Any securities company or its officers and employees promise to make up for any loss arising in connection with securities transaction to their customers or the validity of any act of compensating for such loss (Invalidity).

Article 52 subparag. 3 of the Securities and Exchange Act (amended by Act No. 6176 of Jan. 21, 200; hereinafter the same) prohibits securities companies or their executives and employees, other than acts under subparagraphs 1 and 2 of Article 52, from impeding the protection of investors or the fairness of trading in connection with the issuance, sale and purchase or other transaction of securities, or undermining the credibility of the securities business, which are prescribed by the Ordinance of the Ministry of Finance and Economy. Article 13-3 subparag. 2 of the Ordinance of the Ministry of Finance and Economy provides that the act of compensating for all or part of losses incurred in the transaction concerned without justifiable grounds, which is one of prohibited acts by a securities company, etc. to compensate for losses incurred in connection with the securities transaction to customers. The promise or the act of compensating for losses that the securities company, etc. has damaged the essence of the securities market promoting economic activities by the risk management, resulting in a decision of investment decision, and thus is contrary to the principle of self-responsibility in the securities investment.

Article 103 of the Civil Act, Article 52 subparagraph 3 of the Securities and Exchange Act (amended by Act No. 6176 of Jan. 21, 2000), Article 13-3 subparagraph 2 of the Enforcement Rule of the Securities and Exchange Act (amended by Ordinance of the Ministry of Finance and Economy of Nov. 21, 200) (current deletion)

Supreme Court Decision 94Da38199 delivered on August 23, 1996 (Gong1996Ha, 2800) Supreme Court Decision 97Da47989 delivered on October 27, 1998 (Gong1998Ha, 2747) 99Da3075 delivered on June 11, 199 (Unpublished in the official gazette)

Plaintiff

Defendant

Seoul District Court Decision 98Na4450 delivered on April 30, 1999

The judgment of the court below is reversed and the case is remanded to the Seoul District Court Panel Division.

Article 52 subparag. 3 of the Securities and Exchange Act (amended by Act No. 6176 of Jan. 21, 200; hereinafter the same) prohibits securities companies or their executives and employees, other than acts under subparagraphs 1 and 2 of Article 52, from impeding the protection of investors or the fairness of trading in connection with the issuance, sale and purchase or other transaction of securities, or undermining the credibility of the securities business, which are prescribed by the Ordinance of the Ministry of Finance and Economy. Article 13-3 subparag. 2 of the Ordinance of the Ministry of Finance and Economy provides that the act of compensating for all or part of losses incurred in the transaction concerned without justifiable grounds, which is one of prohibited acts by a securities company, etc. to compensate for losses incurred in connection with the securities transaction to customers. The promise or the act of compensating for losses that the securities company, etc. has damaged the essence of the securities market promoting economic activities by the risk management and caused a decision on investment in the securities market, and thus is contrary to the principle of self-responsibility in the securities investment.

According to the reasoning of the judgment below, the court below rejected the defendant's allegation that the plaintiff's remaining balance of the plaintiff from June 1992 to June 31, 1992 was traded by shares at the non-party Korea Securities Co., Ltd. with the defendant's recommendation, and that the defendant, around January 11, 1995, recommended the plaintiff to additionally invest KRW 10,000,000 and additionally invested KRW 10,000,000 to the plaintiff. The defendant continued to suffer loss despite the plaintiff's additional investment, on January 5, 1996, the defendant did not make an unfair agreement prohibiting the plaintiff from trading shares at least KRW 15,00,000 with the defendant's share purchase agreement or an unfair agreement prohibiting the plaintiff from trading shares until December 31, 1996, and the defendant did not set up the above agreement to secure the plaintiff's unfair investment stock solicitation agreement as 15,000,000 won and 196,000 won.

According to the records, each of the contracts of this case appears to be a kind of profit guarantee that the defendant guarantees a certain amount of money to the plaintiff. However, in light of the circumstances in which the above statement was made, when the plaintiff suffered losses despite the plaintiff's additional investments, it is a promise to compensate the plaintiff's losses by compensating the plaintiff's losses according to the total account balance and additional investments at the time of additional investment. Meanwhile, since each of the contracts of this case was not prepared by the defendant in inducing the plaintiff's investment, it is difficult to view that the agreement of this case is subject to subparagraph 1 of Article 52 of the Securities and Exchange Act, which focuses on the prohibition of unfair solicitation. However, although the defendant asserted that the agreement of this case was in violation of subparagraph 1 of Article 52 of the Securities and Exchange Act and the agreement of this case was null and void, the court below asserted that the claim based on the agreement of this case was unfair in violation of the principle of self-responsibility, and there is room to view that the agreement of this case is invalid under Article 52 subparagraph 3 of the Securities and Exchange Act.

Therefore, the court below should have judged the validity of the agreement of this case after making a statement or giving the defendant an opportunity to present his opinion on this point. Nevertheless, the court below's rejection of the defendant's defense is erroneous by failing to exhaust all necessary deliberations or by misapprehending the legal principles on the validity of the agreement to compensate for losses.

Therefore, the judgment of the court below is reversed and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Jae-sik (Presiding Justice)