The meaning of “the act of allowing another person to use material nonpublic information for trading or any other transaction of specific securities, etc.” among prohibited acts under Article 174(1) of the Financial Investment Services and Capital Markets Act, and whether “the other person” is necessarily confined to the person directly receiving the information from the inside of the listed corporation and the first information recipient (the recipient of the information) (negative)

Article 174(1) of the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”) prohibits a person who falls under any of the following subparagraphs, i.e., a listed corporation’s internal person or a first information recipient (hereinafter “person who receives information”) from using or allowing another person to use material nonpublic information related to its business, etc. in trading or other transactions of specific securities, etc. In prohibited acts under the above provision, “the act of allowing another person to use material nonpublic information in trading or other transactions of specific securities, etc.” refers to the act of providing or allowing another person to use such information in trading or other transactions of specific securities, etc., by allowing another person to use such information. In such a case, the other person can not be deemed to have been limited to a person who directly received information from a criminal. Accordingly, not only where the person who received information allows another person to use such information through the information, but also where the person who received the information through the information directly receives the information becomes aware of the information’s purpose and use of the information as well as the information’s use of the information, the information should be determined as follows.

(A) The penal provisions should be strictly interpreted and applied in accordance with the language and text, and shall not be extensively interpreted or analogically interpreted to the disadvantage of the defendant. However, it does not violate the principle of no punishment without the law to systematically interpret the text and text clearly considering the legislative intent and purpose within the scope of the possible meaning of the language and text.

(B) The Standard Dictionary of Korean Language published by the National Institute of Korean Language defines “other persons” as “other persons.” Moreover, the concept of “other persons” is not differently defined under the Capital Markets Act, and Article 174(1) of the said Act does not provide for restrictions or exceptions on other persons, or does not provide for the relationship between the other persons and the person who delivers information.

(C) Article 174(1) of the Financial Investment Services and Capital Markets Act provides that a provider of information subject to punishment is limited to subparagraphs 1 through 6, and subparagraph 6 provides that the first information recipient shall be “person who received material nonpublic information from the insiders.” However, whether the scope of the recipient is a provision on the scope of the offender, or not a provision on the concept of “other persons” among the forms of prohibited acts. Meanwhile, the concept of “other persons” that the legislators did not limit on the possibility of deterioration in the course of transmitting information cannot be construed as limited compared to the language and text (where the information is changed in the course of delivery, it shall be considered in the determination of whether it constitutes material nonpublic information, etc.). It cannot be said that the above concept is not limited to “person who received material nonpublic information directly from the provider of information,” and it violates

(D) The reason for prohibiting the use of material nonpublic information under Article 174(1) of the Capital Markets Act is that, in the case of an internal company, there are many opportunities to know in advance material information that may affect the share price of a listed company, and thus, it is more favorable position than ordinary investors in the securities transaction, while ordinary investors are likely to suffer damage. The other party’s loss due to the use of material nonpublic information is not caused due to the lack of capacity or negligence of the other party, but is caused by the use of material nonpublic information of a listed company for his own gain. Such use of material nonpublic information goes against the legislative intent of the Capital Markets Act to protect investors and to establish the fairness, reliability, and soundness of the capital market so that the participants in the transaction can trade the same possibility as that of the possible position. In light of such legislative intent and purpose, there is no reason to interpret the concept of the other party in a limited manner.

Article 12(1) of the Constitution of the Republic of Korea; Article 1(1) of the Criminal Act; Articles 1, 174(1), and 443(1)1 of the Financial Investment Services and Capital Markets Act

Supreme Court Decision 93Do695 Decided April 26, 1994 (Gong1994Sang, 1564) Supreme Court Decision 2010Do1388 Decided April 11, 2013 (Gong2013Sang, 891) Supreme Court Decision 2017Do10122 Decided December 7, 2017 (Gong2018Sang, 239) (Gong2018Sang, 209Hun-Ba105, 201Hun-Ba48 Decided December 18, 2002)

Defendant 1 and five others

Defendant 4, Defendant 5, Defendant 6, and Prosecutor (Defendant 1, Defendant 2, Defendant 3, Defendant 4, and Defendant 6)

Law Firm (LLC) et al.

Seoul High Court Decision 2016No313 decided October 19, 2017

The part of the lower judgment against Defendants 1, 2, 3, 4, and 6 is reversed, and that part of the case is remanded to the Seoul High Court. Defendant 5’s appeal is dismissed.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the prosecutor's grounds of appeal

A. Summary of this part of the facts charged and the judgment of the court below

1) Summary of the facts charged

around October 10, 2013, Defendant 1, Defendant 2, and Defendant 3, who belongs to the ○○○○ Team of the lower court, Co-Defendant 4 Co-Defendant 4 Company (hereinafter “Co-Defendant 4 Company”), a KOSDAQ-listed corporation, acquired information that “the operating income of the company is only seven billion won due to the enemy, such as the broadcast sector,” and conspired to sell information that was 60 billion won on the 15th of the same month and 16th of the same month, Non-Party 1 and Defendant 4, Defendant 5, and Defendant 6, who were in charge of corporate analysis of Co-Defendant 4 Company at the domestic securities company at the lower court at the 15th of the same month and 16th of the same month (hereinafter “Co-Defendant 4 Company”), Defendant 3, Defendant 4, Defendant 5, and Defendant 6 were more than expected to have carried out the business performance of the 3rd quarter and less than 5th of the total amount of 10 billion won (hereinafter “the instant information”).

2) The judgment of the court below

Of the facts charged against Defendant 4, the lower court acquitted Defendant 1, Defendant 2, and Defendant 3 (hereinafter “Defendant 1, etc.”) on all of the charges, on the ground that the “other persons” under Article 174(1) of the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”) should be limited to the person who received the information directly from the provider of the information, and the person who received the information again from the provider of the information shall be subject to punishment only when the person who received the information and the person who received the information again serves as a single subject. In so doing, the lower court acquitted Defendant 1, Defendant 2, and Defendant 3 (hereinafter “Defendant 1, etc.”) on all of the charges against Defendant 4, on the part of the facts charged against Defendant 4, on the provision of information to Nonindicted 2 (No. 6 of the lower judgment on the list of crimes in the attached Form of the lower judgment), and on the part of Nonindicted 3 (No.

한편 원심은 피고인 6에 대한 공소사실 중 ◇◇◇◇◇◇◇◇◇◇ 소속 펀드매니저 공소외 4에 대한 정보제공행위(원심판결문 별지 범죄일람표 기재 11번) 중 공소외 5의 매도 부분에 관하여는, 공소외 5가 피고인 6으로부터 전달받은 이 사건 정보를 이용하여 거래하였다고 인정하기 어렵다는 이유로 이유에서 무죄로 판단하였다.

B. Judgment of the Supreme Court

1) Of the facts charged against Defendant 1, Defendant 2, Defendant 3, and Defendant 4 and Defendant 6, the part on the act of providing information to Nonindicted 3, the fund managers belonging to △△△ branch, among the facts charged against Defendant 6

A) Article 174(1) of the Financial Investment Services and Capital Markets Act prohibits a person falling under any of the following subparagraphs, i.e., the internal person of a listed corporation and the first information recipient (hereinafter “person who received the information”) from using or allowing another person to use material nonpublic information related to his/her business affairs, etc. in trading or other transactions of specific securities, etc. In prohibited acts under the said provision, “act of allowing another person to use material nonpublic information in trading or other transactions of specific securities, etc.” refers to the act of providing such information to another person or allowing another person to use such information for trading or other transactions of specific securities, etc. by allowing another person to use such information, etc. In such a case, the other person cannot be deemed to have necessarily received information from a criminal. In such a case, not only where the person who received the information directly received the information allows another person to use such information for the transaction, but also where the person who received the information through the said person allows another person to use the information through the information, the purpose and purpose of the information recipient’s provision and the information provider’s awareness of information should be determined as follows.

(1) A penal provision shall be strictly interpreted and applied in accordance with the language and text, and shall not be extensively or analogically interpreted to the disadvantage of the defendant. However, systematic interpretation that clearly expresses the logical meaning of the language and text in light of the legislative intent and purpose, etc. within the scope of the possible meaning of the language and text does not violate the principle of no punishment without the law (see, e.g., Supreme Court Decisions 2010Do1388, Apr. 11, 2013; 2017Do10122, Dec. 7, 2017).

(2) The Standard Dictionary of Korean Language published by the National Institute of Korean Language defines “other persons” as “other persons.” Moreover, the concept of “other persons” is not differently defined under the Capital Markets Act, and Article 174(1) of the said Act does not stipulate restrictions or exceptions with respect to other persons, or does not stipulate the relationship between the other persons and the person who delivers information.

(3) Article 174(1) of the Financial Investment Services and Capital Markets Act lists the information provider subject to punishment under subparagraphs 1 through 6 as “person who received material nonpublic information from the information provider.” However, the provision on the scope of the information recipient and the provision on the concept of “other person” in the form of prohibited act is not a provision on the scope of the information recipient. On the other hand, the concept of “other person” that is not restricted by legislators on the ground of the possibility of deterioration in the course of information transmission cannot be construed to be limited compared to the language and text (where the information is changed in the course of delivery, it shall be considered in the determination of the relevant material nonpublic information, etc.). It cannot be said that the above concept is not limited to “person who received material nonpublic information directly from the information provider,” and it is against the principle of no punishment without law.

(4) The reason for prohibiting the use of material nonpublic information under Article 174(1) of the Capital Markets Act is that, in the case of an internal company, there are many opportunities to know in advance material information that may affect the share price of the listed company, it is more favorable position than ordinary investors in the securities transaction, while ordinary investors are likely to suffer losses. The loss of the other party due to the use of material nonpublic information is not caused due to the lack of capacity or negligence of the other party, but is caused by the use of material nonpublic information of the listed company for his own gain. Such use of material nonpublic information goes against the legislative intent of the Capital Markets Act to protect investors and to establish the fairness, reliability, and soundness of the capital market (see Supreme Court Decisions 93Do695, Apr. 26, 1994; 90Hun-Ba15, Dec. 18, 2002; 2010Hun-Ba48, Apr. 1, 2005).

B) In light of the above legal principles, Defendant 1, etc. and the above Defendants 1 and 4, Defendant 5, and Defendant 6, who directly received the instant information from the above Defendants, constitute a criminal offender. The fund intermediaries belonging to asset management companies listed in the attached list of crimes in the judgment below, which received the information from the above Defendants or received the information from the direct recipient involved in the middle, shall be deemed to constitute “other persons” as stipulated in Article 174(1) of the Financial Investment Services and Capital Markets Act. Therefore, the lower court should have determined that the Defendants 1, 2, 3, Defendant 4, and Defendant 6 received the instant information from a specific group including institutional investors due to their respective act of providing information, and should have determined that the lower court erred by misapprehending the legal principles on the provision of information under Article 174(1) of the Financial Investment Services and Capital Markets Act, which affected the conclusion of the judgment by failing to exhaust all necessary deliberations by misapprehending the legal principles as to whether the information was used by another person.

2) 피고인 6에 대한 공소사실 중 ◇◇◇◇◇◇◇◇◇◇ 소속 펀드매니저 공소외 4에 대한 정보제공행위로 인한 공소외 5의 매도 부분

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine regarding the act of providing undisclosed information under Article 174(1) of the Capital Markets Act and by misapprehending the bounds of the principle of free evaluation of evidence against logical and empirical rules.

3) The remainder

In submitting a petition of appeal, the prosecutor stated to the effect that he is dissatisfied with the entire judgment except for Defendant 5’s portion among the judgment below. However, the petition of appeal or the appellate brief did not state the grounds of appeal as to the remaining Defendants’ conviction except Defendant 5 in the judgment below.

2. As to the grounds of appeal by Defendants 4, 6, and 5

원심은 판시와 같은 이유로, 피고인 4에 대한 공소사실 중 △△△△△△△ 소속 펀드매니저 공소외 2에 대한 정보제공행위를 제외한 나머지 부분, 피고인 5에 대한 공소사실 중 □□□□□□소속 펀드매니저 소속 펀드매니저 공소외 6에 대한 정보제공행위로 인한 김경훈의 매도 부분을 제외한 나머지 부분, 피고인 6에 대한 공소사실 중 □□□□□□소속 펀드매니저 소속 펀드매니저 공소외 3에 대한 정보제공행위 및 ◇◇◇◇◇◇◇◇◇◇ 소속 펀드매니저 공소외 4에 대한 정보제공행위로 인한 공소외 5의 매도 부분을 제외한 나머지 부분을 모두 유죄로 판단하였다.

Examining the reasoning of the lower judgment in light of the relevant legal principles and evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal doctrine regarding the causal relationship between the Defendants’ intentional act of providing information and the act of using information, the scope of other persons provided by Article 174(1) of the Capital Markets Act, the subject of information and the corporation, the meaning of material nonpublic information, timing of creation, use of material nonpublic information, expansion or analogical interpretation prohibition principle, the principle of no punishment without law, the principle of no punishment without law, the responsibility for acts and the principle of self-responsibility, the principle of presumption of innocence, the principle of presumption of innocence and the principle of trial on evidence, or by misapprehending

Meanwhile, Defendant 4 and Defendant 5 stated to the effect that they are dissatisfied with the entire judgment of the court below in submitting a petition of appeal. However, as to the acquittal portion of the reasoning of the judgment of the court below, the aforementioned Defendants did not have the right to appeal against the said Defendants, this part of the appeal is unlawful (see, e.g., Supreme Court Decisions 93Do1091, Jul. 29, 1994; 201Do1200, Dec. 27, 2012).

3. Scope of reversal

For the same reason as seen earlier, the part of the judgment of the court below on Defendant 1, etc., the part on Defendant 4’s acquittal of reasons, and the part on Defendant 6’s acquittal of reasons related to Defendant 6, should be reversed that the act of providing information to Nonindicted 3, 4, and the fund manager of the fund manager of the fund manager of the fund manager of the △△△△△△ account. However, since the guilty part of the judgment of the court below on Defendant 4 and Defendant 6 is one of the crimes of not guilty of reasons

4. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the part of the judgment below against Defendants 1, 2, 3, 4, and 6 is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. Defendant 5’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Noh Jeong-hee (Presiding Justice)