[1] The elements for establishing tort liability in a case where a customer who invested in investment recommendation by an executive officer or employee of a securities company suffered loss

[2] Where a securities company failed to notify a customer of the occurrence of a reason for additional payment of consignment guarantee money from the customer's futures account, but the customer becomes aware of the reason for lack of consignment guarantee money due to any circumstance, whether the securities company is liable to compensate for damage against the securities company for its breach of notification duty (negative

[3] Whether a securities company is obligated to take measures to appropriate for the settlement of accounts for futures in case where a securities company falls short of good faith deposits to customers in futures trading (negative)

[4] Whether a securities company has a duty of care to dispose of the currency exchange at the first time when it was able to dispose of the currency exchange funds in case where it appropriateds the currency exchange funds of its customers for the settlement of accounts (negative with qualification)

[1] In a case where an executive officer or employee of a securities company actively solicits a customer to make an investment, but if an investment loss incurred as a result of an investment, the existence of active deception as to whether to guarantee a customer’s profit should not be required, but at least take into account the transaction circumstances, transaction methods, customer’s investment situation (property status, age, social experience, etc.), transaction risk, and the degree of explanation as to the transaction risk, etc., and then, it is a case where a general investor, who lacks experience, interferes with the formation of correct awareness about the risk inevitably accompanying the transaction, or actively solicits a transaction involving excessive risk in light of the customer’s investment situation, and thus, it can be evaluated as an unlawful act by neglecting a customer’s duty to protect the customer.

[2] Article 46 of the Securities and Exchange Act provides that a securities company shall notify the customer of the purchase and sale order and other transaction details, etc. under the conditions as prescribed by the Presidential Decree, and Article 12 (1) of the former Regulations on Futures and Exchange Transactions by the Financial Supervisory Commission (amended by Securities Business Supervision Regulations, December 29, 2000) provides that a securities company shall, with respect to additional collection of customer margins in connection with futures trading or options transaction of the customer, require the customer to pay additional payment of customer margins without delay through contact methods, etc. agreed in advance with the customer concerned and maintain materials proving the fact and contents of the request. In light of the nature of a futures account where the additional payment or excess of customer margins can occur every day through daily settlement and determination, a customer holding a futures account has been notified of the shortage of customer margins in his account, and thus, the securities company may not be obliged to notify the customer of any reason for additional payment of customer margins or loss to the customer even if the securities company continues to conduct such trading by making such additional payment or disposal of futures trading held by the securities company.

[3] The purport of Article 26 of the former Rules on Contracts for Brokerage of Futures (amended by the Securities and Exchange Business Regulations on January 29, 1999) of the Korea Stock Exchange based on Article 94 of the Securities and Exchange Act provides that when a truster fails to pay a consignment guarantee money, a securities company may resell or repurchase an outstanding settlement agreement of the relevant truster, or sell substitute securities collected as a consignment guarantee money, the securities company may sell such securities to the customer. The purpose of this provision is to restrain the over-the-counter of the securities market that may be caused by an unlimited or limited futures trading by securities investors, while allowing a securities company to promptly recover the recovery of the amount of futures settlement and operate the securities company. Thus, the securities company does not directly assume the obligation to take measures to appropriate the above futures settlement for the customer, unless otherwise agreed by the securities company and the customer

[4] In the event that a securities company fails to pay a shortage of customer deposit to a securities company and appropriates the disposal price of the futures held by a customer to pay a settlement of gift, even if the securities company has a duty of care under the good faith principle that should limit the loss of the customer as a securities company when it disposes of the futures exchange held by the customer at a minimum, if special circumstances are acknowledged that the futures price at the time was not disposed at the first time when the securities company was able to dispose of the futures exchange, and even if there is a tendency to decrease or increase the futures price at the time, so it cannot be readily concluded that the disposal at that time would minimize the customer's loss, unless there are special circumstances such as the fact that the securities company was delegated by the customer to dispose of the futures exchange at the time prior to the above time, and thus, it cannot be deemed that the securities company violated its duty of care as a customer protection or good manager, unless it did not dispose of the futures exchange at that time without delay.

[1] Articles 750 and 756 of the Civil Act, Article 52 of the Securities and Exchange Act / [2] Article 46 of the Securities and Exchange Act / [3] Article 94 of the Securities and Exchange Act / [4] Articles 2 and 681 of the Civil

[1] Supreme Court Decision 79Da2156 delivered on December 23, 1980 (Gong1981, 13513), Supreme Court Decision 93Da26205 delivered on January 11, 1994 (Gong1994Sang, 687) / [3] Supreme Court Decision 92Da6242, 6259 delivered on July 10, 1992 (Gong1992, 2364) / [4] Supreme Court Decision 92Da1308 delivered on December 8, 1992 (Gong193Sang, 416), Supreme Court Decision 92Da3504 delivered on February 23, 1993 (Gong1993, 106Sang, 1965) / [3] Supreme Court Decision 130Da131404 delivered on April 13, 1994 (Gong197Da13094 delivered on April 14, 1997).

Plaintiff (Attorney Byung-il et al., Counsel for the plaintiff-appellant)

Mez Securities Co., Ltd. (formerly: Hanjin Investment Securities Co., Ltd.) and one other (Law Firm Han-U.S. et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 99Na63390 delivered on August 29, 2000

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

The grounds of appeal (each supplementary appellate brief that was submitted after the deadline is considered to be within the scope of supplement).

1. On the first ground for appeal

Comprehensively taking account of its adopted evidence, the lower court determined that the Plaintiff was not liable for damages to the Defendant 1 on October 23, 1997 when it opened a futures trading account with the Defendant Company on January 7, 1998; KRW 45 million; and KRW 25 million on September 9 of the same month; Defendant 2, who was an employee of the Defendant Company, was not liable for damages to the Plaintiff on March 7, 1998 by taking advantage of the Plaintiff’s aforementioned account’s 19-6 futures trading index up to March 13, 1998; however, the Plaintiff was not liable for damages to the Plaintiff on January 14, 1998 due to the Plaintiff’s non-party 1’s non-party 1’s non-party 1’s non-party 1’s non-party 1’s non-party 1’s non-party 1’s non-party 1’s non-party 2’s non-party 9 trading contract. The Plaintiff’s non-party 1’s aforementioned trading agreement was concluded.

In light of the records, the above fact-finding and decision of the court below are acceptable, and there is no violation of law of misunderstanding of facts against the rules of evidence as alleged in the grounds of appeal. This part of the grounds of appeal is without merit.

2. On the second ground for appeal

In order for an employee of a securities company to actively recommend investment to the customer of an investment, but to be held liable for tort against an investment in the event of loss as a result of investment, it does not require the existence of active deception as to whether to guarantee the profit of the investor. However, it is a case where the act of solicitation is deemed to be an act of illegality by neglecting the duty to protect the customer, since it constitutes a case where a general investor who lacks experience in the solicitation interferes with the formation of correct awareness about the risk inevitably accompanying the transaction, or actively solicits a transaction involving excessive risk in light of the customer’s investment situation, and thus, it is deemed that the act of solicitation is an act of violation of the duty to protect the customer (see Supreme Court Decision 93Da26205 delivered on January 11, 194, etc.).

According to the records, although the plaintiff is a family owner without a special occupation, he has worked for a foreign company after graduating with the foreign company. From around January 7, 1992, the plaintiff entered into a stock consignment transaction contract with the defendant company, Korea Light Securities Co., Ltd. including the defendant company and Korea Light Securities Co., Ltd., and made an investment in the shares. On October 23, 1997, after opening the gift and options trading account of this case with the defendant company on 1997, he deposited 40 million won in total from the same day to December 1, 1997, and he deposited 40 million won with the first day from the same day to December 1997, and it was difficult to predict the price index futures trading of this case and difficult to make an investment. From January 7, 1998 to the defendant 2, the plaintiff could not be seen to have been aware of the risk of interference with or interfered with the plaintiff's pertinent futures trading from time to time in light of the pertinent situation of the defendant company's trading and investment risk.

The judgment of the court below to the same purport is just, and there is no error in the misapprehension of legal principles as to the duty of care of the defendants, or in the misconception of facts against the rules of evidence. This part of the grounds for appeal is without merit.

3. On the third ground for appeal

A. Regarding neglect of duty to notify

Article 46 of the Securities and Exchange Act provides that a securities company shall notify the customer of the purchase and sale order and other transaction details, etc. under the conditions as prescribed by the Presidential Decree, and Article 12(1) of the former Regulations on Futures and Exchange (amended by Securities Business Supervision Regulations, Dec. 29, 2000) of the Securities and Exchange (amended by Securities Business Supervision Regulations) provides that a securities company shall, in the event a cause for additional collection of customer margins arises in connection with futures trading or options trading of the customer, require the customer to pay additional payment of customer margins without delay through contact methods agreed in advance with the customer concerned and maintain materials proving the facts and contents of the request. In light of the nature of a futures account where daily settlement and determination of the additional payment or excess of customer margins, a customer holding a futures account has been notified of the reason that the customer margins fall short of customer margins, and thus, the securities company may be negligent in late payment of customer margins, continuing transactions or disposal of futures products held by him, and thus, the securities company is not obliged to notify the customer of any reason that the customer margins may not be paid.

In light of the records and records, the defendant company notified the plaintiff of only the monthly transaction details and balance status of the end of the month (the plaintiff pointed out that there was an incorrect content due to an omission of Masp indications in some notifications) with respect to the futures trading of this case, and did not notify the plaintiff of the fact on January 14, 1998, despite the occurrence of the plaintiff's grounds for additional payment of the consignment deposit in the futures account of this case. However, even before considering the fact that the plaintiff's shortage of the consignment deposit deposit in the defendant company's business division on January 16, 1998 after the occurrence of the above grounds for late payment of the consignment deposit deposit, the defendant company cannot be held liable for damages against the plaintiff merely because the defendant company did not notify the plaintiff of the grounds for late payment of the consignment deposit.

The court below's conclusion to dismiss the plaintiff's claim for damages on the ground that the defendant company did not notify the lack of good faith deposit money of the fact is not reasonable. Thus, the ground of appeal pointing out the conclusion of the court below on a different premise is without merit.

B. As to the violation of the duty of opposing trade

Article 94 of the former Terms and Conditions of Brokerage Contract for Stock Exchange based on Article 94 of the Securities and Exchange Act (amended by futures and options business rules on January 29, 199) provides that a securities company may resell or repurchase the outstanding settlement agreement of the relevant truster or sell substitute securities collected as consignment guarantee money if a truster fails to pay a consignment guarantee money. The purport of this provision is to restrain ilization of the securities market caused by an unlimited futures trading by securities investors, while allowing a securities company to promptly collect the recovery of the accounts of futures and operate the securities company. Thus, barring any special agreement between the securities company and its customer, the securities company is not obligated to take measures to appropriate the above accounts of futures against its customer pursuant to the above provisions (see Supreme Court Decision 92Da6242, 6259, Jul. 10, 199). 192; 200Da62596, supra, if a securities company did not have any duty of due care at the time of disposal of futures trading to the minimum extent of losses arising from its initial disposal or settlement.

In this view, the judgment of the court below that the securities company cannot be said to have an obligation to immediately terminate the transactional relationship with the customer unless additional payment is made in case the securities company falls short of the customer deposit, is just and there is no error in the misapprehension of legal principles as otherwise alleged.

4. On the fourth ground for appeal

Based on the evidence of employment, the court below rejected the plaintiff's assertion that on January 19, 198, the defendant 2 submitted a written claim for damages from the above defendant's account, including the plaintiff's account of this case, due to a voluntary trade case related to the non-party's account that he was entrusted and managed by the defendant, and on January 19, 1998, the above defendant 2 submitted a written statement to the effect that the principal should be compensated by applying the deposit interest rate of the defendant's company's provision to the principal and would not cause damage to the defendant company, regardless of whether the plaintiff's profit or loss was made in the above account of the plaintiff's above account, and on February 7, 1998, if the security of the whole amount of the plaintiff's above account is insufficient, the defendant 2 submitted to the defendant company and presented it to the defendant company to the effect that the defendant 2 would guarantee the defendant company's losses, and it cannot be deemed that the plaintiff was liable to the plaintiff.

In light of the records, the above fact-finding and decision of the court below are acceptable, and there is no error of law such as misunderstanding of facts or misunderstanding of legal principles as to the probative value of disposal documents against the rules of evidence as alleged in the grounds of appeal. This part of the grounds of appeal

5. Therefore, the appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Ji-dam (Presiding Justice)