2018Da218335 Undue gains

Korea Highway Corporation;

Law Firm LLC (LLC)

Attorney Kim Si-ju et al.

Jinjin Asset Management Co., Ltd. and one other

Law Firm LLC et al., Counsel for the defendant-appellant

Seoul High Court Decision 2017Na2016561 Decided January 19, 2018

April 1, 2021

All appeals are dismissed.

The costs of appeal by the Plaintiff are assessed against the Defendants. The costs of appeal by the Defendants are assessed against the Defendants.

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

1. Plaintiff’s ground of appeal

For the reasons indicated in its holding, the lower court rejected the Plaintiff’s primary assertion on the ground that it is difficult to recognize the fact that Defendant Ujin Asset Management Co., Ltd. (hereinafter referred to as “Defendant Jinjin Asset Management”), an asset management company, and a company selling future U.S. Securities Co., Ltd. (hereinafter referred to as “Defendant U.S. U.S. U.S. Asset Management”), were merged with and taken over the instant lawsuit on December 30, 2016, and the name was changed to that of March 24, 2021; hereinafter collectively referred to as “Defendant U.S. Securities Co., Ltd.”) was of deception or deception at the time of creating each of the instant funds or recommending the Plaintiff to make investments, and recognized the Plaintiff’s fault ratio as 30%, citing part of the Plaintiff’s preliminary assertion seeking damages due to breach of investor protection duty.

Examining the reasoning of the lower judgment in light of the relevant legal doctrine and the record, the lower court did not err in its judgment by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on deception and comparative negligence by omission, without exhaust all necessary deliberations

2. As to the ground of appeal on Defendant Jinjin Asset Management

For the reasons indicated in its reasoning, the lower court determined that Defendant Jinjin Asset Management was an investment recommendation for the Plaintiff, and that Defendant Jinjin Asset Management was liable to compensate the Plaintiff for part of the investment principal due to the Plaintiff’s investment recommendation in violation of the duty to protect investors, and thus, Defendant Jinjin Asset Management was jointly and severally liable with Defendant Jinjin Asset Management. However, the liability for Defendant Jinjin Asset Management was limited to

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court did not err in its judgment by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on investment recommendation, suitability principle, duty to explain, duty to prohibit unfair solicitation and the calculation of damages, comparative negligence and liability limitation, inconsistent reasoning and incomplete reasoning, etc. under the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”).

3. As to the ground of appeal by Defendant Future Deposit Securities

A. Whether the Plaintiff constitutes a “fund established under the Act” as a professional investor under the Capital Markets Act and its Enforcement Decree

1) Article 9(5) of the Financial Investment Services and Capital Markets Act defines the scope of professional investors as investors who are capable of reducing risks arising from investment, in light of whether they have expertise in financial investment instruments, and the scale of their shareholding, and include financial institutions prescribed by Presidential Decree other than the State, the Bank of Korea, stock-listed corporations, and other persons prescribed by Presidential Decree. Accordingly, Article 10 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act provides for the scope of professional investors. Accordingly, whether an investor is a professional investor prescribed by the Financial Investment Services

The Financial Investment Services and Capital Markets Act does not apply most of the regulations on business activities to professional investors, such as the suitability principle, appropriateness principle, and duty to explain, by distinguishing professional investors from general investors. This purport is to enhance the efficiency of regulations by concentrating limited regulatory resources to general investors in need of protection, taking into account the difference between the necessary knowledge, experience, and ability when concluding a financial investment contract between professional investors and general investors (see Supreme Court Decision 2016Da224626, Jul. 11, 2019).

2) Examining the purport of distinguishing professional investors from ordinary investors and the legislative purpose, criteria for distinction, etc., the scope of professional investors should be limited to cases where it is clearly recognized in accordance with the Capital Markets Act and the Enforcement Decree thereof. In other words, solely on the ground that the fund has the legal basis for its establishment, it cannot be readily concluded that it constitutes a “fund established under the Act” as a professional investor under Article 10(3)12 of the Enforcement Decree of the Capital Markets Act. In particular, it is more necessary to determine whether the fund is established or not. Accordingly, the Plaintiff, a corporation established with the approval of the Minister of Employment and Labor for the stabilization of livelihood and the promotion of welfare of the employees of the Korea Highway pursuant to Articles 50 and 52 of the Framework Act on Labor, cannot be deemed as a “fund established under the Act” under Article 10(3)1

3) Examining the reasoning of the lower judgment in light of the aforementioned legal doctrine, the lower court’s conclusion that part of the reasoning of the lower judgment was partially inappropriate, but the Plaintiff did not constitute a professional investor is justifiable. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending

B. As to the remaining grounds of appeal

The lower court determined that the Defendant’s future deposit securities, in violation of the duty to protect investors, resulted in the Plaintiff’s failure to recover part of the investment principal by recommending investment in violation of the duty to protect investors, thereby jointly and severally liable with the Defendant U.S. Asset Management. However, the liability of Defendant U.S. deposit securities was limited to 70% equivalent to Defendant U.S.

Examining the reasoning of the lower judgment in light of the relevant legal doctrine and the record, the lower court did not err in its judgment by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on suitability principles, duty to explain, duty to prohibit unfair solicitation, duty to comparative negligence and liability limitation under the Capital Markets Act.

4. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal by the Plaintiff are assessed against the Defendants. The costs of appeal by the Defendants are assessed against the Defendants. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Young-gu

Justices Lee Dong-won

Justices Park Jong-young

Justices Kim Gin-soo