The principal and interest of redemption, etc. 2016Na5926

1. A;

2. B

3. C

4. D;

5. E.

6. F;

7. G.

8. H;

9. I

10. J

11. K;

12. L.

13. M;

14.N

15.O

16. P;

17. The Saemaul Bank of Korea;

18. Korea Development Bank of Korea MM Saemaul (trade name before the change: MN Changwon Saemaul Bank of Korea);

19. The Gangnam Saemaul Fund;

20. Qua

21. R:

22. The Jeonnam University Development Fund Foundation;

23. The Japanese Saemaul Savings Depository (the Korean Saemaul Savings Depository before its change);

24. S;

25. Telecommunication

26.1.2.3 Dong Saemaul Savings Depository;

Domina Bank (Deutche Bank AG business offices)

Seoul Central District Court Decision 2010Gahap27835 Decided January 12, 2012

Seoul High Court Decision 2012Na12360 Decided December 14, 2012

Supreme Court Decision 2013Da2740 Decided March 24, 2016

October 5, 2016

October 28, 2016

1. Of the judgment of the court of first instance, the part against the defendant exceeding the amount ordered to be paid below is revoked, and the plaintiffs' claims corresponding to the revoked part are dismissed.

The defendant shall pay 5% interest per annum to each of the plaintiffs listed in the " Claim Amount Schedule" as stated in the " Claim Amount Schedule" and 20% interest per annum from September 1, 2009 to October 28, 2016, and 20% interest per annum from the next day to the date of full payment.

2. The defendant's remaining appeal is dismissed.

3. All costs of the lawsuit shall be borne by the defendant.

1. Purport of claim

The Defendant shall pay to each of the Plaintiffs listed in the “Plaintiff’s Schedule of Claim Amount” as follows: 5% per annum from September 1, 2009 to March 24, 2016; and 20% per annum from the next day to the date of full payment (the Plaintiff reduced the claim amount at the trial after remand).

2. Purport of appeal

The judgment of the first instance is revoked, and all the plaintiffs' claims are dismissed.

1. Basic facts

A. On August 31, 2007, Korea Investment Securities Co., Ltd. (hereinafter referred to as the “Korea Investment Securities”) issued the “Korea Investment Securities Co., Ltd. 289 (hereinafter referred to as the “instant stock-linked securities”) No. 289 (hereinafter referred to as the “instant stock-linked securities”). The main contents set out in the prospectus are as follows:

- The name of a good: The 289 unit price of Samsung Ordinary Co., Ltd. - Total Redemption Amount: 19.89 billion won-Initial Base Price: August 30, 2007 - the maturity of 7% (572,000 common shares of national banks, 74,600 won): the due date of redemption of each underlying asset - the due date of 6% (2%) of the initial redemption price on August 31, 209 - the due date of maturity of 6% (6%) of the initial redemption price on August 26, 209 - the due date of 6%) the due date of 5% (2%) of the initial redemption price on which the due date of underlying assets falls below the due date of 6%) - the due date of 3% of the initial redemption price on which the initial redemption price of underlying assets reaches or exceeds 90% of the initial redemption price on August 26, 2009.

B. On August 30, 2007, in order to avoid the risk that the terms and conditions of early redemption of the stock-linked securities of this case or the terms and conditions of redemption at maturity are met, Korea Investment Securities entered into a “U.S.D. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S. S.S. S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.S.

C. After that, the instant stock-linked securities led to August 26, 2009, the date of determining the maturity price without fulfilling the conditions for early redemption (hereinafter “the base date of this case”), and there was a problem as to whether the terms and conditions for redemption A or redemption C have been fulfilled. At the time, Samsung Ordinary Co., Ltd was formed at the 700,000 won higher than the base price (572,000 won), and there was no problem to satisfy the terms and conditions for redemption (429,000 won higher than the base price). However, in the case of KB Ordina Financial Co., Ltd. (hereinafter “instant shares”), since the maturity price was adjusted to 54,740 won according to the capital increase for new stocks, 75% of the base price was adjusted to 50,000 won, 40,500 won, 50,500 won, 209, 205, 209, 2005, 2005.458.29

D. However, on August 26, 2009, the Defendant repeatedly sold 242,214 shares as indicated below [the table] as of August 26, 2009. Specifically, during the connection time period, 8,182 shares were sold at KRW 53,500 immediately before the immediately preceding conclusion of the transaction. On the other hand, the Defendant sold 128,000 shares (14:5:196,00 shares, 14:58:472,00 shares, which are 15:0 shares, via the EL Seoul branch, not affiliate companies, at KRW 14:500 through the ELS Seoul branch (14:5:196,400 shares, 14:5732,00 shares). (hereinafter referred to as “the Defendant’s sale of shares” of the instant shares was collectively referred to as “the act of selling shares”).

A person shall be appointed.

E. The sale of shares at the same time as above was made at the time when the expected execution price of the instant shares was sharply exceeded KRW 54,800,000, which is the base price for redemption of the instant stock-linked securities. The expected execution price was lowered to KRW 53,600 by selling 96,00 shares in 14:55:19, and the anticipated execution price was lowered to KRW 54,500 by selling 32,00 shares in 14:58:47.

F. At the time of the instant base date, the sales share of the Defendant’s shares was 7.24% in length, but at the end, 46.9% in the closing time, and the immediately preceding closing time was 16% in the length, but at the end, 46% in the closing time.

G. As of the instant base date, the final closing price of the instant shares was determined at KRW 54,740,00, which is below 54,740 won, which is the base price for the redemption condition of the instant stock-linked securities. Accordingly, the Defendant paid KRW 6.6 billion, which is much smaller than KRW 11.3 billion, if the Korea Investment Securities satisfied the redemption condition for the return-linked securities. The Plaintiffs received only the amount indicated in the column for the “actual payment sheet” in the attached claim amount corresponding to approximately 74.9% (the redemption condition at maturity) of the investment principal from the Korea Investment Securities on August 31, 2009, which is the maturity date of the instant stock-linked securities.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 5, 9, Eul evidence 1, Eul evidence 1 to 3, Eul 1 to 7, 8 (including branch numbers), and the purport of the whole pleadings

2. Occurrence of liability for damages;

A. Relevant legal principles

1) Article 179(1) of the Financial Investment Services and Capital Markets Act (amended by Act No. 11845, May 28, 2013; hereinafter “Capital Markets Act”) which provides for financial investment instruments (referring to securities and derivatives) provides that “any person who violates Article 178 of the said Act shall be liable to compensate for damages incurred by a person who trades or makes any other transaction in financial investment instruments due to such violation in connection with the trading or other transaction.” Article 178(1) of the said Act provides that “no person shall commit any of the following acts in relation to trading or other transaction in financial investment instruments.” Article 178(1) of the said Act provides that “Any person shall commit any of the following acts in relation to the prohibited unfair trading” (Article 178(1) of the said Act provides that “an illegal act related to trading in financial investment instruments may affect a large number of market participants, and thus, it shall be prohibited from regulating individual unfair trading in the capital market and from comprehensively protecting the fairness and reliability of the capital market (Article 1310(13).13).

In full view of the legislative purpose, statutory structure, and content of such provisions, whether an act constitutes an illegal act prohibited under Article 178 of the Financial Investment Services and Capital Markets Act in relation to trading of financial investment instruments ought to be determined by comprehensively taking account of the structure, method, and details of the pertinent financial investment instrument, characteristics of the market where the financial investment instruments are traded, the rights and obligations of investors arising from the financial investment instrument and the time of termination thereof, the relationship between investors and the offender, and the situation before and after the act. Therefore, in cases where a financial investment instrument is of a structure where the exercise of rights or the fulfillment of conditions depending on the price of underlying assets at a certain time or the numerical value related thereto is determined, and the act affects the exercise of rights or fulfillment of conditions stipulated in the said financial investment instrument, including market price manipulation fixing the price of securities, which are the underlying assets of the financial investment instrument, and thus, constitutes an act of violating Article 178(1)1 of the Financial Investment Services and Capital Markets Act in relation to trading of the financial investment instrument, and thus, the investor is held liable for damages arising from an unfair act.

2) Article 176(3) of the Financial Investment Services and Capital Markets Act prohibits “a series of trading, entrustment, or consignment with respect to securities or exchange-traded derivatives for the purpose of fixing or stabilizing the market price of listed securities or exchange-traded derivatives.” Here, the term “fixed price of listed securities, etc.” means forming and fixing, or fixing, the market price by artificially manipulating the market price of securities, etc. to be formed in a free competitive market due to other factors not attributable to market factors according to normal demand and supply. Whether an act is for the purpose of determining the market price ought to be determined by comprehensively taking into account the nature of securities, etc. issued and indirect facts such as the total number of issued securities, etc., price and transaction volume trends, transaction situation before and after the issuance of the securities, etc., economic rationality and fairness of the securities, degree of market contribution, and continuous closing management (see, e.g., Supreme Court Decision 2014Do1280, Jun. 11, 2015).

Therefore, in violation of Article 176(3) of the Financial Investment Services and Capital Markets Act, when a person causes damage to another person by fixing the market price of listed securities through the sale and purchase of listed securities in violation of Article 176(3) is liable for tort liability under Article 750 of the Civil Act to the extent that proximate causal relation exists.

B. Determination on the cause of the claim

In light of the following circumstances, the instant stock sales act constituted market price manipulation or unfair trading prohibited by the Capital Markets Act in order to lower the closing price as of the base date of the instant stock in order to prevent the fulfillment of the condition of refund at maturity with respect to the instant stock-linked securities. Therefore, the Defendant is obliged to compensate the Plaintiffs for the damages incurred by the instant stock sales act pursuant to Article 750 of the Civil Act or Article 179(1) of the Capital Markets Act.

1) The instant stock-linked securities are in such structure that the amount to be repaid to investors is determined according to the closing price as of the base date for redemption of underlying assets. However, if the price of the instant stocks as of the base date of the instant base date was repeated near the base price, which is the quarter of profit and loss, and if the closing date of the instant base date is below the base price of the instant case, the Defendant was obliged to pay KRW 11.3 billion to the Korean Investment Securities in return for the amount equivalent to KRW 128.6% of the contract amount in accordance with the instant swap agreement. Accordingly, there is sufficient motive to reduce half the amount to be paid to the Korean Investment Securities by lowering the closing price as of the base date of the instant stocks, thereby reducing the amount to be paid to the Korean Investment Securities.

2) The Defendant sold the instant shares to an up-to-date p.m. during the connection and sale period, and in particular, during the single temporary sale period, the expected execution price of the instant shares has been repeatedly sold by means of a market price having a large effect on price decline every time when the base price of the instant shares was extremely exceeded the nearest, and the expected execution price was actually lowered as the sales subscription ratio accounts for a large portion. In light of these circumstances, the Defendant appears to have committed the instant shares sale by taking account of the lower price of the instant shares with the intention to lower the price of the instant shares and the estimated execution price.

3) Considering the Defendant’s influence over the Defendant’s sales share ratio, the actual conclusion amount, and anticipated conclusion price fluctuations, if the Defendant did not sell the instant shares by means of a market selling order for ten minutes prior to the end of the transaction, it appears that the closing price of the instant shares was formed at least 54,740 won as of the base date of the instant case.

C. Judgment on the defendant's assertion

1) The assertion that the act is a legitimate transaction in accordance with the deel hedging principle

A) Summary of the argument

Since the act of selling the instant shares as part of a hedge transaction and conforms to its purpose, even if that act did not affect the price of the instant shares, it does not constitute market price manipulation. Furthermore, due to the characteristics of deel hedging, the Defendant must dispose of all the instant shares during a single temporary sale period, at the same time. However, in the instant case where the Defendant disposed of the instant shares during a single temporary sale period by means of a designated order, not a market price order, but a single temporary sale period, the Defendant failed to prove that there was a proximate causal link between the act of selling the instant shares and the damage of the Plaintiffs, in order to find a proximate causal link between the act of selling the instant shares and the damage of

B) Determination

However, in light of the following circumstances, which are acknowledged in full view of the purport of the entire pleadings, the Defendant’s act of selling the instant shares cannot be deemed as a legitimate transaction according to the deel hedging, and the proximate causal relation between the act of selling the instant shares and the damage of the Plaintiffs is sufficiently recognized. Accordingly, the Defendant’s above assertion is rejected.

(1) In order to avoid the risk of price fluctuation in underlying assets, the so-called deel hedging financial investment business entity, which regulates the quantity of underlying assets in accordance with the delta value, refers to the sensitive value of options for the price fluctuation in underlying assets, is merely a financial transaction method in which the financial investment business entity evades or manages its risk. Therefore, even if a financial investment business entity engages in a specific stock transaction on the ground that it was the performance of delta hedging, whether it constitutes market price manipulation or unfair trading prohibited under the Capital Markets Act should be separately determined.

(2) As seen earlier, the instant stock sales act constitutes either artificial manipulation for the purpose of operating the stock price of the instant case and thereby affecting whether the Defendant met the redemption condition for the maturity of the instant stock-linked securities. Thus, even if the instant stock sales act was conducted for the purpose of avoiding risk for the Defendant in relation to the instant stock-linked securities, such circumstance alone cannot be deemed to constitute market price manipulation or unfair trading.

(3) The Supreme Court Decision 2013Da7264 Decided March 10, 2016, cited as the grounds for the Defendant’s argument, is the case where stocks that constitute underlying assets are sold in large volume on the early redemption base date, which is relatively less beneficial than the redemption base date for maturity, and the Supreme Court Decision 2012Da108320 Decided March 24, 2016, which held that a financial institution disposes of the stock disposal volume of the dedele value within the scope of 10% of the total trading volume, and that a financial institution disposes of the stock disposal volume of the stock in large quantities within the scope of 10% of the total trading volume, and it is inappropriate to invoke the instant case differently from the instant case. Moreover, even in accordance with the purport of the Supreme Court Decision 2013Da7264 Decided March 10, 201, the instant stock sale act constitutes a special circumstance where fairness in trading, such as artificially manipulating the price for the purpose of affecting the contract terms of the instant stock exchange securities.

(4) Since it is merely a financial transaction technique in which the delel hedge financial investment business entity avoided or manages its own risks, even if there is a need to dispose of all of the instant shares, as seen earlier, it constitutes market price manipulation or unfair trade practices prohibited by the Capital Markets Act because the timing and method of disposal of the instant shares were not justifiable. Therefore, if the maturity redemption conditions were not satisfied as a result of the delel hedging, it should be deemed that a proximate causal relation exists between the instant act of selling shares and the damages suffered by the Plaintiffs. Furthermore, the circumstance that the Defendant sold the instant shares during a single temporary sale period is only one of the various circumstances, taking into account the fact that the instant act of selling shares constitutes market price manipulation or unfair trade practices, and therefore, it cannot be said that there is a proximate causal relation between the instant act of selling shares and the damages suffered by the Plaintiffs only by the Defendant’s assertion.

2) The allegation that Article 176(4)3 of the Capital Markets Act does not apply to the instant stock-linked securities

A) The Defendant asserts that Article 176(4) of the Capital Markets Act only applies to the “listed securities” and thus, the instant stock-linked securities, which are non-listed securities, are not subject to the said Capital Markets Act.

B) However, even though the instant stock-linked securities do not constitute “securities” under Article 176(4)3 of the Financial Investment Services and Capital Markets Act, the Plaintiffs asserted liability for damages under Article 179 of the Financial Investment Services and Capital Markets Act or liability for damages under Article 750 of the Civil Act on the premise that the instant stock-linked securities constitute “market price manipulation or unfair trading prohibited by the Financial Investment Services and Capital Markets Act.” Accordingly, as seen earlier, insofar as the instant stock-linked securities constitute “market price manipulation or unfair trading” and the Defendant is liable for damages under Article 750 of the Civil Act, there is no need to further determine

3. Scope of liability for damages

A. Scope of recognition

The Plaintiffs, who purchased the instant stock-linked securities due to the Defendant’s above market price manipulation or unfair trading, suffered damages equivalent to the difference in the redemption amounting to approximately KRW 74.9% of the investment principal already paid out of the redemption amount equivalent to 128.6% of the agreed investment principal when the maturity repayment conditions are met.

Therefore, the defendant is obligated to pay to the plaintiffs damages for delay calculated by the rate of 5% per annum under the Civil Act from September 1, 2009, the day following the date of maturity repayment, to which the defendant's obligation to perform the obligation is determined, and 20% per annum under the Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings, from the next day to the day of full payment, to the day of maturity payment, with respect to each of the above amounts as stated in the "amount of claim" column of "amount of claim" column of "amount of claim under the same Table, which deducts each money as stated in the "amount of claim" column of the same Table, and each of the above amounts.

B. Determination of the limitation of liability assertion

1) The Defendant asserts that: (a) the sale of the instant shares was made as part of the delta hedging; (b) the sale of the instant shares was different from the general act of market price adjustment without any intention of market price adjustment; and (c) it is unreasonable to impose liability due to the price fluctuation only on the Defendant even after the sale of underlying assets of the instant stock-linked securities; and (d) the Plaintiffs knew that the risk-hedging transaction between the Korea Investment Securities and its interested parties at the time of the purchase of the instant stock-linked securities could have an impact on the Plaintiffs’ profit and loss, and thus, the Defendant’s liability should be limited in accordance with the principle of fair liability for damages (e).

2) However, in light of the following circumstances acknowledged based on the facts acknowledged earlier, the Defendant’s assertion that the Defendant asserted cannot limit the Defendant’s liability, and there are no other circumstances to limit its liability. Therefore, the Defendant’s assertion is rejected.

A) Even if there is a need to dispose of all of the instant shares in accordance with the deel hedging, it is merely a financial transaction technique in which a financial investment business entity evades or manages its risk. Therefore, insofar as the purpose of price manipulation exists to sell the instant shares, and the timing and methods of disposal are not legitimate, the liability cannot be restricted solely on the ground that the instant shares are the conversion of deteel hedging as long as they violate the Capital Markets Act

B) As seen earlier, Supreme Court Decision 2013Da7264 and Supreme Court Decision 2012Da108320 Decided the instant case is different from the instant case, and thus, it cannot be readily concluded that the Defendant did not limit the Defendant’s liability. Moreover, the fact that Korea Investment Securities sold the underlying assets of the instant stock-linked securities with the Defendant as well as the Defendant is difficult to serve as a reason to limit the Defendant’s liability.

C) The damages suffered by the plaintiffs are rather than the result of the occurrence of risks inherent in the stock-linked securities of this case, but rather, the damages suffered by the defendant were caused by market price manipulation or unfair trading, which is prohibited by the Financial Investment Services and Capital Markets Act, with the intent to lower the price of the stocks of this case and to circumvent the fulfillment of the redemption condition for profit-making by lowering the price of the stocks of this case, and therefore, the damages

4. Conclusion

Therefore, the plaintiffs' claim of this case shall be accepted within the scope of the above recognition, and the remaining claims shall be dismissed as it is without merit. Since the judgment of the court of first instance partially different conclusions are unfair, the part against the defendant in excess of the above recognition amount shall be revoked by accepting the defendant's appeal, and the part against the defendant in excess of the above recognition amount shall be revoked, and the defendant'

Judges Lee Sung-sung

Judges Dok-Jon Line

Judges Lee Jae-hee

1) The stock-linked securities are called Equi-Linked Securities (hereinafter referred to as “ES”);

2) Since the issuance of the instant stock-linked securities, the common owner of the national bank was changed to the common share of the KB finance following the stock exchange and transfer thereof.

3) According to the Korea Stock Exchange Business Regulations (Article 23) and the Enforcement Instructions of the said Regulations (Article 35), the ten-minutes of the stock market from 10 minutes to 10 minutes from 10 minutes before the end of the term of the stock market are determined at the end of the term, and the closing price is determined at the end of the term and the closing price is concluded at the end of the contract by a single unit price. In regard to the determination of the closing price at a time of a single unit sale, the principle of price preference is first applied between different orders, and the principle of time preference is applied between the same price orders.

4) Items and quantities shall be designated in the form of an order that does not designate the price, and it refers to an order that intends to immediately trade at the price conditions that are most favorable at the present time or at the price formed in the market. Therefore, in general, the market price orders may have the effect of price decline since the order of the other party, which takes precedence over the designated price orders, is concluded in order from the most favorable order until the full amount of the order quantity is settled.

5) It is determined including the arguments expressed in the defendant's reference documents dated October 13, 2016.

A person shall be appointed.

A person shall be appointed.