[1] The meaning of "for the purpose of inducing a trade transaction" under Article 188-4 (2) of the former Securities and Exchange Act concerning the prohibition of unfair trade such as market manipulation and the meaning of "the trading that misleads a person into believing that the securities transaction constitutes a active trading or changes the market price" under subparagraph 1 of the same paragraph, and the criteria for its determination

[2] The case holding that in case where Gap et al. purchased and sold Byung's shares of the company Byung which is a company registered in the KOSDAQ pursuant to the agreement with Eul, such as guarantee of profit, etc., and accrued profits from the purchase and sale of Byung's shares, it is difficult to view that Eul et al. purchased Byung's shares under Eul's instructions in light of the trend of change of Byung's share price, the number of shares of Byung purchased, the number of sales and other circumstances, and it cannot be concluded that Eul et al. concluded the above agreement with the intention of unfairly forming Byung's share price contrary to the normal supply and demand market

[3] Whether the principle of prohibition against guarantee of earnings under the former Securities and Exchange Act can be applied immediately to the "income guarantee agreement between private persons" (negative)

[1] Article 188-4 (2) of the former Securities and Exchange Act (amended by Act No. 8315, Mar. 29, 2007) provides that "No person shall independently or in collusion with other persons for the purpose of inducing transactions on the securities market or the KOSDAQ to make a false and misleading appearance of active trading or to make a change in the market price, or entrust or be entrusted with such transactions." Here, "the purpose of inducing transactions" is to mislead investors into being formed by the principle of natural demand and supply in the securities market and to attract them to sell and purchase securities by misunderstanding that the market price has been formed by artificial manipulation and thus making changes in the market price so as to encourage them to buy and sell securities, and there is sufficient recognition of the degree of recognition of the purpose of such transactions. In addition, it is sufficient to determine whether there is a change in the market price before and after the sale price of securities, and whether there is a possibility of a change in the market price due to such factors as the price increase in the market price as a whole, and it is not necessary to establish or manage the market price of such factors."

[2] The case holding that in case where Gap et al. entered into an agreement with Eul et al. to provide Eul with 50% of investment profits in excess of 10% of investment profits at the same time as the investment termination, and purchase and sale of Byung's shares in accordance with the agreement, it is difficult to view that Eul et al. purchased Byung's shares in accordance with Eul's order did not have an absolute influence on Byung's increase in stock price, and Eul's purchase of shares in light of the trends of change in stock price, the number of purchase and sale of Byung's shares, and other circumstances, it cannot be concluded that Eul et al. entered into the agreement with the intent of unfairly forming Byung's share price contrary to the normal supply and demand market principle in the open market.

[3] The denial of the judicial effect of an agreement guaranteeing profits to the customers by a securities company or its officers and employees under the former Securities and Exchange Act (amended by Act No. 8315 of Mar. 29, 2007) shall be based on the fact that the securities company or its officers and employees have an obligation to make efforts to form a fair price in the securities exchange and have an agreement guaranteeing profits to the customers, and that there is a risk of undermining the fair transaction order in the securities exchange by making an unfair or variable transaction in order to implement such an agreement and to implement it, it is difficult to immediately apply the principle prohibiting profit security under the former Securities and Exchange Act to the revenue guarantee agreement between the securities company and its officers and employees, and it is difficult to find any ground to deny the judicial effect.

[1] Article 188-4 (2) 1 of the former Securities and Exchange Act (amended by Act No. 8315 of March 29, 2007) (see current Article 176 (2) 1 of the Financial Investment Services and Capital Markets Act) / [2] Article 188-4 (2) 1 of the former Securities and Exchange Act (amended by Act No. 8315 of March 29, 2007) (see current Article 176 (2) 1 of the Financial Investment Services and Capital Markets Act) / [3] Article 52 subparagraph 1 of the former Securities and Exchange Act (amended by Act No. 8315 of March 29, 2007) (see current Article 55 of the Financial Investment Services and Capital Markets Act)

[1] Supreme Court Decision 2001Do606 Decided December 12, 2003 (Gong2004Sang, 192) Supreme Court Decision 2003Do4320 Decided May 11, 2006 (Gong2006Sang, 1079) Supreme Court Decision 2007Do9051 Decided June 24, 2010 (Gong2010Ha, 1507)

Plaintiff (Attorney Kim Si-hwan, Counsel for the plaintiff-appellant)

Defendant 1 and two others (Law Firm Domin, Attorneys Kim Jong-Un et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2008Na29477 decided May 6, 2009

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

The grounds of appeal are examined.

According to the reasoning of the judgment below, the Plaintiff and the Defendants were to sell 00,000 won to the non-party 1’s company’s account with 00,000 won or more on January 27, 206, and the amount invested by the non-party 2 was 40,000,000 won, or 150,000 won to the non-party 3’s account with an average of 0,000,000 won and 45,000,000 won and 10% of its own shares issued by the non-party 40,000,000 won and 70,000,000 won and 40,000 won and 00,000 won and 7,000 won and 0,000 won and 10,000 won and 10,000 won and 7,00 won of shares issued by the Defendants to the non-party 1’s account.

However, we cannot accept the above judgment of the court below for the following reasons.

Article 18-4 (2) of the former Securities and Exchange Act (amended by Act No. 8315, Mar. 29, 2007) provides that no one shall independently or in collusion with other persons for the purpose of soliciting trading on the securities market or the KOSDAQ, or entrust or be entrusted with such trading with the intention of inducing such trading. Here, the term “purposes to attract trading” means that investors are formed by the natural principle of supply and demand in the securities market and thus inducing trading volume, and there is sufficient awareness of the degree of recognition of the purpose of trading. It is sufficient that the purpose of this provision is to determine whether there is a separate purpose or if there is a 60-year rate of trading volume before and after the trading volume, and that there is no possibility of a misunderstanding or changing the market price as to the securities market volume, and that there is no possibility of a misunderstanding or causing a misunderstanding of the market price as to the trading volume before and after the trading volume in the securities market or the KOSDAQ as a whole, and that there is no possibility of price fluctuation in the market volume or price increase in the market.

According to the evidence rejected by the court below, the total number of shares of the non-party company purchased on 4 days according to the plaintiff's order is 192,277 shares, which are merely 0.81% of the total number of shares issued by the non-party company, and there is no additional purchase or sale until the maturity date. The non-party company's share price, which remains at an average of 1,500 shares around August 2005, was reduced to 4,420 won before the conclusion of the contract of this case, and it was hard to readily conclude that the non-party company's share price increase by 2,30 shares issued by the non-party company around January 31, 2006, and that the non-party company's share price increase by 5,010 shares purchased on April 3, 2006, and that the non-party company's share price increase by the non-party company's share price increase by 20,000 won.

Even if the Plaintiff entered into the instant agreement with the Defendants on such intent as the judgment of the court below, it is merely a purpose or motive residing in the Plaintiff’s internal trial. Thus, in this case where such purpose or motive was externally indicated at the time of the instant agreement, or it does not seem to have been well known by the Defendants, it cannot be determined that the Plaintiff’s purpose and motive of entering into the instant agreement is naturally null and void inasmuch as the purpose and motive of the agreement contravenes good morals and other social order.

In addition, denying the judicial effect of an agreement to guarantee profits to customers by a securities company under the Securities and Exchange Act, or its officers and employees, taking into account the fact that there is a risk of undermining the fair trade order of the securities exchange by making an agreement to guarantee profits to customers and performing the agreement with a securities company or its officers and employees, which is responsible for making efforts to form a fair price in the securities market, and by making an irregular transaction or variable transaction in order to implement this agreement, it is difficult to promptly apply the principle of prohibition of profit guarantee under the Securities and Exchange Act to the instant revenue guarantee agreement between the securities company and its officers and employees, and any other private person, which is not between them, as well as customers, it is difficult to find any ground for

Nevertheless, the court below determined that the agreement in this case was null and void as an act contrary to good morals and other social order on the ground of the circumstances in its holding. Thus, the court below erred by failing to exhaust all necessary deliberations in determining whether it constitutes a market price manipulation act under the Securities and Exchange Act, or by misapprehending the legal principles on the validity of an act or a juristic act contrary to good morals and other social order, which affected the conclusion of the judgment.

Therefore, without further proceeding to decide on the remaining grounds of appeal, the judgment below is reversed, and the case is remanded to the Seoul High 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 Park Si-hwan (Presiding Justice)