In addition, the aforementioned suitability principle and the duty to explain against a specific investor refers to an obligation to provide specific investors with information, such as its investment purpose, status of property, investment experience, etc., and to provide an explanation to the extent that it can be understood by a specific investor. As such, a quasi-investment advisory business entity that provides investment advice to many and unspecified persons may not be deemed to have an obligation under the principle of suitability and the duty to explain by analogical application of the provisions on the suitability principle or the duty to explain. In addition, in the absence of special circumstances where an unregistered investment advisory business entity agrees with an investment advisory business entity to assume the same obligation as the duty of investment advisory business entity under the Financial Investment Services and Capital Markets Act under a contract with an investment advisory business entity, it shall be deemed that the non-registered investment advisory business entity is subject to criminal punishment on the ground of a violation of the Financial Investment Services and Capital Markets Act, or that the duty under the principle of trust and good faith with such content

1. Regarding ground of appeal No. 1

In full view of the adopted evidence, the lower court acknowledged that the Defendant-Eato Co., Ltd., which reported quasi-investment advisory business pursuant to the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”) and Defendant 2’s main service provided to the Plaintiffs by the said Defendant as an investment expert pursuant to the terms and conditions is a securities broadcast that provides information on financial investment instruments to the general members of Defendant 2’s investment clubs, including the Plaintiffs. However, the Defendants did not register the investment advisory business and provided Defendant 2’s individual answers to the individual questions of the members through the Internet hostings at the investment clubs without registering the investment advisory business. In so doing, the lower court determined that the instant contract entered into between the Defendants and the Plaintiffs pursuant to the terms and conditions constitutes a quasi-investment advisory contract on the grounds that the experts belonging to the Defendant Company provided the investment advisory service by means of broadcasting, etc., and during that process, Defendant 2’s individual inquiries by

In light of relevant laws and records, the fact-finding and judgment of the court below are just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the expression of intent

2. Regarding ground of appeal No. 2

The Financial Investment Services and Capital Markets Act provides for the suitability principle (Article 46) and the duty to explain (Article 47) that a financial investment business entity is required to comply with when it solicits an ordinary investor to make an investment. Here, a financial investment business entity refers to “a person who obtains authorization from, or registers with, the Financial Services Commission on, a financial investment business under each subparagraph of Article 6(1) of the Financial Investment Services and Capital Markets Act (Article 8(1)).” Therefore, it cannot be deemed that the suitability principle and the duty to explain for a financial investment business entity is applicable to a quasi-investment advisory business that gives investment advice to many and unspecified persons through publications, publications, communications materials, broadcasting, etc., or an unregistered investment advisory business entity that conducts investment advisory business without registration.

In addition, the above suitability principle and the duty to explain against a specific investor refers to the duty to make suitable investment recommendations with information, such as investment purpose, financial situation, investment experience, etc. from the investor, and the duty to explain to the extent that the specific investor can understand the contents of financial investment instruments. As such, a quasi-investment advisory business entity that gives investment advice to many and unspecified persons cannot be deemed to have applied the suitability principle and the duty to explain by analogy or to have the same duty as that of the duty to explain.

In addition, barring any special circumstance where an unregistered investment advisory business entity entered into a contract with a person providing investment advisory services and agreed to assume the same obligation as that of an investment advisory business entity under the Financial Investment Services and Capital Markets Act, it cannot be said that the unregistered investment advisory business entity is subject to criminal punishment on the ground of violating the Financial Investment Services and Capital Markets Act, apart from being subject to criminal punishment on the unregistered investment advisory business entity’s violation of the Financial Investment Services and Capital Markets Act.

Therefore, the lower court’s determination that the Defendants did not recognize the duty imposed on an investment advisory business entity under the Capital Markets Act, and that agreement between the parties to recognize the same content cannot be acknowledged is justifiable. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal principles on the application or analogical application of the Capital Markets Act, or the legal principles on the duty

3. As to the third ground for appeal

For the reasons indicated in its holding, the lower court determined that there is no proximate causal relation between the Defendants’ act and the damages suffered by the Plaintiffs, on the ground that the Defendants violated their duty to provide investment information in good faith as a quasi-investment advisory business entity, and even if the Defendants violated such duty, the Plaintiffs purchased and sold financial investment instruments based on their own judgment by taking account of the information provided by Defendant 2, not the purchase and sale of financial investment instruments merely based on the information provided by Defendant 2.

In light of the relevant legal principles and records, such determination by the court below is just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors by misapprehending the legal principles on the duty of good faith or proximate causal relation.

4. As to the fourth ground for appeal

“False or exaggerated advertisement” under Article 3(1)1 of the former Act on Fair Labeling and Advertising (amended by Act No. 11050, Sep. 15, 201) refers to an advertisement that is likely to deceive or mislead consumers by falsely advertising any fact, and that is likely to undermine fair trade order. Whether an advertisement is likely to deceive or mislead consumers shall be objectively determined on the basis of the overall and extreme increase that ordinary consumers with ordinary caution receive the advertisement (see, e.g., Supreme Court Decision 2013Da22553, Nov. 14, 2013).

Considering the fact that it is impossible to accurately forecast the investment in financial investment instruments and that it is also impossible to guarantee only a large amount of profit without any loss in the course of investing in financial investment instruments, the lower court determined that the advertising made by the Defendants cannot be deemed to be a large profit if it is made only according to the information provided by Defendant 2.

In light of the above legal principles and records, the fact-finding and judgment of the court below are justified, and there is no error of law by misunderstanding the legal principles as to false or exaggerated advertisements.

5. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Shin (Presiding Justice)