Co., Ltd.

Plaintiff 2 (Law Firm continental Aju, Attorneys Kim Sung-i et al., Counsel for the plaintiff-appellant)

Korea Standards Bank (Attorneys Kim Su-soo et al., Counsel for the plaintiff-appellant)

New Bank Co., Ltd. (Law Firm Rated, Attorney Promotional, Counsel for the defendant-appellant)

August 25, 2011

Seoul Central District Court Decision 2008Gahap124238, 2010Gahap53780 decided Nov. 29, 2010

1. The judgment of the court of first instance is modified as follows.

A. The Defendant New Bank Co., Ltd. shall pay 938,937,00 won and 14,040,000 won among them from June 5, 2008 to June 5, 2008, 20,340,000 won from July 7, 2008 to August 5, 2008; 43,350,000 won from September 5, 2008; 106,932,00 won from September 7, 2008; 87,270,000 won to 14,000 won from June 5, 2008 to 10,000 won per annum; 16,000 won from 20,000 won to 30,000 won per annum 16,000 from 20,000 won per annum 16,27,270,000 won

B. The plaintiff 2's claim against the defendant 2's Korea Standards Bank, and the remainder of the claim against the defendant 3 Shin Han-chul, Inc. is all dismissed.

2. Of the total costs of litigation, the portion arising between the Plaintiff Sejong High School and the Defendant New Bank shall be ten minutes, and the remainder shall be borne by the said Plaintiff, while the remainder shall be borne by the said Defendant, and the portion arising between the Plaintiff 2 and the Defendant New Bank, Inc., Ltd., as well as between the Plaintiff 2 and the Defendant New Bank.

3. Paragraph 1(a) of this Article may be provisionally executed.

1. The plaintiffs' claims and purport of appeal

The judgment of the court of first instance is modified as follows. The Korea Standards Bank shall pay to the plaintiff 2 KRW 919,940,00 and the amount of the principal subject to 7 times or 12 times as stated in paragraph (1) of the [Attachment 3], 9 through 12 times as to each of the principal subject to interest, 5% per annum from the date indicated in paragraph (2) to May 3, 201 until the date of delivery of a copy of the application for change of claim as of 50%, 20% per annum from the following day to the date of full payment, 3,129,790,00 won, and 50% per annum from the date indicated in paragraph (3) to the new bonds of the plaintiff 200, 50% per annum from the date indicated in the new bonds of the court of first instance to the date of full payment, 50% per annum from the date indicated in the new bonds of the plaintiff 200, 50% per annum, and 50% per annum.

2. Purport of appeal by the Defendant New Bank

Of the judgment of the first instance, the part against the Defendant New Bank shall be revoked, and the claim for the confirmation shall be dismissed.

1. Basic facts

A. Quotation of the first instance judgment

The reasoning for this Court’s explanation concerning this part is that “The exchange rate until May 2010 changes from KRW 1,100 to KRW 1,100” in the last part of paragraph (d) of “1.1. Basic Facts” in the judgment of the court of first instance is determined as follows: “The exchange rate until May 2010 changes mainly from KRW 1,10 to KRW 1,100”; (e) Section (b) is determined as follows; and the ground for recognition is the same as “1. Basic Facts” in the judgment of the court of first instance, except for addition of evidence No. 64 (including the serial number) as a ground for recognition. Therefore, this is cited as it is in accordance with the main sentence of Article 420 of the Civil Procedure Act.

B. The fulfillment of the terms and conditions set forth in Section 1 of the instant currency option contract

According to the above increase in exchange rates, the Plaintiffs performed the duty to sell USD 2 as a result of the fulfillment of the conditions set forth in each currency option contract of this case or the duty to settle the difference. The total amount of the final profit and loss accrued therefrom is KRW 919,940,00 in the case of Plaintiff 2 as shown in attached Form 3 (attached Form 3) (i.e., KRW 286,920,000 in the contract of this case + KRW 633,020,000 in the contract of this case) and KRW 3,129,790,000 in the case of the Plaintiff Company.

2. The grounds for the plaintiffs' claims (the return of unjust enrichment or the selective claim for damages);

A. Each currency option contract of this case is a product that is not suitable for avoiding exchange risk due to its structural problem from the structural design, and its contents constitute unfair terms and conditions, and is contrary to the principle of trust and good faith under the Civil Act, and is null and void as it constitutes unfair legal acts under Article 104 of the Civil Act. Furthermore, even though each currency option contract of this case is inappropriate for foreign exchange hedging, the Defendants deceiving the Plaintiffs by concealing the theoretical value of options and claiming for Zero Coin Co., Ltd., and accordingly, the Plaintiffs concluded each currency option contract of this case by causing mistake on the important part of each currency option contract of this case, and thus, the Plaintiffs were revoked pursuant to Articles 109 and 110 of the Civil Act.

B. In addition, each currency option contract of this case was concluded by the Defendants’ tort, such as the Defendants’ deception, suitability principle, and breach of duty to explain.

C. Therefore, based on the return of unjust enrichment due to the invalidation or cancellation of the instant currency option contract or tort damages, the final damages paid by the Plaintiffs upon the conclusion of the instant currency option contract. Defendant Japan is obligated to pay Plaintiff 2 the amount of the principal subject to the instant currency option contract at KRW 919,940,00 and KRW 919,940,00 among them (attached Form 3) and KRW 7,99,940,000 from the date of each settlement date as to the amount of the principal subject to the instant interest at KRW 12 to 12,00 from the date of each settlement date, and Defendant New Bank is obligated to pay the Plaintiff Company for delay damages from the date of the date of each settlement date with respect to the amount of the principal subject to the instant currency option contract at KRW 3,129,790,00 from the date of each settlement date on KRW 3 to 12,00 from the date of each settlement date.

3. Determination as to a claim for return of unjust enrichment due to the invalidation or cancellation of a contract

A. Determination as to whether the exchange risk avoidance (hedge) of each currency option contract of this case is appropriate

1) Quotation of the first instance judgment

The reasoning of this court concerning this part is as follows: (a) the “The Hague 6,00,000 Won” under Section 12 of Section 18 of the judgment of the court of first instance shall be deemed to be “the Hague 6,00,000 Won”; (b) the overall title of the “the theoretical value of call options” under Sections 9 and 10 of Section 21 shall be deleted; and (c) the plaintiffs’ assertion as to whether the fees are excessive is identical to the “the judgment on whether the exchange risk of each currency option contract of this case is appropriate” under the main sentence of Article 420 of the Civil Procedure Act, and (d) the same shall be cited as it is in accordance with the main sentence of Article 420 of the Civil Procedure Act.

2) Determination on the plaintiffs' additional assertion on whether the fees are excessive

The plaintiffs asserted that the contract of this case focuses on the exchange of put options and put options, and that when comparing the value of put options and put options, the rate of margin (rate) falls under 257% or 615.6.4%, and that the defendants can gain profits in opposite trades, etc., the defendants would have received excessive fees. In light of this, the defendants would have received excessive fees.

The fee includes credit risk management expenses, market risk management expenses (dynamic hedge(dynamic hedge) expenses), business cost following the design, sale, post management, etc. of derivatives, net profits, etc. As such, it is possible or reasonable to individually distinguish specific expenses, etc. constituting the fee and to determine whether it is excessive or reasonable, actual expenses, etc., and whether the Defendants obtained profits in relation thereto.

First, it is difficult to uniformly conclude that the amount of credit risk management expenses, in addition to the size of the entire fees, should be separately removed from the amount of the credit risk management expenses to the extent that it is fair or appropriate to set up if a certain enterprise causes losses to a bank due to its failure to perform its obligations by reserving a certain amount according to the policy decisions of the bank, management ability, market situation, etc. established by the bank in preparation for the company's credit risk compared to the insurance proceeds.

In light of market risk management costs, banks can unilaterally purchase foreign currency options at maturity or at maturity through the currency option transaction like each of the instant currency options. 5 weeks publicly notified by the Minister of Strategy and Finance pursuant to Article 11 of the Foreign Exchange Transactions Act, or a note 6, enacted by the Financial Services Commission, are restricted foreign exchange transaction regulations and banks need to eliminate the risk of exchange fluctuation in currency options held by them. As a result, banks are required to maintain foreign exchange soundness and as a result, even if the bank receives exchange rates in the future, it is difficult for them to continuously purchase foreign currency options at a separate rate of exchange (e.g., rate of exchange 7) no more than 000 options in the process of sale of individual currency options, including the Defendants, inasmuch as it is difficult for them to use foreign currency options at a different rate of exchange than 20 options in the process of sale of underlying assets.

In view of the operating cost and net profit, banks could not set excessively any other operating cost or net profit in the course of free competition with other banks (in this case, the instant contract was rejected and actively recommended to Plaintiff 2). There is no evidence to acknowledge that the operating cost and net profit have been excessively set in the instant currency option contract.

As above, it is difficult to view that there is no other data on the fact that it is impossible or inappropriate to compute individual expenses that constitute fees in reality, and it is difficult to view that the Defendants acquired any benefit therefrom. Ultimately, the determination of the excess of fees in the instant currency option contract ought to be made by comparing the amount of the entire fees with other financial transactions with similar purposes and contents. However, as stated in the judgment of the court of first instance, it is reasonable to calculate the margin rate as exchange based on the total contract amount of put options. In other words, even if each of the instant currency options contract consists of an association of put options and call options, the economic utility that the Plaintiffs gain, such as the establishment and change of put options does not reflect profits from setting and changing put options, are not all reflected in the theoretical value of put options. Moreover, it is difficult to determine the excessive rate of fees in the instant currency option contract, not the theory of put options, but the rate of excessive disclosure of fees in the instant currency option contract amount corresponding to the contract amount (see, e.g., Supreme Court Decision 15 through 20%, supra.

B. Determination as to the assertion that it is invalid as an unfair terms, violation of the principle of good faith, and unfair legal act

1) Quotation of the first instance judgment

The reasoning for this Court’s reasoning is as follows: (a) through (c) of Article 420 of the Civil Procedure Act is the same as that of the judgment of the court of first instance, except for the addition of the judgment as to the plaintiffs’ assertion as to the following 2).

2) Determination as to the assertion of invalidation on the ground that there was no negotiation as to option price

In the process of concluding each currency option contract of this case, the Plaintiffs asserted that, as a result of no negotiations on the option price calculated taking into account the probability of exchange rate fluctuations and the distribution thereof, the value of the call option was considerably unfair contracts that are more than 2 times more than the value of put option, and that this constitutes an unfair legal act under Article 104 of the Civil Act or the principle of trust and good faith, and that there is no agreement on the price, which is an essential element of a sales contract, is null and void.

In the process of concluding the instant currency option contract, it seems that there was no negotiation on each option theory taking into account the probability of exchange rate fluctuations distribution. However, even if there was no such negotiation, the structure of the instant currency option contract is equal in consideration of the probability distribution of exchange rate fluctuations, and thus, both the Plaintiffs and the Defendants’ expected profits equal. Thus, even if the market exchange rate is at an inappropriate level after the conclusion of the contract, and there was a price imbalance between both parties due to a change in exchange rate, it cannot be deemed that the contract itself was significantly unfair. Moreover, as seen earlier, it cannot be deemed that the commission of each of the instant currency option contract is excessive.

In addition, each contract of this case constitutes a trade contract of put options and call options, or where agreement on the price of each option is not necessarily required, the contract itself is not deemed null and void. However, Article 65 subparagraph 6 (e) of the Regulations on Supervision of Banking Business provides that "in the case of non-fixed derivatives transactions, the respective price information (referring to the information on the level of transaction price, not the financial institution's transaction cost) for each inherent transaction shall be provided." Accordingly, even if this is applicable to banks, the obligation to provide information on the level of transaction price for customers is recognized, and thus, it cannot be deemed that the agreement on individual options price is an essential element for derivatives transactions, such as each contract of this case. Thus, the plaintiffs' above assertion is without merit.

C. Determination on the assertion on revocation of each currency option contract of this case

1) The plaintiffs' assertion

In light of the structure of each currency option contract of this case, exchange hedge cannot be conducted when the conditions for melting are fulfilled, and when the conditions for melting are fulfilled, the Plaintiffs assume new risks, and the Plaintiffs are exposed to a higher risk than before the conclusion of the contract. Therefore, even though the instant currency option contract is not appropriate for the exchange hedge which is the purpose of the contract concluded by the Plaintiffs, the Defendants deceiving the Defendants as if the instant currency option contract was a product suitable for exchange hedge, or caused the Plaintiffs

In accordance with each currency option contract of this case, there is a significant imbalance between the value of put options acquired by the Plaintiffs and the value of put options acquired by the Plaintiffs. The Defendants designed the goods by reflecting the theoretical value of put options or customer prices equivalent to the difference. The Defendants, who sell these goods, should inform customers of the valuation value of put options (in-depth value based on the option pricing model) and fees, etc., which are assessed by reflecting the probability distribution of exchange rate fluctuations, thereby allowing customers to make reasonable decisions. However, the Defendants: (a) concealed the valuation value of put options and fees; and (b) emphasized Cost as if the values of put options purchased by the Plaintiffs are equal to those of put options and sold by the Plaintiffs.

Therefore, pursuant to Article 109 or Article 110 of the Civil Act, the plaintiffs shall revoke each currency option contract of this case through the service of a duplicate of the complaint of this case.

2) Determination

(A) deceit or mistake as to the appropriateness of foreign exchange hedging;

This Court's reasoning is the same as the judgment of the court of first instance No. 4-4(d)(2). Thus, this Court's reasoning is cited by the main text of Article 420 of the Civil Procedure Act.

(B) the theoretical value of options, fees, or fraud or mistake in connection with the common market;

① Whether the Defendants are obliged to disclose the doctrine of options or fees

As seen earlier, Article 65 Subparag. 6(e) of the Regulations on Supervision of Banking Business provides information on the customer price level to the bank which trades the call options. Since the customer price of the option is determined by adding the costs and profits of the bank to the theoretical value of the option, where the bank sells put options to the customer, i.e., the customer price = + + + cost and profit, and where the bank purchases the call options from the customer, i.e., the customer price doctrine - cost and profit. In general, the bank determines the customer price of put options by adding part of the cost and profit plus the fee to the customer price of put options at the same level, i.e., the total price of put options at the maturity of each put option, i., the total price of put options at the maturity of each put option, i.e., the same method as the total price of put options at the maturity of each put option, i.e., the same method as the total price of put options at the maturity of each customer option.

The instant currency option contract also is designed at a higher level than the theoretical value of put options acquired by the Plaintiffs. The Defendants, as commission, received the difference equivalent to put options, reflecting the difference in put options’ customer prices, etc., and, in full view of the entries in Gap 1, 2, 5, 34, Eul 5, Eul 5, Eul 12, the testimony of non-party 1 (the non-party to the judgment of the Supreme Court), Plaintiff 2 himself/herself, and the overall purport of oral argument, the Defendants did not explicitly explain to the Plaintiffs at the time of entering into the instant currency option contract, and it was acknowledged that the Defendants recommended the conclusion of each of the instant currency option contract, by explaining that there is no need for additional premium payments.

However, if a bank provides customers with options theory, it is inevitable to disclose the amount of fees equivalent to the difference between the operator of put options theory and the operator of put options theory. However, in light of Article 65 subparagraph 6 (e) of the Regulations on the Control of Banking Business, a financial institution provides “information on the transaction price level of customers other than the operator of the transaction.” The purport of the above provision, which states that “the operator of the transaction” refers to the operator’s theory, or that “the operator of the transaction” does not have any obligation to disclose the amount of fees received by the bank while selling derivatives, is that it does not need to disclose the amount of fees received by the bank at least in the course of selling derivatives. This is because information on credit risk management costs, dynamic hedge costs, net profits, etc., which accounts for the contents of the commission, should be protected as trade secrets from the perspective of the bank, because the bank directly requires the customer to disclose the same amount of fees and the total amount of fees, not the operator’s theory and fees.

Meanwhile, the plaintiffs argued to the effect that the theory of options or fees are included in the "risk inherent in a transaction" under Article 65 Item 6 Item 6 Item (c) of the Enforcement Rule of the Banking Business Regulation, which requires the notification of derivatives trading, or that the notification of commissions is mandatory under Articles 47(1) and 58(1) of the Financial Investment Services and Capital Markets Act and Article 53(1)2 Item 11 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act (hereinafter "Capital Markets Act") and Article 53(1)2 Item 2 of the Enforcement Decree of the same Act. However, even if the above "risk inherent in a transaction" can not be deemed to include the theory of options or fees, it is difficult to view that the above "risk" was only implemented after the conclusion of each currency option of this case and the provisions of the Enforcement Decree of the Capital Markets Act and the above provisions mean the consideration for services provided by a financial institution as an intermediary or intermediary such as a bank.

Therefore, it cannot be said that the defendants who design and sell financial products that receive certain fees from customers as contracting parties to over-the-counter derivatives have a duty to disclose the option theoretical value or fees in addition to the customer price level information.

(2) Degrasation or mistake relating to the costa.

The fact that a bank reflects various expenses, operating profits, etc. at the customer price of an option that constitutes a currency option contract that is a company seeking profit. It is difficult to see that such business methods are unfair in light of financial transaction practices, credit risk management, and necessity for opposite transactions under the foreign exchange transaction regulations. The reflection of fees of each currency option contract of this case in order to purchase only put options is to pay large amount of premium. Therefore, the transaction of put options is almost unforeseeable, and accordingly there is a aspect to meet the demand of the exporting company intending to put put put to exchange hedging even without spending put to put to put options, and it is necessary for the bank to receive information on each individual transaction inherent in the non-specified derivatives market (referring to information on the market price level of customers rather than the trading costs of the financial institution) separately from the market price of put to put to exchange 200% of the transaction amount of put to cash options in Seoul Special Metropolitan City.

On the contrary, if the theory of put option and put option are identical to that of put option, a bank would result in unreasonable consequences without having to obtain any margin and without appropriating various necessary expenses. As seen earlier, as long as the Defendants are a company pursuing profit, it would be reasonable to obtain certain profits through the sale of each of the instant put option products, and it would be possible for anyone to expect that the Defendants would have been aware that the Defendants would not have paid any cost or profit when entering into each of the instant put option contracts. Therefore, even though the Defendants did not explicitly state to the Plaintiffs that separate fees need not be paid, or that the Defendants’ profits are included in the structure of the instant put option contracts, it cannot be deemed that it constitutes deception against the Plaintiffs, or that the Plaintiffs did not bear all the expenses incurred in entering into each of the instant put option contracts.

(3) Whether it can be deemed that there was deception from the manipulation of customer prices.

In light of the overall purport of arguments and arguments in Gap evidence 5-2, Eul evidence 67, Eul, and Eul evidence 16-1, and Eul evidence 16-2, in the past, it is not indicated separately the prices of put options or call options for each put-in and call-in products, which are co-market products, and it is not indicated separately the prices of put-in and call options or call options, and it is revised to provide customers with "each price information by individual transaction" at the end of 2005, but some banks are required to indicate the prices of put-in and call-in products, which were issued to customers after entering into the contract. On the other hand, other banks do not indicate the specific prices of put-in and call-in products, which are not the specific prices of put-in and call-in products, separately from put-in and call-in products, and provide customers with separate information on each of the above terms and conditions after entering into the contract.

The customer price of options is determined by the method as seen earlier by adding or adding the costs and profits of the bank to the option theoretical value without consultation with the plaintiffs. In calculating the customer price by adding or adding the fees to the option theoretical value without consultation with the plaintiffs, it is problematic whether the service fees can be charged to the customer price of put options and put options by adding both the difference between the theoretical value of put options and the theory of put options, or adding them to the theoretical value of put options.

However, prior to the conclusion of the instant currency option contract, Plaintiff 2, who entered into the instant currency option contract, on the premise that there is no premium to be paid separately without any interest to the customer price, as seen above at the time of the conclusion of the instant currency option contract, concluded a contract through negotiations on individual transaction terms, such as exchange rate, melter exchange rate, melter exchange rate, contract amount, etc. In this respect, it is difficult to acknowledge deception due to the manipulation of the customer price in this point. In addition, as seen earlier, there is no obligation to indicate the Defendants on how much the option theory or fee of each of the instant currency option contract is, and there is no other provision on how to determine the customer price by allocating fees to each of the individual options, and thus, it cannot be deemed that the fees actually calculated by the Defendants are excessive as seen earlier (in addition, the theory of options is calculated by the option price model, and the numerical values of which are the basis for the calculation thereof are no more objective factors that constitute the customer price, or that there is no objective provision on the customer price in the following form of the association.

(4) Whether the part concerning the theory of options or fees is an important part of the contract.

As seen earlier, with respect to whether the theoretical value of put options and put options are important terms and conditions of contracts in each currency option contract of this case, the possibility of a stable decline in exchange rates was dominant at the time of entering into each currency option contract of this case. Accordingly, Plaintiff 2 entered into a three KIKO currency option contract with Defendant Il-il Bank around 2006 and anticipated a decline in exchange rates in the conclusion of each currency option contract of this case. The KIKO currency option product of this case had the advantage of increasing exchange rates compared to the simple futures exchange contract without the need to pay premium separately. In light of the above, Plaintiff 2, including the Defendants, actively promoted the KIKO option product of this case, based on these contents, had no interest in entering into a new currency option contract of this case by comparing the terms and conditions of the contract, such as the exchange rate, exchange rate, exchange rate, and exchange rate, which were presented by the Defendants, and the Plaintiff 2 still had no interest in the presentation of the terms and conditions of the contract of this case.

Therefore, from this point of view, it is difficult to see that matters concerning options theory or fee size are important parts of the instant currency option contract.

C) Sub-decision

Therefore, the plaintiffs' assertion that the defendants deceptiond the plaintiffs in relation to the suitability of foreign exchange hedging, the theoretical value of options, fees, and zero list, etc., or caused the plaintiffs' errors is without merit.

4. Determination as to a claim for damages caused by a tort

A. Determination on the claim for damages caused by the Defendants’ deception

As stated in the above argument, the Plaintiffs, like in the above assertion, deceiving the Defendants as if the instant currency option contract was a contract suitable for exchange hedging; ② The Defendants concealed the appraisal value and fees of the options and emphasized the exchange option as if they were sold to the Plaintiffs, thereby deceiving the Plaintiffs, thereby seeking compensation for damages arising therefrom, claiming that they concluded the instant currency option contract.

However, as seen earlier, in concluding the instant currency option contract, it cannot be deemed that there was deception, option theory, fee, and deception related to the suitability of foreign exchange hedging against the Defendants. Therefore, it is difficult to recognize deception in tort as well as the grounds for revocation. Therefore, the Plaintiffs’ claim for damages in this part is without merit without further review as to the remainder.

B. Determination on claims for damages caused by breach of the suitability principle and the duty to explain

1) The plaintiffs' assertion

Each currency option contract of this case is a currency option product that is exposed to the risk higher than before the conclusion of the contract and is not suitable for the purpose of avoiding exchange risk, and thus, the Defendants’ solicitation and sale of such product to the Plaintiffs constitutes a tort in violation of the suitability principle.

In addition, when entering into the instant currency option contract with the Plaintiffs, the Defendants used the term “financial expertise in English” in the contract form, and did not clearly and fully explain the risks or structure that are contained in the said goods only in the form of a contract, but did not explain. Also, the Defendants committed tort in violation of the duty to explain, such as concealing the fact that the option theory and fees were reflected in the theoretical value of the call option option or the customer price, thereby becoming a product structure more unfavorable to the Plaintiffs due to the increase of exchange rate, and forecasting only a decent exchange rate decline.

Therefore, the defendants are obligated to compensate the plaintiffs for the amount stated in the claims as damages suffered by the plaintiffs due to the violation of the suitability principle and duty of explanation of the defendants.

2) Criteria for determination

The OTC derivatives, such as the instant currency option contract, are new forms of contracts developed by high-tech financial engineering using various information and expertise such as transaction principles in foreign exchange markets, prospect of exchange rate fluctuations, appraisal of options value, etc., and there is a risk of unlimited expansion of losses resulting therefrom if circumstances different from the prediction and speculation occur, as well as exchange risk management. Thus, it is difficult for a non-financial specialist company to accurately understand the contents, structure, risks, etc. of complicated contracts. Therefore, in order to make reasonable decisions and make decisions under its own responsibility, it is necessary to receive appropriate transaction information from a financial institution selling financial products as an expert. Accordingly, a financial institution is obligated not to actively recommend transactions involving excessive risk, taking into account various circumstances such as customer transaction purpose, transaction experience, and financial situation, and it is reasonable to see that it is also obligated to inform customers of such risk if it appears to require transaction conditions that are not suitable for themselves without properly recognizing the risk accompanied by monetary option products (Principle of suitability).

In addition, when a financial institution trades over-the-counter derivatives with a general customer, it is obligated to protect the customer by clearly explaining the characteristics of the product, major contents, and risks involved in the transaction in order for the other party to properly evaluate the structure and risk of the transaction.

Article 46 of the Financial Investment Services and Capital Markets Act also provides that a financial investment business entity shall verify whether an investor is an ordinary investor or a professional investor, and shall not make investment recommendations deemed inappropriate for the investor in light of the purpose of investment, status of property, experience in investment, etc. Furthermore, Article 47 of the Financial Investment Services and Capital Markets Act provides that a financial investment business entity shall explain the details of financial investment instruments, risks associated with investment, etc. when it makes an investment recommendations against an ordinary investor, so that the investor can understand the contents of the investment instruments, risks associated with the investment, etc. In addition, Article 48 of the Financial Investment Services and Capital Markets Act provides that a financial investment business entity shall compensate for damages if it falsely or distorteds, or omitted important matters that may have a significant impact on the investor’s reasonable judgment or the value of the relevant financial investment instrument. Although the provisions of the Financial Investment Services and Capital Markets Act were established after the conclusion of each currency option contract of this case, the aforementioned provisions shall be based on the principles and the duty of explanation applied to the financial transaction, etc. established prior to the enforcement of the Act.

(iii) the facts of recognition

This Court's reasoning is that Article 420 of the Civil Procedure Act is the same as Article 5-2 (b) and (b) of the judgment of the court of first instance.

4) Whether Defendant Il Bank violated the suitability principle and duty to explain

A) As to whether the Defendant Il-il Bank violated the suitability principle, the instant contract was concluded by the Health Board, the Defendant Il-il Bank, and the instant case ①, which was concluded by the Defendant Il-il Bank. The instant contract is likely to cause considerable loss to the Plaintiff 2 in the event of the fulfillment of the melting condition of the call options, as all of the two times of the set-off structure. The direction and scope of exchange rate fluctuations are difficult to predict experts. Since each of the above contract is a long-term contract term of one year, it is difficult to easily predict the specific rights and obligations that may occur in the future. Moreover, since Plaintiff 2 did not actually pay to the bank due to the rost structure, it is difficult for the Plaintiff 2 to seriously consider the risk of the fulfillment of the call options conditions without considering the possibility of the fulfillment of the call options conditions, raising the exchange rate and lowering the exchange rate. As seen above, it seems that there is no need to inform the Plaintiff 2 of the possibility that the exchange rate will decrease mainly by exercising the exchange rate.

However, considering the direction and degree of exchange fluctuation ordinarily anticipated at the time of entering into the contract, each of the above contracts is the rapid increase of exchange rates to achieve the purpose of avoiding exchange risk arising from the decline in exchange rates, while taking over risks arising from relatively low possibility at the time of entering into each of the above contracts, and it is difficult to view that the contract term, structure, and terms are unreasonable. As such, ① the contract in this case is able to sell USD 1 at an exchange rate more favorable than the monetary forward transaction instead of avoiding exchange risk only within a certain range of exchange rates set by melting the maturity rate. On the other hand, when the exchange rate increases above the green exchange rate and the maturity rate is higher than the exercised exchange rate, ② the contract in this case was concluded with the Plaintiff 2 at the time of entering into the contract in this case’s own effort to obtain exchange gains by selling twice of put put option contract price at the exchange rate, ② the Plaintiff 2 at the time of signing the contract in this case’s own view and management of the Plaintiff 2 at the time of signing the contract.

Ultimately, the instant contract ① is basically a product aimed at hedging, and even if an enterprise performs its duty to sell twice the call options by exercising the call options from a bank, if it owns goods on the basis of the call option contract amount, it does not incur losses to additionally incur additional payments of the amount in reality for the purchase of goods. However, if a company does not hold goods in kind, it is important to determine whether the contract price is appropriate in light of the company’s transaction purpose, exchange rate outlook and exchange rate fluctuation, risk preference, and property status.

However, it is clear that the contract of this case was concluded: ① the export performance of the Plaintiff 2 at the time of entering into the contract of this case; ② the Plaintiff 2 notified Defendant 2 of the estimated export performance in 2008 at the time of entering into the contract of this case to USD 10,000,00; ② the actual export performance of the contract of this case was confirmed as USD 9,350,286 at the time of entering into the contract of this case. ② The contract of this case was 40,000 per month but the contract of this case was 10,000 to August 208. The contract of this case was concluded at the time of entering into the contract of this case, ② the total export performance of the contract of this case was 30,000,000,000,0000,0000,0000,0000,000,0000,000,000,000 won.

B) Next, as seen earlier, Defendant Il Bank did not consider the possibility of a rapid increase in the exchange rate, but did not specifically emphasize the risk or loss level in the event of the increase in the exchange rate to Plaintiff 2 on the basis of the prospect of a decline in the exchange rate or the possibility of a stable change. It seems that the instant contract ① only was cryp on the contract, ② was cryp on the contract, and did not explain the price and the commission of options in detail.

However, Plaintiff 2 entered into a three currency option contract with Defendant 1 Bank prior to the conclusion of the instant currency option contract, and appears to have been aware of the basic structure of the KIKO currency option contract in the process thereof, and, at the time of the conclusion of the instant contract, Plaintiff 2 stated the settlement scenario and the part emphasizing the monthly transaction amount not to exceed the USD that would have been received by the customer. Plaintiff 2, at the time of the conclusion of the contract, included the following as a whole: (a) the transaction proposal that Defendant 1 Bank sent to Plaintiff 2, at the time of the conclusion of the instant contract (No. 11 certificate), stating that “If the monthly transaction amount exceeds the green exchange rate, it shall be sold twice the transaction amount at the exchange rate at the time of the observation; and (b) it is difficult to view that Plaintiff 2 violated the duty to explain the structure and content of the goods, such as the exchange rate, melting exchange rate, and melting exchange rate, etc.; and (c) it cannot be deemed that Defendant 2 violated the duty to disclose the terms and conditions of exchange option.

5) Whether Defendant New Bank violated the suitability principle and duty to explain

A) Occurrence of liability for damages

In concluding the instant contract, the Defendant New Bank explained to the effect that: (a) the transaction was terminated if the exchange rate is lower than the exchange rate in the Green Cross; (b) the exchange rate is more than once in the Green Cross; and (c) during the observation period, the Plaintiff entered into the instant contract with the understanding of the basic structure and content of the contract. In addition, the Plaintiff 2 was aware of the basic risk of the instant contract, as it entered into the instant contract, while performing the duty to sell twice as much as the exchange rate was higher than the exercise rate.

However, the non-party 1 branch of the Defendant New Bank: (1) knew that the exchange rate increase after the Plaintiff 2 entered into a KIKO currency option contract with the Defendant Il-il Bank; and (2) requested that the Plaintiff 2 enter into an additional KIKO currency option contract in order to compensate for losses during the contract term of the previous KIKO currency option contract; (3) Defendant Il-il Bank refused additional transactions on the ground that the Plaintiff 2, who applied for additional transactions after the contract, should not engage in speculative transactions in the state of OB on March 2008 (Evidence 35, the purport of oral argument); (2) Defendant New Bank, knowing that the contract term of this case was 1,00,000 US dollars, was 0,00,000 won in total; and (3) Plaintiff 2 would not be able to enter into the new currency option contract of this case; and (2) Defendant 2 would not be able to enter into the contract of this case with the Plaintiff 2, which was 12,500,0000 won in total,000.

Furthermore, at the time of entering into the instant contract, Nonparty 1’s head of Nonparty 1: (a) did not receive the above project promotion plan, etc. (Evidence B, 13,500,500, the export performance amount of which was stated as USD 12,500 at the time of entering into the instant contract (Evidence B, No. 9-1); (b) did not receive the said project promotion plan, etc. (Evidence B, the number of exports of KRW 5 million around November 2005, approximately KRW 7,180,000, the annual sales amount of KRW 60-70,000, and the production amount of KRW 60-70,000 (Evidence B, No. 9-1). In addition, at the time of entering into the instant contract, the instant contract was concluded only with information on the extent described in the said written opinion. In addition, at the time of entering into the instant contract, the exchange rate had already been changed to KRW 1,000, Mar. 3, 2008.

In conclusion, the instant contract is a transaction involving excessive risk in light of Plaintiff 2’s export status and economic situation at the time of the contract, and is in violation of the suitability principle by actively recommending the conclusion of the instant contract amount for an speculative purpose to make financial profit with the knowledge of such circumstance (the Defendant New Bank presented evidence No. 13). However, Plaintiff 2 presented evidence No. Na 13, which was written on May 21, 2008, following the conclusion of the contract, and even based on the document, the annual sales in 2007 exceeded KRW 8,00,000,000, and thus, even if it was anticipated that Plaintiff 2 would continuously increase sales in light of the economic situation at the time of the contract, the instant contract is concluded in combination with the contract amount in this case, and thus, it cannot be said that Plaintiff 2 violated the duty of explanation as well as the duty of explanation as it did not sufficiently exceed the reasonable scope of contract amount.

Therefore, Defendant New Bank violated the suitability principle and duty to explain while entering into the instant contract with Plaintiff 2, thereby causing damages to Plaintiff 2 and Plaintiff 2, thereby comprehensively taking over all the claims and obligations arising under the instant contract. Thus, Defendant New Bank is liable to compensate for damages arising from the conclusion of the instant contract with the Plaintiff Company that received comprehensive claims and obligations as above.

B) Scope of damages

The Defendant New Bank’s loss incurred by the Plaintiff Company in violation of the suitability principle and duty to explain in executing the instant contract. ③ The amount equivalent to the loss incurred by the conclusion of the instant contract (attached Form 3) shall be KRW 3,129,790,000, as shown in paragraph (3).

Meanwhile, during the contract term of the contract of this case, there are parts that did not occur over the contract term of this case ①, ② parts that did not overlap with the contract term of this case ② The contract term of this case were overlapping only with the contract term of this case ② The other losses are included in the part due to exchange rate fluctuations within the reasonable scope at the time of conclusion of the contract of this case ③ but the losses related to this part are losses that could not have occurred if the contract of this case did not enter into the contract of this case ③, and thus, they are included in the damages suffered by the plaintiff company due to the violation of the suitability principle and duty to explain of the defendant new bank.

However, in full view of the following circumstances, Plaintiff 2 understood and understood the structure and contents of the instant currency option contract several times from the Defendants. In particular, prior to the conclusion of the instant contract with the Defendant New Bank, Plaintiff 2 experienced risks arising from the instant contract by performing the obligation to sell twice as a result of the occurrence of losses from each contract. Although Defendant New Bank recommended the Plaintiff to conclude the instant contract in violation of the suitability principle, Plaintiff 2 decided the said contract by itself under the determination that the exchange rate decline from the purpose of compensating for losses. Plaintiff 2 suffered significant losses from the instant contract ③ The Plaintiff Company cannot be seen as Defendant New Bank as having been unexpectedly affected by the global financial crisis that occurred from the instant contract, and Plaintiff 2 cannot be seen as having been unilaterally liable to compensate for damages from Defendant 30% of the Plaintiff Company’s fault in view of the fair sharing of damages, and Plaintiff 2’s fault in the instant contract.

Therefore, Defendant New Bank is obligated to pay 938,937,00 won (3,129,790,000 won) and 14,000 won (30% per annum 46,800,000 won) for the damages arising out of the contract of this case 30.30,000 won (30% per annum 60,80,000 won per annum from June 5, 2008 to 30.30,000 won (30% per annum 67,80,000,000 won) for the damages arising out of the contract of this case 40.30,80,000 won per annum 20,305.30,000 won per annum 60,305,70,000 won per annum 9,405,305,000 won per annum 205,305,005,000 won per annum

5. Conclusion

Therefore, the plaintiff 2's claim against the defendant 1 Bank is dismissed, and the plaintiff 2's claim against the defendant 1 Bank shall be accepted within the scope of the above recognition and the remaining claim shall be dismissed. Since the judgment of the court of first instance differs from this part of the judgment, the judgment of the court of first instance shall be modified as above, and it is so decided as per Disposition.

Judges Lee Jae-won (Presiding Judge)

Note 1) In the first instance judgment, the first instance judgment indicated “Knock-in-investment” as “Knock-in-investment,” but the right marking in accordance with the loan agreement is “melter” and “green-in-investment”.

Note 2) The “observer’s theory” refers to the numerical value calculated by using the option price calculation model. The Plaintiffs asserted that the expression “observer’s theory” in the trial is misunderstanding to the effect that only exists in the theoretical sense, and thus, should be expressed as “value or fair value of option”. However, as seen above, there is no practical example that expresses the price calculated by using the option price calculation model as “value or fair value of option” and is generally expressed as “the option’s theory”. As such, as in the judgment of the first instance, the term “ theoretical value” should be used. Moreover, as in the judgment of the first instance, there is a dispute between the parties as to whether the difference between the option’s theoretical value and the put option’s theoretical value is “fee” or not, but this also appears to be “fee” for convenience as in the judgment of the first instance.

3) As seen thereafter, the theory of call options is the same as that of a customer, but is not necessarily such.

(4) Mad Ratio = (the theory of put options - the theoretical value of put options)/ 257% = (52,478-14,700)/14,700 of the contract of this case ② approximately 615.6% of the contract of this case = (46,885- 6,552)/6,552 ③ approximately 449.8% of the contract of this case = (100,160,364 - 18,218,364)/18,218,364)/18,364 of the contract of this case

(5) Article 2-9 (Limit of Foreign Exchange Transfer) (1) of the Foreign Exchange Transaction Regulations provides that the limit of foreign exchange circulation shall be an amount equivalent to 50/100 of the equity capital as of the end of the preceding month on the basis of the aggregate of purchases in excess of foreign currencies by each foreign country: Provided, That in the case of the Export-Import Bank of Korea, an amount equivalent to 150/100 of the balance of loans in foreign currency, and in the case of the Export-Import Bank of Korea, an amount equivalent to 110/100 of the balance of loans in foreign currency, and in the case of the excess of purchase in exchange due to the difference settlement futures exchange transaction with non-residents on or after January 14, 2004, an amount equivalent to 110/100 of the same surplus of purchase in exchange (in the case of establishment after January 14, 2004, such excess of purchase in foreign currency shall be 0/50 of the equity capital as of the end of the preceding month:

6) Article 63 (Foreign Exchange Risk Control) (1) of the Regulations on the Supervision of Banking Business shall be confirmed on the basis of the balance of each business day as to whether a foreign exchange handling agency establishes or amends the management standards referred to in paragraph (1) or handles foreign exchange transactions in excess of such standards (hereinafter referred to as the “foreign exchange circulation limit”). <2) If a foreign exchange handling agency violates the foreign exchange circulation limit, it shall report it to the Director within three business days from the date of the violation.

Note 7) means the hedge method in which a bank enters into a transaction with an enterprise which is a customer and in the form or condition of the opposite transaction.

8) The KIKO currency option contract has a large cost required for the hedging structure, such as opposite trading, compared to simple futures exchange, and the customer-specific goods have a large business cost in the design of goods, negotiation of terms and conditions, follow-up management, etc. As a result, each of the instant currency options contract also has much more than the theoretical value of put options among the factors constituting the price of customers. However, if the size of put options is compared to the theoretical value of put options, as alleged by the Plaintiffs, if the theory of put options is more simple futures exchange (a simple futures exchange is a factor constituting put options’ theory and fees) than put options, it would result in unreasonable results in which more costs can be collected from put options than the put options’ theory and fees.

Note 9) As seen earlier, this refers to “the theoretical value of options”.

10) Article 65 subparagraph 6 (c) of the Regulations on Supervision of Banking Business shall notify the other party to the transaction of important information on the transaction, such as important factors that affect the structure and potential loss inherent in the transaction, so that the other party to the transaction may evaluate the structure and risk of the transaction. In the case of non-fixed derivatives transaction, the relevant risk for each individual transaction inherent in the transaction shall be separated and notified, and in the case of non-fixed derivatives transaction, the change in profit and loss of the transaction in light of the terms of the contract, liquidity, etc., the details related to the change in appraised profit and loss shall be explained in addition to the simple change in cash flow due to the change in the financial variables when explaining the risk of loss to the other party

(11) Article 47(1) of the Financial Investment Services and Capital Markets Act (i) (i) A financial investment business entity shall explain to ordinary investors the details of financial investment instruments, the risks associated with the investment, and other matters prescribed by Presidential Decree so that ordinary investors can understand such matters. Article 58 (Fees) (1) A financial investment business entity shall determine matters concerning the guidelines and procedure for imposing fees and disclose such matters on its website. Article 53(1) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act (i) “matters prescribed by Presidential Decree” in Article 47(1) of the Act refers to the following matters: