A. As to the Prosecution (Defendant 1 of the Supreme Court’s judgment)

The sentence of the lower court (ten months of imprisonment, two years of suspended execution) is too unhued and unreasonable.

B. Defendant 1

1) misunderstanding of facts and misunderstanding of legal principles (a violation of Defendant 1’s prohibition of use of undisclosed information)

A) The Defendant purchased the instant shares for the purpose of aiding and abetting the long-term investment perspective for the formation of the property of his children and the acquisition of shares necessary for delisting of Nonindicted Co. 2, and did not intend to obtain market price gains by using undisclosed information, which is the tender offer of the stocks of Nonindicted Co. 2, and did not intend to obtain gains from market price gains.

B) Therefore, this part of the facts charged does not constitute an element of “use of undisclosed information” or should be pronounced not guilty on the ground that there is no intention to do so.

2) Illegal calculation of the surcharge

The court below determined a surcharge by deeming the profits that belongs to the defendant and the non-indicted 3's four children as criminal proceeds, which is illegal due to mistake of facts and misapprehension of legal principles about criminal proceeds subject to the collection of the surcharge.

C. Defendants (e.g., misappropriation)

Each sentence of the lower court (Defendant 1: Imprisonment with prison labor for 10 months, suspended execution for 2 years, and Defendant 2 Company (Defendant 1 Company in the judgment of the Supreme Court: fine of 5 million won) is too unreasonable.

2. Determination

A. Judgment on the mistake of facts and misapprehension of legal principles by Defendant 1

1) Facts of recognition

According to the evidence duly admitted and examined by the court below, the following facts are recognized:

A) Division of Nonindicted Co. 2 (former Co. 2, Ltd.; hereinafter “former Non-Indicted Co. 2”)

(1) From around 2007, the former Nonindicted Co. 2 reviewed the improvement of the governance structure by means of human division for the purpose of business expansion, capital inducement, etc. Around December 2007, ○ Accounting Corporation received a review report on the improvement of the governance structure from ○ Accounting Corporation, and then constituted the “T/F team” to establish and implement a plan for the improvement of the governance structure around March 2008.

(2) On April 11, 2008, the former Nonindicted Co. 2 decided to divide the company into the board of directors. On May 29, 2008, the temporary general meeting of shareholders was held to approve the plan for the division of the former Nonindicted Co. 2’s personally divided company (hereinafter “Defendant 2”) and Nonindicted Co. 2’s newly incorporated company (hereinafter “Nonindicted Co. 2”). After completing the division registration on July 3, 2008, the registration of division was completed on July 3, 2008, the former Nonindicted Co. 2 concluded an advisory contract for the change and listing of △△ Investment Securities and Defendant 2, and the re-listed of Nonindicted Co. 2 on July 29, 2008. < Amended by Act No. 8857, Jul. 29, 2008>

B) Determination on the tender offer for delisting of Nonindicted Company 2

(1) Unlike the initial expectation that “the share price of Nonindicted Company 2, a business company, has been formed higher than the share price of Defendant 2, a holding company, and the share price has been formed at a rate of 6:4: The Defendant, who is the representative director of Defendant 2’s company, was unable to achieve the initial purpose of attracting external investments through personnel division, as the share price of Nonindicted Company 2 was formed lower than the share price of Defendant 2’s company, thereby promoting measures to convert Nonindicted Company 2, a business company, into a listed subsidiary and delisting it. On August 208, 2008, the Defendant instructed Nonindicted Company 4, a vice president of Defendant 2, to review the method of delisting the tender offer.

(2) In the process, on August 18, 2008, Defendant 2, Defendant 2, and Defendant 2, etc. submitted a proposal of “PMO pro rata” to include Nonindicted Company 2 into Defendant 2’s full subsidiaries by closing their entire stock purchase and listing, and Nonindicted 4 reported this to the Defendant, and the Defendant instructed Nonindicted 5’s head of the fund team to grasp the funds that Defendant 2 can secure.

(3) On August 24, 2008, the Defendant received a report from Nonindicted 4 that the funds required for the tender offer amounting to KRW 70 billion, and reviewed the method of tender offer and investment in kind by delisting. On August 24, 2008, the Defendant considered the method of tender offer and investment in kind as well as the method of delisting. On August 2008, the Defendant first reviewed the method of tender offer for Nonindicted Company 2’s stocks with a decrease in the funds anticipated to be required for the tender offer due to the decline in the stocks

(4) Around August 2008, Defendant 2 decided to delisting Nonindicted Company 2 through a public tender offer. Around August 29, 2008, Nonindicted Company 6’s executive director, upon receiving the Defendant’s order, proposed a consultation agreement with respect to the tender offer of Nonindicted Company 2’s stocks on △△ Investment Securities. Defendant 2 concluded a consultation agreement with Nonindicted Company 2 on September 5, 2008, regarding “listing through conversion of holding companies and the tender offer, etc. for Nonindicted Company 2’s stocks.”

(5) After the Defendant decided to proceed with the tender offer at the end of August 2008, the Defendant instructed the head of Nonindicted 13 Strategic Planning Team to review the board schedule of the agenda for the tender offer, and ordered on September 4, 2008, “the board of directors on September 19, 2008” to hold the agenda for the tender offer on September 19, 2008.

(6) On September 19, 2008, Defendant 2 approved the tender offer of Nonindicted Company 2’s shares in a temporary society, and announced the tender offer of Nonindicted Company 2’s shares on the bulletin board of the Securities Futures Exchange (autonomous disclosure) at around 11:25 on the same day, and submitted the tender offer statement and the tender offer prospectus for Nonindicted Company 2’s shares to the Financial Services Commission on September 22, 2008.

(1) - Majors

2. The tender offer period: Defendant 2: September 22, 2008 and October 13, 2008: The tender offer period: the tender offer period: on September 22 and 2008; on May 1, 2008: The number of expected shares of Non-Indicted 2: 37,000 won per ordinary share: The number of expected shares of public tender offer on June 1, 200: on September 2, 2008: on September 22, 2008: on September 13, 2008: on September 1, 200: on September 2, 2008: on September 22, 2008: on September 2, 2008: on September 22, 2008: on September 22, 2008: on September 1, 2008: on September 1, 2009.

C) Calculation of the price fluctuation and tender offer price of Nonindicted Company 2

(1) In determining the price for the tender offer of Nonindicted Company 2’s shares, Defendant 2 calculated KRW 37,000 per share by adding each premium of KRW 25.66%, 12.12%, and 12.12% to the market price (for the latest one month, one week, and the recent date).

(2) On July 29, 200, the stock price of Nonindicted Co. 2, 208, 200 won per share after the split-off, entered KRW 20,000 per share on September 1, 2008, which was the date of re-listed after the split-off, and then the average stock price per share until the information on tender offer was disclosed, was KRW 32,800 per share, but the tender offer information was published up to KRW 36,200 per share on September 19, 2008.

C) Defendant 2 and Nonindicted Company 2’s purchase of shares

(1) On June 16, 2008 and June 20, 2008, the Defendant divided shares of KRW 1 billion in the Defendant’s name, KRW 750 million in each of the accounts in the name of Nonindicted 8 and KRW 9, KRW 300 million in the name of Nonindicted 3’s children, KRW 600 million in the accounts of KRW 11 and KRW 120 million in total, KRW 50 million in the accounts of Nonindicted 3’s children, KRW 205 billion in the shares of Nonindicted 2.5 billion in the accounts of KRW 205 billion in total, KRW 205 billion in the shares of Nonindicted 3’s children, KRW 50 million in the shares of Nonindicted 20, KRW 500 in each of the above accounts, KRW 205 billion in the shares of Nonindicted 3’s 5 billion in total, KRW 608 billion in the shares of each of the above 200 billion in the shares of Nonindicted 3’s 2.6 billion in the shares of the Defendant 2.

(2) After that, the Defendant: (a) was pointed out by the Asset Management Company; (b) terminated the said private equity fund on August 8, 2008; (c) on August 12, 2008, in order to transfer the shares of Nonindicted Company 2 in the name of their children to the account in the name of their children; and (d) opened a new account in the name of their children on August 13, 2008 to put the shares included in the said private equity fund into the account in the name of their children on August 13, 2008; and (b) in the process, the Defendant provided KRW 115,294,107 to Nonindicted 8 and 9, respectively.

(3) On September 3, 2008, with the consent of Nonindicted 3, the Defendant opened a securities account in the △△△△ branch in his name, deposited one billion won in his own money on the same day, and then purchased 34,910 shares of Nonindicted Company 2 in the name of Nonindicted 3 from September 3, 2008 to September 18, 2008 through the said securities account, such as the list of crimes in the attached list.

(4) On September 2, 2008, the Defendant and Nonindicted 3 deposited KRW 250 million in each account of each other’s children established in the securities of the △△△ in question (as above, the Defendant took the form of cross-loan in order to avoid the gift tax problem against their children). During this period from September 10, 2008 to November 11, 208, the Defendant purchased Nonindicted 8 (4,700 shares), Nonindicted 9 (4,50 shares), Nonindicted 11 (4,00 shares), Nonindicted 3’s children, and Nonindicted 12 (4,50 shares) each in the name of each other’s children.

2) Determination

A) In full view of the following circumstances acknowledged by the above facts and the evidence duly adopted and investigated by the lower court, the Defendant, as the representative director of Defendant 2, was aware of the undisclosed information, which was the tender offer of Nonindicted Company 2’s stocks generated inside the Defendant 2, and the Defendant purchased Nonindicted Company 2’s stocks in the name of Nonindicted 3 and his children and children, using the information prior to disclosure.

(1) The Defendant, as the representative director of the former Nonindicted Company 2, and the Nonindicted Company 2 after the division, was listed after the division and division of the Company, was difficult to achieve the initial objective of attracting investment, and subsequently, was decided to make a direct tender offer of Nonindicted Company 2’s shares as a detailed implementation plan while promoting the delisting of Nonindicted Company 2. Although the price of the tender offer of Nonindicted Company 2’s shares was set at KRW 37,00 per share, the Defendant purchased Nonindicted Company 2’s shares at an average of KRW 29,327 per share below the tender offer price prior to the disclosure of the said tender offer information.

(2) The Defendant stated, at the prosecution, that “The stock price at the time of the purchase was a single motive for the purchase. Since the stock price drops, if a large number of shares can be purchased, it would be possible to form more assets for his children.” On September 2, 2008, Defendant 2’s regular board of directors of the company on September 2, 2008, “The stock price is high, as there is a defense such as tender offer during the process of improving the governance structure,” the market is responding to the recent response. However, the performance of Nonindicted Company 2 itself is good, so it would be expected to be improved in the future.” In light of this, the Defendant anticipated that if the public tender offer of Nonindicted Company 2, an undisclosed information, was made at the time of the purchase of the instant shares, it would increase the stock price, and acquired the instant shares before the disclosure of the said information.

(3) When the Defendant ordered Nonindicted 7 (Attached Crime List) to purchase the shares of Nonindicted Company 2, the Defendant continuously purchased the maximum limit of KRW 30,00 per share within 30% of the daily trading volume, and if there is no separate situation, the accounts of the children shall be purchased from 16 days ( September 4, 2008) and purchased the shares of Nonindicted Company 2 from the accounts in the name of the children to 30% ( September 10, 2008) and purchased the shares of Nonindicted Company 2 within the limit of KRW 32,00,00 in purchasing the shares of Nonindicted Company 3 and four separate accounts in the name of the children ( September 11, 2008). The Defendant specifically instructed the purchase price, quantity, and period of the shares of Nonindicted Company 2, including the purchase of the shares of Nonindicted Company 3 and four separate accounts in the name of the children.

(4) The fact that the Defendant provided to Nonindicted 7 “the purchase volume within the limit of 30% of the daily trading volume” is to prevent any abnormal trading from being recovered when trading exceeds 30% of the daily trading volume according to the market monitoring work guidelines of the Korea Exchange.

(5) The Defendant asserts that he purchased the instant shares for the purpose of seeking assistance in securing shares for the delisting of Nonindicted Company 2. The Defendant appears to have purchased shares within the scope of the tender offer price (37,000 won per share) if it was for the purpose of assisting in the tender offer. However, the Defendant ordered the purchase of shares within the amount of KRW 32,00,000, which is the lower amount. Such purchase behavior is inconsistent with the aforementioned assertion.

(6) From the end of August 2008, the Defendant deposited KRW 250 million in each account in the name of the Defendant and Nonindicted 3’s children on September 2, 2008, immediately after the creation of nonpublic information, which was the tender offer of Nonindicted Company 2’s shares, from Defendant 2’s inside, and around the end of August 2008. On September 3, 2008, the Defendant opened a borrowed securities account in the name of Nonindicted 3, and deposited KRW 1 billion on the same day, and purchased Nonindicted Company 2’s shares by September 18, 2008, which was prior to the disclosure of information on the said tender offer.

(7) In light of the fact that the Defendant purchased shares in the name of his children in accordance with the independent judgment or without any prior consultation with Nonindicted 3, and that the written statement submitted to the Financial Supervisory Service stating, “The use of undisclosed information in relation to the tender offer would have been at issue, but the additional purchase of Non-Indicted 2’s shares was suspended thereafter,” the Defendant was aware that there was a violation of the Securities and Exchange Act due to the use of undisclosed information. Nevertheless, the Defendant purchased Non-Indicted 2’s shares by September 18, 2008 through the securities account in the name of Non-Indicted 3, which is the next securities account.

B) Therefore, this part of the facts charged is found guilty, and the judgment of the court below with the same conclusion is just, and the defendant's assertion is without merit.

B. Determination as to the assertion that the calculation of the surcharge is unlawful

1) Article 188-2(3) and Article 188-2(1)1 of the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007) provides that "information on the enforcement or suspension of tender offer" shall not be used or allowed any other person to use such information in connection with the sale and purchase of securities subject to tender offer. The use of undisclosed information prohibited under the above provision is irrelevant to whether it is for its own account for the purpose of pursuing its own interest or for another person's interest (see Supreme Court Decision 2009Do1374, Jul. 9, 2009).

2) According to the evidence duly adopted and examined by the court below, the defendant and non-indicted 3 deposited a total of KRW 500 million in each other's account of each other's children on September 2, 2008 and deposited KRW 500 million in mutual crossing each other's children, and it is recognized that the defendant and non-indicted 3 purchased the shares of non-indicted 2 with the above funds.

However, as seen earlier, the above shares in the name of the above children are purchased by the defendant using undisclosed information, regardless of the intention of the defendant, which is the tender offer of the non-indicted 2's shares, regardless of the intention of the non-indicted 3 and his own decision. In light of Article 10 (1) of the Act on Regulation and Punishment of Criminal Proceeds Concealment, where it is deemed that it is not appropriate to confiscate the property to be confiscated pursuant to Article 8 (1) or due to the nature of the property, the situation of its use, the existence of the right of a person other than the criminal, or other circumstances, the equivalent value of the property may be collected from the criminal. In addition, regardless of whether the above shares belongs to the defendant and the non-indicted 3's children, if the defendant purchased the shares in this case using undisclosed information, the profits acquired thereby may be collected from the defendant (in addition, in light of the relationship between the defendant and the non-indicted 3, the defendant and the non-indicted 3 take the form of crossing the shares to their children and purchased the shares in this case with the funds purchased.)

3) Therefore, Defendant 1’s above assertion is without merit.

C. Determination on the grounds of unfair sentencing by the prosecutor and the Defendants

1) Determination as to Defendant 1

A) Use of undisclosed information, such as the instant crime, and violation of the duty to report owned stocks, etc. are likely to undermine the transparency and soundness of the securities transaction market, and the supervisory organization’s market monitoring function, thereby undermining the trust in the company and the market and causing damages to many securities investors, and thus, it is inevitable to punish them accordingly.

나) 한편, 피고인은 구 공소외 2 회사를 창립하여 국내 유수의 기업으로 성장시켜 왔고, 지배구조 개선을 위한 회사분할 후 새로 설립된 공소외 2 회사의 상장폐지를 추진하는 과정에서 이 사건 범행에 이르게 된 것으로 그 경위에 참작할 사정이 있는 점, 2008. 11. 28. 공소외 2 회사 주식 34,910주를 매도하여 얻은 차익으로 피고인 2 회사 주식 4,680주를 매수한 다음 이를 ◎◎◎◎◎장학재단에 기부한 점 등을 피고인에게 유리한 정상으로 참작하고, 기타 피고인의 증권거래법위반 전과(벌금형 1회) 및 이종전과(벌금형 3회) 관계, 연령, 경력, 범행경위, 범행 후의 정황 등 이 사건 기록과 변론에 나타난 양형의 조건이 되는 여러 사정들을 종합하여 보면, 원심의 형이 너무 무겁거나 가벼워서 부당하다고 판단되지 아니한다.

C) Therefore, the prosecutor and Defendant 1’s above assertion are without merit.

2) Determination as to Defendant 2 Company

A) In full view of the status of Defendant 1’s possession in the Defendant Company and other circumstances, which are the conditions for sentencing as shown in the records and arguments, the lower court’s punishment is too unreasonable, as it undermines the market monitoring function of supervisory agencies. In so doing, it is not determined that the lower court’s punishment is too unreasonable.

B) Therefore, Defendant 2’s above assertion is without merit.

3. Conclusion

Therefore, the appeal by the defendants and the prosecutor is dismissed in accordance with Article 364 (4) of the Criminal Procedure Act since the appeal by the defendants and the prosecutor is groundless.

[Attachment]

Judges Kim Sung-ho (Presiding Judge) (Presiding Judge)

Note 1)

2) The Defendant and Nonindicted 3 are the same text of the law department of △△ University and are closely related to the members of the same marina club.

3) The criteria for trading volume under Article 9(1) and attached Table 3 of the Korea Exchange’s Guidelines for Market Surveillance Work (Recovery of Abnormal Transactions) that one of the “standards for Recovery of Abnormal Transactions” is defined as follows: The cumulative trading volume (Cumulative Trade volume) shall be the base value for cumulative trading volume, and the upper 20 account transfer rate shall be at least 30 per cent (35 per cent on the KOSDAQ market).