a deposit basis), leasehold rights, rights to purchase condominium, etc.; or
5. Acquisition of the money receivables (limited to offering real estate as collateral) whose creditor is a creditor financial institution (including corporations in the procedure of liquidation or bankruptcy in accordance with the Debtor Rehabilitation and Bankruptcy Act which have been financial institutions under the Act on the Structural Improvement of the Financial Industry) under subparagraph 1 of Article 2 of the Act on the Structural Improvement of the Financial Industry.
(5) The term "securities related to real estate prescribed by the Presidential Decree" under subparagraph 2 of Article 229 of the Act shall mean those falling any of the following subparagraphs:
1. Securities under subparagraph 1 of paragraph (2) (excluding item (d));
2. Stocks under subparagraph 2 of paragraph (2); or
3. Securities under subparagraph 6 of paragraph (2). (6) The term "ratio prescribed by the Presidential Decree" under Article 229 (3) of the Act shall be 50/100.
Article 241 (Collective Investment Scheme of Short-term Finance) (1) The term "short-term financial products prescribed by the Presidential Decree" under subparagraph 5 of Article 229 of the Act shall mean assets falling under any of the following subparagraph, which are denominated in Korean won:
1. Certificates of deposit whose remaining maturity is not more than six months;
2. Government bonds, municipal bonds, special bonds, corporate bonds (excluding stock- linked debentures under subparagraph 4 of Article 71 of the Act and corporate bonds issued
through private placement) and commercial papers: Provided, That the restriction of remaining maturities shall not apply to purchases of securities with repurchase agreement;
3. Notes (excluding commercial papers) under Article 79 (2) 5 of this Decree whose remaining maturity is not more than one year;
4. Short-term loans under Article 83 (4) of the Act;
5. Deposits in the financial institutions falling under each item of Article 79 (2) 5 of this Decree with maturity of up to six months; or
6. Collective investment securities of other collective investment schemes of short-term finance.
(2) The term "methods prescribed by the Presidential Decree" under subparagraph 5 of Article 229 of the Act shall mean those falling under any of the following subparagraphs:
1. Management with the methods of borrowing or lending securities shall be prohibited;
2. Sales of securities with repurchase agreement shall be made within the scope prescribed and publicized by the Financial Services Commission;
3. Weighted average