The method of calculating the damage suffered by an investor who has traded or entrusted the securities concerned according to the market price manipulation under Article 188-4 (2) 1 of the Securities and Exchange Act.

In calculating damages incurred by an investor who traded or entrusted the securities at the securities market or the KOSDAQ market based on the price formed by the market price manipulation under Article 188-4 (2) 1 of the Securities and Exchange Act, the difference between the market price formed by the investor and the market price actually purchased (the difference between the market price and the market price where the actual sale was made at a price higher than the market price) and the market price (the difference between the market price and the market price where the actual sale was made at a price higher than the market price) can be deemed as damages. The normal market price calculation method can be seen as the difference between the market price and the market price (the period of the case) price which was affected by the expert’s appraisal and the market price trend which would have been conducted without the market price manipulation, and the difference between the market price price and the market price index which was formed at the time of the purchase and the market price index after a certain period of time prior to or after the market price calculation, based on the most appropriate index of the market price index during the normal market price calculation period.

Articles 188-4(2)1 and 188-5(1) of the Securities and Exchange Act

Plaintiff 1 and 51 others (Law Firm Hannuri, Attorneys Kim Sang-won et al., Counsel for the plaintiff-appellant)

Hyundai Securities Co., Ltd. and one other (Law Firm Subdivision, Attorneys Cho Yong-hwan et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2002Na3343, 3350 delivered on December 9, 2003

The judgment below is reversed and the case is remanded to Seoul High Court.

1. As to Defendant 2’s assertion of mistake of facts about market price manipulation

The court below found, based on its adopted evidence, Defendant 2 conspired with Nonparty 1’s regular director of the Defendant Hyundai Securities Co., Ltd. and conducted market price manipulation in its decision. In light of the records, the court below’s findings of fact are just and acceptable, and there is no error of law such as misconception of facts due to violation of the rules of evidence.

2. As to the defendants' assertion on the calculation method of damages

A. In calculating the damages incurred by an investor who traded or consigned the securities at the securities market or the KOSDAQ market based on the price formed by the market price manipulation under Article 188-4 (2) 1 of the Securities and Exchange Act, the difference between the market price that would have been formed at the time of purchase if there was such market price manipulation (hereinafter referred to as “market price”) and the market price formed due to the market price manipulation and the price actually purchased by the investor (hereinafter referred to as “market price”) can be deemed as damages. The normal market price calculation method can be seen as the difference between the market price and the market price calculated based on the market price index and the pertinent market price index during the pertinent period before or after the pertinent market price manipulation. The normal market price calculation method can be seen as the difference between the market price price and the market price calculated based on the market price index and the pertinent market price index during the pertinent period.

The court below is just in finding the method of calculating the amount of damages, and there is no error in the misapprehension of legal principles as to the method of calculating the amount of damages due to market price manipulation.

B. However, the fact-finding by the court below on the time when the market price manipulation was first occurred is contradictory, and this point affected the calculation of damages by the court below.

In other words, Article 1-3(4) of the reasoning of the judgment of the court below, even though the time when the stock price manipulation of the Defendants first occurred on April 4, 1998 (the judgment below 12 pages) and Article 2-2(b)(2) of the same month, the appraiser 2 and the non-party 3 were employed on the 9th day of the same month as they are (the judgment below 18 pages). If the starting point of the stock price manipulation was not on the 9th day of the same month but on the 4th day of the same month, the closing period of the presumption period in the judgment of the court below has changed, and there is a possibility that the amount of damages to be compensated for the normal stock price even if the stock price was changed on the 1st day of the case immediately before the normal stock price calculation (the criminal judgment attached to the record is not attached to the criminal judgment attached to the record, which can be identified as the first date of the stock price manipulation, and the appraiser 2 and the non-party 3 were based on the first appraisal date of the same month.

Therefore, the fact finding by the court below concerning the first market price manipulation date, which is the basis of the financial economics analysis, is erroneous in the misapprehension of the rules of evidence, and the defendants' ground of appeal pointing this out is with merit.

3. Therefore, without examining the remainder of the grounds of appeal, we reverse the judgment below and remand the case to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yoon Jae-chul (Presiding Justice)