[1] Whether the first-class investment adviser of a securities company may engage in unfair solicitation or trade securities on his/her own account (negative)

[2] The case denying the employer's liability of a securities company for damages to a customer in case where the customer deposited the investment fund into the investment adviser's personal account of the securities company without opening the futures option account with the securities company and entrusted the sale and purchase of the futures option

[1] The primary business of a Class 1 investment adviser employed as a contractual position in a securities company is to recommend the entrustment of sale and purchase transaction of securities with respect to the stock index, futures and options trading, or to provide advice on investment for customers, and to prevent customers from performing unfair solicitation, such as the principal and profit security agreement, or from trading or entrusting securities on his/her account regardless of in whose name the principal and profit security agreement is made.

[2] In a case where a customer did not open a futures option account to a securities company and deposited an investment money into an investment advisory account of the securities company and entrusted sales of a futures option, the case denying the customer's liability for the employer of the securities company for damages suffered from investment by the customer, taking into account the following: (a) the customer knew of the fact that the investor created a fund personally and knowingly performed futures option transaction through a borrowed-name account; (b) he received high-rate profit dividends regardless of actual profit from investment; (c) not only securities companies but also investment advisers did not check the details of the investment; and (d) the customer agreed to keep the securities company and the third party including the securities company confidential with respect to the investment; and (e) the customer cannot return the investment amount if the investor violated the contract.

[1] Article 756 of the Civil Code, Articles 42 and 52 of the Securities and Exchange Act / [2] Article 756 of the Civil Code

Labor law (Attorney Han-jin, Counsel for defendant-appellant)

Mez Securities Co., Ltd. (Law Firm Square, Attorneys O Chang-seok et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2003Na82077 delivered on May 21, 2004

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

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

1. Regarding ground of appeal No. 1

In full view of relevant provisions, the non-party is a Class 1 investment adviser employed as a contract-based employee in the defendant company, and whose primary business is to recommend the entrustment of trading of the price index futures and options trading, or to provide advice on investment for the customer. The non-party is prohibited from engaging in unfair solicitation, such as the principal and profit security agreement, or from trading or entrusting securities on its own account regardless of in whose name it is named. Therefore, in this case, the non-party solicits the plaintiff to make an investment through a principal and profit security agreement, and without opening a trust account in the name of the plaintiff company, it cannot be said that the non-party's act of receiving investment money from the plaintiff company to his own personal deposit account and conducting futures option trading on its own account through a borrowed account opened in the name of the other party in the defendant company falls under the original business scope of the investment adviser.

The court below is just in holding that it did not err by misapprehending the legal principles on the duties of investment consultants, as otherwise alleged in the ground of appeal.

2. Regarding ground of appeal No. 2

According to the reasoning of the judgment below, the court below comprehensively adopted evidence: ① (a) the Plaintiff deposited the instant investment fund in the name of the non-party without opening a futures option account in the name of the non-party; (b) the Plaintiff made an investment in the form of investing in the non-party’s fund in order to make more effective investment by being aware of the fact that the non-party created the fund in a borrowed-name account; (c) the Plaintiff received monthly high-interest dividends regardless of the actual profit of the investment of this case from the non-party; and (d) the Plaintiff received a refund of principal amount; and (e) the Plaintiff received a cash custody certificate in the name of the non-party as to each of the investment funds separately from the non-party; and (e) the Plaintiff did not receive the non-party’s profit dividends from the non-party for 2 years and 34 months, regardless of the fact that the Plaintiff did not request the non-party to return the funds to the non-party and the non-party’s investment trust funds to the non-party.

The above fact-finding and judgment of the court below are just in light of the records, and there is no error in the misapprehension of the legal principles as to the scope of office performance in employer liability and in violation of the Supreme Court precedents as to the victim's bad faith or gross negligence as an exemption from employer liability.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Hong-hoon (Presiding Justice)