Plaintiff 1 and two others (Bae, Kim & Lee LLC, Attorneys Song-chul et al., Counsel for the plaintiff-appellant)

Financial Services Commission and one other (Law Firm LLC, Attorneys Sung Chang-hoon et al., Counsel for the plaintiff-appellant)

November 17, 2016

Seoul Administrative Court Decision 2015Guhap74593 decided April 15, 2016

1. A. The part of the judgment of the court of first instance against the defendant is revoked.

B. The plaintiffs' lawsuits against the defendant Governor are dismissed.

2. (a) Of the judgment of the first instance court, the part of the judgment against the Defendant Financial Services Commission of the Plaintiff SPP as to the quota limited company shall be revoked.

B. On June 24, 2015, the Financial Services Commission revoked the warning disposition against the Plaintiff S&A regarding the quota limited company.

3. The appeal filed by the plaintiff 1 and Subdivision against the defendant by the Financial Services Commission is dismissed.

4. The plaintiffs, the plaintiffs and the Governor of the Financial Supervisory Service bear the total costs of litigation between the plaintiffs, the limited liability company and the defendant's Financial Services Commission, respectively, while the costs of appeal between the plaintiffs 1, and the defendant's private equity fund and the defendant's Financial Services Commission are borne by the above plaintiffs.

The judgment of the first instance court is revoked. On June 24, 2015, the Financial Services Commission revoked each disposition of a disciplinary warning against Plaintiff 1, which was issued against Plaintiff 1, and each disposition of a warning against the private equity fund, Plaintiff Don&A, and Defendant Don&A against Plaintiff Don&A, respectively, and revoked each disposition of warning against each of the administrative warning against Plaintiff 1 on July 2, 2015 by the Governor of the Financial Supervisory Service against Plaintiff 1, and against Plaintiff Don&A, Plaintiff Don&A against Plaintiff Don&A, respectively.

1. The part citing the judgment of the court of first instance

Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act, except for an addition of the following determination, the details of the judgment of the court of first instance and the part as to the legitimacy of the disposition 1. and 3. The part as to the lawfulness of the disposition 3. The judgment of the court of first instance are modified as follows.

2. Whether the plaintiffs' lawsuits against the defendant Governor are legitimate

A. Main Safety Defenses

The disposition by the Governor of the Financial Supervisory Service cannot be viewed as an administrative disposition because it is merely a de facto notification or recommendation or guidance that explains the details of the disposition by the Financial Services Commission and instructs the defendant to take measures accordingly.

B. Determination

1) The term "administrative disposition", which is the object of an appeal litigation, means an act of an administrative agency under public law, which directly changes the specific rights and obligations of citizens, such as ordering the establishment of rights or the burden of obligations with respect to a specific matter, or giving rise to other legal effects (see Supreme Court Decision 2006Du18362, Sept. 11, 2008). It does not constitute an act of an administrative agency to inform a new disposition already taken and to notify a withdrawal of measures following such a disposition.

2) As seen earlier, Article 14(1) of the Regulations on Inspection and Sanctions of Financial Institutions (amended by the Financial Services Commission Notice No. 2015-29, Sept. 14, 2015) provides that the Governor of the Financial Supervisory Service may notify the relevant financial institution of the results of the inspection of the financial institution or request the head of the relevant financial institution to take necessary measures, and Article 15(1) provides that the financial institution shall organize the said requirements within a given period and report it to the Governor of the Financial Supervisory Service, and Article 15(2) provides that the Governor of the Financial Supervisory Service may proceed with sanctions in accordance with the above reports. Accordingly, under the relevant statutes, the Plaintiffs are subject to legal obligation by the disposition of the Governor of the Financial Supervisory Service, and thus, it is difficult to view that the Defendant’s disposition is merely a de facto notification, recommendation or guidance, etc., and that it constitutes an administrative disposition subject to appeal litigation because it orders the Plaintiffs to bear obligations or causes other legal effects.

3) Of the examination results notification and the request for measures by the Governor of the Financial Supervisory Service, the part seeking revocation by the plaintiffs among the contents of the plaintiffs' request for measures is that the Financial Supervisory Service imposed a warning or reprimand against each violation of the plaintiffs' respective regulations on the recommendation by the Governor of the Financial Supervisory Service, and thus, it is difficult to view that the Governor of the Financial Supervisory Service imposes separate legal obligations on the plaintiffs. In the event that the plaintiffs fail to implement such measures, if they violate relevant Acts and subordinate statutes, it can be subject to separate sanctions based on relevant Acts and subordinate statutes. Therefore, it cannot be said that the disposition by the Governor of the Financial Supervisory Service directly imposes new obligations on the plaintiffs,

4) Therefore, the plaintiffs' above assertion is without merit and the lawsuit of this case against the disposition by the Governor of the Financial Supervisory Service is unlawful.

3. Whether the dispositions by the Financial Services Commission are legitimate

(a) the nine-way decision of the court of first instance added to the nine-way decision at the end;

The plaintiffs asserts to the effect that the provisions of this case are unlawful since they are in violation of the principle of strict interpretation to the effect that the broad interpretation of the provisions of this case is to prohibit share options contracts between LPs.

On the other hand, in light of the behavior of Plaintiff LP as seen earlier, the respective dispositions of this case by the Financial Services Commission were not carried out on the ground of a share option contract between LPs (the guarantee of principal and a certain amount of profit through an equity option contract against the remaining LPs of LS network corporation), but on the basis of the fact that Plaintiff LP et al. engaged in an act of unfairly soliciting other LPs by guaranteeing principal or a certain amount of profit, and thus, the Plaintiffs’ assertion is without merit.

The Supreme Court Decision 2011Do11237 Decided May 24, 2012 ruled that the prohibition provision cannot be extended or analogically applied to the act of guaranteeing the principal or profit of a private person, who is not a criminal offender, and thus, cannot be punished accordingly. The issue of this case differs from this case.

B. The portion added between 10 pages 9 and 10 of the first instance judgment

2)-1. As to the laws and regulations based on the disposition

A) The Plaintiff L&C asserts that the Act on the Grounds for Disposition of Unfair Solicitation by the same Plaintiff on 208 is Articles 144-18(2) and 166(5) of the former Indirect Investment Asset Management Business Act, and that it cannot be a ground provision for imposing sanctions against the managing partner of a private equity fund.

However, Article 144-18(2) of the former Indirect Investment Asset Management Business Act provides that Article 166 of the same Act shall apply mutatis mutandis to private equity funds, and Article 166(5)5 of the same Act provides that measures prescribed by Presidential Decree among measures that can be taken by the Financial Services Commission shall be taken. According to delegation, Article 159 subparag. 2 of the former Enforcement Decree of the Indirect Investment Asset Management Business Act (amended by Presidential Decree No. 20947, Jul. 29, 2008; hereinafter the same shall apply) provides that a warning to the officers of a company shall be given by the Financial Services Commission.

Meanwhile, Articles 144-2(2), 144-3(1) and (4), and 144-10(1) of the former Indirect Investment Asset Management Business Act provide that no private equity fund shall have employees or full-time officers; however, a general partner (a company may also become a general partner) and limited partners shall have limited partners, and only the managing partner shall have the right and duty to manage the company. According to Articles 269 and 207 of the Commercial Act applied mutatis mutandis by Article 144-2(4) of the same Act, a representative of a private equity fund shall be an executive partner.

Thus, the former Indirect Investment and Assets Management Business Act assumes a general partner as a company, and Plaintiff Donb as a general partner of PEF, and Plaintiff Donb as a representative, is an officer of Plaintiff Donb in light of its occupational rights and duties. Therefore, Plaintiff Donb may be subject to the disposition of warning against an officer of the company in accordance with the above provision.

However, Articles 17 and 18 of the former Regulations on the Inspection and Sanctions of Financial Institutions (amended by Act No. 2008-34, Dec. 31, 2008; hereinafter the same) provide that an executive officer shall be subject to a disciplinary warning, not an agency warning, for an executive officer, separately from the agency, and provided that there is no evidence to prove that the effect of the warning and the warning is equal to that of the warning, the Defendant’s disposition on the warning of the officer against the Plaintiff N&P is unlawful.

Therefore, the above argument by the plaintiff LAW is therefore justified.

B) On the other hand, with respect to Plaintiff LAW’s unfair solicitation in 2009 and 2013, the Financial Services Commission rendered the instant disposition against Plaintiff LAW on the ground that Article 278(3)5 of the former Financial Investment Services and Capital Markets Act (amended by Act No. 13448, Jul. 24, 2015; hereinafter the same) was the ground for the disposition, and Article 278(4)1(c) of the former Financial Investment Services and Capital Markets Act (amended by Act No. 13448, Jul. 24, 2015; hereinafter the same) against Plaintiff LAW as the ground for each disposition.

However, Article 438(3) of the former Financial Investment Services and Capital Markets Act and Article 387(3) of the former Enforcement Decree of the Financial Investment Services and Capital Markets Act (amended by Presidential Decree No. 26374, Jun. 30, 2015) are entrusted to the Governor of the Financial Supervisory Service with the authority and authority of the Governor of the Financial Supervisory Service under the former Financial Investment Services and Capital Markets Act. Thus, the said sanctions should be imposed upon the Governor of the Financial Supervisory Service.

Thus, each of the dispositions against the above plaintiffs of the defendant's financial council is unlawful.

C) Therefore, in the part on the disposition against Defendant Mebnb, which is subject to unfair solicitation in 2009 and 2013, the disposition against Plaintiff Menb is unlawful as a disposition without any legal basis for all of the disposition.

D) As to this, under the Indirect Investment Asset Management Business Act at the time of unfair solicitation in 2008, the Defendant Financial Services Commission had the right to warning against the Plaintiff SPEF under the Indirect Investment Asset Management Business Act, which was enacted and implemented (Law No. 8635, Feb. 4, 2009) and entrusted to the Governor of the Financial Supervisory Service with the right to warning. If the Governor of the Financial Supervisory Service separately issued a separate disposition against the unfair solicitation in 2009 and 2013, only one of the instant dispositions against the Plaintiff was harsh to the said Plaintiff, and the determination of the disposition was made only against the unfair solicitation in 2008, and in light of the aforementioned sanctions regulations, which are the basis for the process of the disposition and determination of the disposition, the determination of the disposition against the said Plaintiff was lawful.

If the amount of solicitation for unfair solicitation in 2008 (231 billion won) is almost the same as the total amount of solicitation for unfair solicitation in 2009 and 2013 (231.8 billion won), there is room to deem that the disposition without authority by the Financial Services Commission without authority is illegal.

However, there is room to regard the above three times of unfair solicitation as the same economic substance as the plaintiffs' own assertion, even if it is a separate solicitation act under the law. The defendants seem to have made a disposition only by the defendant with the knowledge that it has divided the disposition authority in consideration of this point, while the defendant's disposition that can be made by the Financial Services Commission for the illegal solicitation in 2008 is not 4) but a minor disposition by the defendant's act under Article 17 (1) 7 (a) and 2 (b) of the Sanctions Regulation which impedes the sound operation of financial institutions pursuant to Article 17 (1) 7 (a) and 17 (1) 7 (b) of the Sanctions Regulation, which causes damage to the sound management or property loss to the financial institutions, financial traders, etc., but the above disposition was taken in light of the size of the unfair solicitation act in 208 and 2013, the above disposition was legitimate even if it was excluded from the unfair solicitation act in 209 and 2013.

(c) A portion added following the 11th decision of the first instance; and

In light of the following, the Plaintiff 1 and the Plaintiff G&W’s PEF’s act of unfair solicitation was unlawful, unlike the allegations by the Plaintiffs, it was due to the absence of awareness of illegality, and the disadvantages suffered by the Plaintiffs due to the instant sanctions, that part of the act of unfair solicitation subject to sanctions against the Plaintiff L&W did not have the authority to dispose of the Plaintiff’s Financial Services Commission, and that it can achieve the purpose more minor sanctions, the respective dispositions of the instant case by the Financial Services Commission are unlawful since they exceeded discretionary authority.

However, as seen earlier, the act of unfair solicitation in this case is prohibited, and the sanctions imposed on the violation of administrative laws are imposed on the objective facts that are violation of administrative laws in order to achieve administrative purposes. Thus, not realistic offenders but those who are stipulated as persons in charge under the Acts and subordinate statutes can be imposed without intention or negligence (see Supreme Court Decision 2012Du1297, May 10, 2012). The above plaintiffs' reasons for internal payment cannot be seen as the above special reasons, and what measures should be imposed upon the discretion of the sanctions authority, and it is hard to find that some sanctions were imposed upon the sanctions authority as exercise of its discretionary authority are unlawful only when it is recognized that part of those sanctions were abused by social norms and thus, it is difficult for the sanctions authority to find that the sanctions were clearly inappropriate in light of the contents and nature of the sanctions and other factors of the sanctions (see Supreme Court Decision 201Du2940, May 10, 2012).

4. Conclusion

Therefore, the plaintiffs' lawsuits against the defendants Do Governor are dismissed, and the claims against the defendant Financial Services Commission by Don&W against the plaintiff 1 and Don&W against the defendant Financial Services Commission shall be accepted for the reasons, and they shall be dismissed for each reason. The judgment of the court of first instance is unfair for the part against the plaintiffs 1 to the Governor of the Financial Supervisory Service and the part against the defendant Financial Services Commission by Don&W, and is just for the conclusion with respect to the part against the defendant Financial Services Commission by Don&W as to the plaintiff 1 and Don&W as to the part against the defendant Financial Services Commission by Don&W.

Judges Kim Jong-ju (Presiding Judge)

Note 1) Of the reasons for the judgment of the first instance court, the Limed Part 1 among the reasons for the judgment of the second instance is corrected to Limed Part 1.

2) The Plaintiff’s act of unfair solicitation on three occasions is specified according to the year of that act.

(3) The Defendant Financial Services Commission specified the grounds for the disposition against the Plaintiff P&C as such. The statutes initially asserted by the Defendant Financial Services Commission were Article 159 subparag. 1 of the Enforcement Decree of the said Act, and Article 144-18 and Article 166 of the former Indirect Investment Asset Management Business Act and Article 159 of the Enforcement Decree of the said Act are construed as a matter of interpretation, not a private equity fund, but a

4) The disposition under the former Indirect Investment Asset Management Business Act requires the cancellation of license or registration, the suspension of all or part of business, the request for dismissal of an officer, the removal of an employee, etc., and the disposition under the Enforcement Decree of the same Act requires the warning or caution of the company, the request for suspension of duties and warning, etc. to an officer or employee of the company, the request for corrective