[1] Method of redemption of beneficiary certificates by a selling company under the former Securities Investment Trust Business Act

[2] The case where the redemption obligation of a selling company for its own property under the former Securities Investment Trust Business Act can be modified or modified

[1] Articles 7 (2), 23 (2) (see current Article 105 (7) and 30 (1) (see current deletion) of the former Securities Investment Trust Business Act (Amended by Act No. 558, Sep. 16, 1998); Article 12 (see current Article 95 of the Enforcement Decree of the Indirect Investment Trust Business Act) of the former Enforcement Decree of the Securities Investment Trust Business Act (Amended by Presidential Decree No. 15895, Sep. 2, 1998); Article 7 (4) of the former Securities Investment Trust Business Act (Amended by Act No. 5558, Sep. 16, 1998; see current Article 65), 23 (2) (see current Article 105 (7) and 30 (1) (see current Enforcement Decree of the Indirect Investment Asset Management Business Act); Article 12 (2) of the former Enforcement Decree of the Securities Investment Trust Business Act (Amended by Presidential Decree No. 15895, May 25, 1998)

[1] [2] Supreme Court Decision 2002Da19018 Decided December 8, 2006 (Gong2007Sang, 126)

Korea Standards Bank (Law Firm Geosung, Attorneys Ro-won et al., Counsel for the plaintiff-appellant)

Hansung Securities Co., Ltd. (Attorney Jeon Young-young, Counsel for the plaintiff-appellant)

Seoul High Court Decision 2003Na49339 delivered on June 16, 2004

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

The grounds of appeal are examined.

1. Article 7(4) of the former Enforcement Decree of the Securities Investment Trust Business Act (amended by Act No. 5558 of Sep. 16, 1998; hereinafter “former Enforcement Decree”) imposes not only a trust enterprise of securities investment trust but also a company selling beneficiary certificates. In the event a trust company or a selling company performs the redemption obligation upon beneficiaries’ claims for redemption by bearing the redemption obligation, the trust company may repurchase beneficiary certificates with its own property pursuant to Article 30(1) of the former Act. Under Article 23(2) of the former Act, the trust company may terminate part of the trust under the conditions as prescribed by the Presidential Decree. Under the conditions as prescribed by the Presidential Decree, it provides the two methods of redemption, i.e., redemption through partial termination of redemption and trust with its own property. Article 23(2) of the former Enforcement Decree of the Securities Investment Trust Business Act (amended by Presidential Decree No. 15895 of Sep. 22, 1998; hereinafter “former Enforcement Decree”) provides for a part of the trust company’s claims for redemption from the trust company’s inherent property.

According to Articles 16 and 25 of the former Terms and Conditions of Investment Trust (hereinafter “former Terms and Conditions”) enacted at the time of the enforcement of the former Terms and Conditions of Investment Trust (hereinafter “former Terms and Conditions”), a truster or dealer who has received a claim for redemption of beneficiary certificates is normally obligated to immediately redeem the beneficiary certificates for its proprietary property, and the selling company may request the truster company to partially terminate the investment trust in relation to redemption, limiting the case to “when the selling company is unable to pay the redemption price,” thereby making it difficult for the truster company to request the partial termination of the trust.” As a result, the selling company which received a claim for ordinary redemption without any such reason becomes unable to request the truster company to partly terminate the trust, and thereby, bears the obligation for redemption with its proprietary property. In this regard, the court below is just in holding that the Defendant, who is the beneficiary company, bears the obligation for redemption with the Plaintiff’s inherent property. There is no

2. The former Act and the former Enforcement Decree are the system that revises the obligation to repurchase with the inherent property of the truster and selling company. Article 7(4) of the former Act and Article 23(2) of the former Act and Article 12 of the former Enforcement Decree provide for the partial termination of the trust. Articles 16(3) and 25(1) of the former Act and Article 16(1) of the former Act also provide for the same purport. In full view of the provisions of the former Act and the former Act, the truster and selling company shall repurchase within 15 days from the date of receiving the claim for redemption, but may postpone the redemption until the cause is resolved upon approval by the Financial Supervisory Commission in the event of natural disasters, terrestrial disasters, securities markets, permanent closure, or other unavoidable circumstances. The defendant who are the selling company may be exempted from the obligation to repurchase with inherent property by requesting the truster company partial termination of the trust, only when the selling company's claim for redemption of beneficiary certificates has occurred in a large quantity, and it is impossible to repurchase it with its inherent property.

Examining the reasoning of the judgment below in light of the above legal principles and the records, it is just to determine that the court below did not constitute such exceptional reasons as above to revise the Defendant’s obligation to repurchase with the Defendant’s proprietary property at the time of the Plaintiff’s claim for redemption.

3. 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 on the bench.

Justices Jeon Soo-ahn (Presiding Justice)