[1] Whether the act of a stock company’s act of compiling and publicly announcing financial statements based on the estimated sale price of the product raised only on the nominal basis, based on the estimated sale price and net realization price of the product, constitutes Article 20(1)8 of the former Act on External Audit of Stock Companies (affirmative)

[2] The case holding that since the deletion of Article 69 (1) 4 (b) of the "Regulations on Issuance, Public Disclosure, etc. of Securities", which provides for a corporation's duty to report on a certain monetary lending decision, cannot be viewed as arising from reflective consideration that the punishment for the violation of the above provision itself is unfair, there is punishment for the violation committed before the abolition of the above provision

[3] The meaning of "the purpose of inducing trade transactions" under Article 188-4 (2) of the former Securities and Exchange Act concerning prohibition of market price manipulation, etc. and the meaning of "the trading that misleads a person to know as if the securities transaction form a active trading or changes the market price" under subparagraph 1 of the same Article of the same Act, and the criteria for determining whether the trading constitutes such "the trading

[1] According to the provisions of Articles 13, 20(1)8, and 13 of the former Act on External Audit of Stock Companies (amended by Act No. 6991 of Dec. 11, 2003), each provision of Articles 2, 3, and 58 of the corporate accounting standards applied at the time of the accounting standards under the provisions of Article 13 of the same Act, such as Articles 2, 3, and 58 of the same Act, a stock company shall increase the sales price of its products on the pretext without an intention to trade at the price actually increased in order to reduce the loss of inventory assets, and make an appraisal of inventory assets on the basis of the estimated sales price calculated on the basis of the increased sales price and the net realization price, and prepare and publicly announce such financial statements on the basis of the above increased sales price, the act of preparing and publicly announcing the financial statements constitutes "when preparing and publicly announcing false financial statements in violation of the accounting standards" under Article 20(1)8 of the same Act. The above false financial statements can be seen as an expression of the important matters of Article 186-2 of the former Securities and Exchange Act.

[2] The case holding that the deletion of Article 69 (1) 4 (b) of the Regulation on the Issuance and Public Disclosure of Securities, which provides for a corporation's duty to report on a certain monetary loan shall not be deemed to have arisen from reflective consideration that the punishment for the violation of the previous provision is unfair due to the change of legal ideology, and thus, the punishment for the violation committed before the repeal of the above provision shall not be deemed to have ceased to exist

[3] The crime of violation of Article 188-4 (1) of the former Securities and Exchange Act (amended by Act No. 7025 of Dec. 31, 2003) is established when a person in collusion with another person at the same time as the sale or purchase he/she makes it possible to mislead him/her into misunderstanding that the market price was formed by the principle of natural demand and supply in the securities market. The purpose of Article 188-4 (2) of the former Securities and Exchange Act (amended by Act No. 7025 of Dec. 31, 2003) is to attract investors to trade securities by misunderstanding that the market price was formed by the principle of natural demand and supply in the securities market. The purpose of Article 188-4 (1) of the former Securities and Exchange Act (amended by Act No. 7025 of Dec. 31, 2003) is to determine the market price and trading volume to be formed in the free competition market according to the normal demand and supply of securities, and its purpose and purpose is to determine whether there exists any potential or possibility of market price increase.

[1] Articles 13 and 20(1)8 (see current Article 20(3)6 of the former Act on External Audit of Stock Companies (amended by Act No. 691 of Dec. 11, 2003), 186-2 (see current Article 159 of the Financial Investment Services and Capital Markets Act) and 211 subparag. 2 [2] of the former Securities and Exchange Act (amended by Act No. 7025 of Dec. 31, 2003), Article 186 (2) of the former Securities and Exchange Act (amended by Act No. 7025 of Dec. 31, 2003), Article 211 subparag. 2 of the former Securities and Exchange Act (see current Article 44 subparag. 13(d) of the Financial Investment Services and Capital Markets Act) / [2] Article 186 of the former Securities and Exchange Act (amended by Act No. 7015 of Dec. 31, 2003; see current Article 20 subparag. 14(1) of the Financial Investment Services and Capital Markets Act

[2] Supreme Court Decision 2004Do5890 Decided January 14, 2005 (Gong2006Sang, 205) Supreme Court Decision 2009Do12930 Decided March 11, 2010 (Gong2010Sang, 776)/ [3] Supreme Court Decision 2001Do606 Decided December 12, 2003 (Gong2003Do691 Decided November 10, 2005) (Gong2003Do4320 Decided May 11, 2006)

Defendant 1 and two others

Defendants and Prosecutor

Attorneys Son Ji-yol et al.

Seoul Central District Court Decision 2002No10572 Decided September 14, 2007

All appeals are dismissed.

The grounds of appeal are examined.

1. As to the Defendants’ grounds of appeal

A. As to the violation of the Act on External Audit of Stock Companies and the false entry in business reports

According to each provision of Articles 13, 20(1)8 of the former Act on External Audit of Stock Companies (amended by Act No. 6991 of Dec. 11, 2003; hereinafter “former External Audit Act”) and each provision of Articles 2, 3, and 58 of the corporate accounting standards applied at the time of the instant case based on the accounting standards under Article 13 of the former External Audit Act, the act of a stock company preparing and publicly announcing inventory assets according to the estimated sale price calculated on the basis of the increased sales price and net realization price calculated on the basis of the increased sales price, without its intent to trade at the actual price in order to reduce the loss of inventory assets, and the act of preparing and publicly announcing such financial statements falls under “when it prepares and publicly announces false financial statements in violation of accounting standards” under Article 20(1)8 of the former External Audit Act and Article 13 of the former Securities and Exchange Act (amended by Act No. 7825, Dec. 31, 2003; hereinafter the same shall apply).

Examining the aforementioned legal principles, the lower court’s judgment, and the evidence duly admitted by the lower court in light of the records, on the ground that the Defendants prepared and published false financial statements in violation of the accounting standards and made false statements concerning material facts in the business report with the aim of overappropriating net income for the current term, unlike the actual circumstances as indicated in its reasoning, the lower court’s judgment that found the Defendants guilty of all these facts charged of this part of the facts charged is somewhat inappropriate, but its conclusion is acceptable.

In order to more accurately assess inventory assets, the Defendants asserted that the estimated sale price was calculated based on the estimated sale price at that time as of March 2002 in the future, and that it was merely an increase in the sale price in December 2001, since the inventory assets were assessed based on the previous sale price in December. However, in light of the evidence and records duly adopted by the court below, the Defendants merely calculated the estimated sale price as of December 2001 and calculated the estimated sale price based on the estimated sale price at the time of March 2002, as alleged in the previous accounting method, and as long as the Defendants prepared and publicly announced the financial statements based on the estimated sale price at that time based on the false increase in the sale price at that time, the Defendants did not have any influence on the fact-finding that the above estimated sale price at a certain time after the increase in the sale price at that time, and that there were no errors in the misapprehension of the legal principles as to the presumption sale price at the time of March 201.

Ultimately, the court below did not err in the misapprehension of legal principles as alleged in the grounds of appeal, and the remainder of the grounds of appeal are merely criticisming the selection of evidence and fact-finding belonging to the court below's exclusive authority, which is a fact-finding court

B. As to the violation of the former Securities and Exchange Act due to the violation of the obligation to report the lending decision

The provisions of Article 1(2) of the Criminal Act shall apply to cases where the evaluation of acts deemed a crime in the past has changed depending on the changes in the legal ideology which served as the reason for the enactment of the penal law, and thus the evaluation thereof has been recognized and punished as a crime is unfair, or where the Acts and subordinate statutes have been amended or amended to cope with the special needs at that time due to changes in other circumstances, not changes in the legal ideology. In cases where the Acts and subordinate statutes were amended or amended to cope with the special needs at that time, the punishment shall not be imposed on the situations at the time of the acts, even if the Acts and subordinate statutes were amended or amended, it shall not be deemed to have been abolished (see Supreme Court Decision 2004Do5890, Jan. 14, 2005).

As recognized by the court below, Article 69 (1) 4 (b) of the Regulations on the Issuance and Public Disclosure of Securities, which provides for the obligation to report a certain amount of money lending pursuant to the FSC Notice No. 2005-65 of December 29, 2005, which was established after this part of the crime, was deleted. However, the amendment of these Acts and subordinate statutes significantly enhance the management transparency of the company due to the implementation of the above duty to report, while the need to reduce the burden of various disclosure and public notification by the increased listed companies due to changes in economic conditions, it can be deemed as a result of the policy measures to cope with it, and it cannot be deemed that the punishment itself under the previous provisions is unfair due to the changes in the legal ideology, and therefore, the punishment for the violation of this case by Defendant 2 Co., Ltd. (hereinafter referred to as the "Defendant Co., Ltd.") committed prior to the abolition of the above provision is not extinguished.

The judgment of the court below with the same purport is just and there is no error in the misapprehension of legal principles as alleged in the grounds of appeal.

The remaining arguments in the grounds of appeal are nothing more than criticism on the selection of evidence and fact-finding which belong to the lower court’s full power as a fact-finding court and do not constitute legitimate grounds of appeal.

2. As to the Prosecutor’s Grounds of Appeal

The crime of violation of Article 188-4 (1) of the former Securities and Exchange Act is established when a person in collusion with another person at the same time as his/her own sale or purchase with the intent to mislead another person to make a wrong judgment. "the purpose of inducing a trade" under Article 188-4 (2) of the former Securities and Exchange means the purpose of inducing investors to trade securities by misunderstanding that the market price has been formed by the natural demand and supply principles in the securities market. "The purpose of this Article is to misleads investors that the market price has been formed in accordance with the principle of supply and demand in the securities market or to change the market price" under subparagraph 1 of the same Article refers to 00 transactions which are likely to cause an artificial change in the market price and trading volume to be formed in the free competition market according to normal supply and demand. The purpose of the above provision is to determine whether there is a difference in the market price or trading volume before and after the issuance of the securities market, and whether there is a difference in the market price or trading volume before and after the issuance of the securities 20.

Examining the above legal principles, the lower court’s judgment, and the evidence duly admitted by the lower court in light of the records, the lower court’s determination of not guilty of all of the facts charged against Defendant 1 and Defendant Company on the grounds indicated in its reasoning is justifiable.

The Supreme Court Decision 2002Do1696 Decided July 22, 2002, etc. cited in the ground of appeal is inappropriate to be invoked differently from the case of this case, and there is no error of misunderstanding the legal principles as otherwise alleged in the ground of appeal in the judgment below, and the remainder of the grounds of appeal in the grounds of appeal is nothing more than criticism of the selection of evidence and fact-finding which belong to the exclusive jurisdiction of the court below, and thus,

3. Conclusion

Therefore, all appeals by the Defendants and prosecutor against Defendant 1 and Defendant Company are dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jeon Soo-ahn (Presiding Justice)