The meaning of "important matters" under Article 429 (1) 1 of the Financial Investment Services and Capital Markets Act;

Articles 429(1)1 and 430(1) of the Financial Investment Services and Capital Markets Act

Dongbu Securities Co., Ltd. (Law Firm LLC, Attorneys Lee Dong-sik et al., Counsel for the defendant-appellant)

Securities and Futures Commission

Seoul High Court Decision 2013Nu46626 decided March 20, 2014

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. The Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”) provides that an underwriter, etc. of securities may make a false description or representation of a material fact in a registration statement (including a corrective registration statement and documents to be submitted) or may impose a penalty surcharge not exceeding 3/100 of the value of the securities publicly offered or sold, if he/she intentionally or by gross negligence commits a violation (Articles 429(1)1 and 430(1)).

The purpose of the Financial Investment Services and Capital Markets Act is to protect investors by offering accurate information on issuing companies and securities to investors at the time of public offering of securities, thereby eliminating the name of information that may arise between the issuing company and investors. In light of such intent, the term “material fact” under the aforesaid provision refers to matters necessary for fair trade of securities and protection of investors, which may have a significant impact on the investor’s reasonable investment judgment or value of securities.

2. Comprehensively taking account of the adopted evidence, the lower court acknowledged the Plaintiff’s participation in the company’s representative director and underwriter of securities in relation to the issue of new shares in the amount of KRW 12,00,000 (hereinafter “instant subscription for new shares”) issued on January 28, 201 by the public offering of forfeited shares, and the amount of KRW 28,680,00,000 (hereinafter “instant subscription for new shares”) after the Plaintiff’s allocation of shareholders, and on the grounds that the Plaintiff borrowed KRW 201,200,000 (hereinafter “instant subscription for new shares”), on September 28, 2010 to provide the instant subscription for new shares, submitted a registration statement to the Financial Services Commission on January 14, 201, the final corrective statement (hereinafter “instant registration statement”). On the ground that the Plaintiff’s borrowing KRW 201,200,000,000 for KRW 20,000 (hereinafter “the instant subscription”).

(4) Based on the above factual basis, the lower court unilaterally held that: (i) the number of shareholders, the largest shareholder of the relevant company, is 3 billion won in its capital stock with loan funds of KRW 27 billion; (ii) the issue of whether the amount of KRW 2 billion in the loan funds of KRW 27 billion has been converted to the capital is likely to have an impact on the value of stocks of the relevant company; and (iii) the largest shareholder of the issuing company is likely to exercise its voting rights or management rights on important matters of the company subject to the resolution of the general meeting of shareholders or the board of directors if the largest shareholder exercises voting rights in the direction favorable to him/her; (iv) the fact that the largest shareholder of the relevant company, which is the largest shareholder of the relevant company, can only be considered as an important factor in determining whether the largest shareholder's equity interest in the loan funds of KRW 1,700,000,000,000,000,000,000,00.

In light of the above legal principles and records, the judgment of the court below is just, and contrary to the allegations in the grounds of appeal, there is no error of law by misunderstanding the legal principles as to material facts and gross negligence under Articles 429(1)1 and 430(1) of the Capital Markets Act, which affected the conclusion

3. Conclusion

Therefore, the appeal is 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 Lee Ki-taik (Presiding Justice)