Whether the act of recommending the purchase of securities by investment advisory business entities, securities analysis entities, persons engaged in press media, investment-related web site operators, etc. without indicating their interests in the securities held prior to the purchase and sale of such securities after the recommendation constitutes “act of using unlawful means, plans, or tricks” under Article 178(1)1 of the Financial Investment Services and Capital Markets Act and “use of deceptive schemes” under Article 178(2) of the same Act (affirmative)

Article 178(1)1 and (2) of the Financial Investment Services and Capital Markets Act; Article 443(1)8 and 9 of the former Financial Investment Services and Capital Markets Act (Amended by Act No. 11845, May 28, 2013);

Supreme Court Decision 2014Do6910 Decided March 30, 2017 (Gong2017Sang, 930)

Defendant

Prosecutor

Law Firm Squa Law Firm, Attorneys Lee Jae-hoon et al.

Seoul High Court Decision 2014No1890 decided December 19, 2014

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

The grounds of appeal are examined.

1. As to the assertion of mistake of facts

Based on the circumstances indicated in its reasoning, the lower court determined that it is difficult to recognize that the Defendant recommended the purchase of the instant item to the fee-charging members of the Internet Securities Broadcasting Cooperative by referring to the items while conducting the Internet broadcasting on the date and time indicated in the facts charged, referring to the items while conducting the Internet broadcasting, or leaving the events on the mobile phone text message and the cell phone hosting.

Even if examining the record, the lower court did not err by failing to exhaust all necessary deliberations in its judgment and by misapprehending the legal doctrine of logic and experience.

2. As to the assertion regarding misapprehension of legal principles

A. Of the instant facts charged, the summary of the part regarding the violation of the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”) by using the broadcast of Nonindicted Co. 1 (hereinafter “Nonindicted Co. 1”) among the instant facts charged is as follows.

From April 209, the Defendant had been working as a securities broadcasting expert in Nonindicted Company 1 from around April 2009, and intended to obtain personal benefits by using the influence and influence of broadcasting and by purchasing the items recommended in the broadcast, and to broadcast the items recommended in the broadcast program of Nonindicted Company 1 by concealing the fact that the shares were purchased in advance by contributing to the broadcast program of Nonindicted Company 1, and to obtain transaction gains under the way that the share price is corrected immediately.

On October 4, 2011, the Defendant purchased 76,074 shares of Nonindicted Co. 2 in KRW 3,094,989,579. On the same day, around 22:00, the Defendant recommended the items to ordinary investors by concealing the purchase of shares in advance by contributing to Nonindicted Co. 1’s “○○○○○○○○○○,” which is a broadcast program of Nonindicted Co. 1, and on October 5, 201, included the said items in the “△△△△△△△△△△△△△” Co., Ltd.’s “△△△△△△△△△△△△,” which is a broadcast program of Nonindicted Co. 1, 201. On October 5, 201, following the short-term increase in the share price due to the inflow of purchased seeds, sold shares in advance on October 17, 201 and purchased shares of KRW 2,312,792,280, and purchased shares of Nonindicted Co. 36,46,46, etc.

B. After finding the facts as stated in its reasoning, the lower court determined that: (a) in light of the fact that the Defendant could not be deemed to have false facts in the contents of broadcasts conducted in Nonindicted Company 1’s broadcast program; (b) there was no provision prohibiting prior trade with the same quasi-investment advisory business entity as the Defendant at the time of committing the instant crime; and (c) Nonindicted Company 1’s internal regulations or the contract with the Defendant did not have any provision stipulating such a provision, the Defendant’s recommended the purchase of the instant item in Nonindicted Company 1’s broadcast program without notifying the Defendant of the purchase of the purchase of the instant item; and (b) there was no provision prohibiting prior trade with the Defendant at the time of committing the instant crime, and it is difficult to recognize the Defendant’s duty under the good faith principle to notify the viewers of the purchase of the items to be recommended by Nonindicted Company 1’s regular broadcast program; and (d) in view of the fact that the instant broadcast program is a stock transaction upon his own judgment; and (e) there was no agreement between the Defendant and the Defendant’s recommendation of the Defendant’s candidate for the instant stock price increase in Korea.

C. However, the act of recommending purchase of securities by an investment advisory business entity, securities analysis business entity, press employees, and investment website operators without indicating their interests in the securities that such securities may be held and sold after recommendation constitutes “act of using unlawful means, plans, or tricks” under Article 178(1)1 of the Financial Investment Services and Capital Markets Act. Meanwhile, the act of recommending purchase of securities constitutes “an act of recommending investors to make an increase in personal interests necessary for not causing misunderstanding of investors,” and the act of inducing investors to make a transaction by omitting an indication of personal interests, which is necessary for not causing misunderstanding of investors, constitutes “use of deceptive scheme” under Article 178(2) of the Financial Investment Services and Capital Markets Act (see Supreme Court Decision 2014Do6910, Mar. 30, 2017). Therefore, the lower court erred by misapprehending the legal doctrine on the first issue of stocks and thereby did not err by failing to exhaust all necessary deliberations as to whether the Defendant’s act in this part of the facts charged constitutes a violation of Article 178(1) of the Financial Investment Services and Capital Markets Act.

3. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Ki-taik (Presiding Justice)