[1] The method of determining whether an interview article falls under Article 188-4 (4) 1 of the former Securities and Exchange Act, and the meaning and scope of the purpose of obtaining an "unfair benefit" under the above provision in cases where an interview article, etc. on the status of business promotion or prospect of a company is reported through the press

[2] The meaning of "material facts" and "use of documents" under Article 188-4 (4) 2 of the former Securities and Exchange Act prohibiting unfair trade practices using false or fraudulent display documents

[3] The meaning of "profit from a violation" under Articles 207-2 and 214 of the former Securities and Exchange Act and its calculation method, and the meaning of "illegal profit from a violation of Article 207-2 of the former Securities and Exchange Act, which is subject to confiscation or collection under the Act on Regulation and Punishment of Criminal Proceeds Concealment

[4] The time of creation of important information, which is the object of prohibiting the use of undisclosed information under Article 188-2 of the former Securities and Exchange Act, and whether the crime of violation of the said Act is limited to the use of undisclosed information, "one's own account" (negative)

[1] In a case where an interview article, etc. on the status or prospect of a company's business promotion through the press is reported, it is not merely an opinion or evaluation related to the business, simple promotional statement, but also an act of spreading false facts under Article 188-4 (4) 1 of the former Securities and Exchange Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, promulgated by Act No. 8635 of Aug. 3, 2007, enforced February 4, 2009) and whether such an act constitutes an act of spreading false facts under Article 188-4 (4) 1 of the former Securities and Exchange Act, and whether such an act is intended to gain unfair profits or not, with the intent of the above provision, should be determined by objective criteria, considering the overall and comprehensive purpose of the expression of the situation of the company's business management and the overall purport of the interview and the news, the opportunity and existence of the report, and various real circumstances of the company related to the contents of the report. Furthermore, the purpose of "profit from the above provision is not limited to an act of acquiring comprehensive profits from disposal of an act, but to an entity.

[2] "Important matters" under Article 188-4 (4) 2 of the former Securities and Exchange Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, promulgated by Act No. 8635 of Aug. 3, 2007 and enforced Feb. 4, 2009) means matters that may have a significant impact on the property and management of the pertinent corporation, or on investors' investment judgment as those necessary for fair securities and protection of investors, which are identical with "material information not disclosed to the general public" under Article 188-2 (2) of the same Act, which is prohibited from using undisclosed information. In addition, it does not mean that a document containing false or defective matters is not merely neglected without merely correcting it, but the act of actively utilizing the document to the effect that it can cause misunderstanding of matters that may affect investors' investment judgment, such as money or other financial benefits, can be seen as a false or similar opportunity to make use of the document, such as making use of the document known to the effect that it can be seen as a false or a fraudulent securities trading.

[3] The term "profit from a violation" under Articles 207-2 and 214 of the former Securities and Exchange Act (amended by Act No. 8635, Aug. 3, 2007; Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, repealed by Act No. 8635, Feb. 4, 2009) refers to the profit from a transaction related to such violation, which is recognized as having a causal relationship with the risk of the violation. In ordinary cases, the causal relationship may be calculated by calculating the gross income from a transaction related to the violation after deducting the total expenses for such transaction from the gross income from the total amount of the violation. However, if there are circumstances to deem that the value of the profit from the violation is unreasonable by the above method, the above legislative intent of Articles 207-2 and 214 of the former Securities and Exchange Act and the principle of responsibility, which is the major principle of criminal law, should also be considered to have the motive, circumstance, mode, involvement of a third party, the securities market and other profits recognized by the prosecutor [17].

[4] Article 188-2 of the former Securities and Exchange Act (amended by Act No. 8635, Aug. 3, 2007; Act No. 952, Feb. 4, 2009; Act No. 940, Feb. 4, 2009) prohibits a person, etc. who becomes aware of material information that is not disclosed to the public in the course of performing his/her duties, from using or allowing another person to use it. Generally, material information generated within a corporation does not mean a case where the material information generated in the process of passing through several stages, not a case where the material information is completed automatically and objectively, and the time when the material information was generated is created is not necessarily a case where it is clearly and objectively completed from a reasonable investor by comparing and assessing the probability of its importance and fact to the point that it has an important value in making a decision on the transaction of securities. In addition, the use of material information that is prohibited under the above provision does not distinguish whether it is for his/her own account or for another person's interest, such as disposition to the corporation.

[1] Article 188-4 (4) 1 (see current Article 178 (1) 1 of the Financial Investment Services and Capital Markets Act) of the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007 and enforced Feb. 4, 2009) / [2] Article 188-4 (4) 2 (see current Article 178 (1) 2 of the Financial Investment Services and Capital Markets Act (amended by Act No. 8635 of Aug. 3, 2007) of the former Securities and Exchange Act (amended by Act No. 178 (1) 2 of the current Financial Investment Services and Capital Markets Act) / [3] Article 28-4 (4) 1 of the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007; Article 27-4 of the former Securities and Capital Markets Act (amended by Act No. 475 of Feb. 4, 20009) of the Financial Investment Services and Capital Markets Act)

[1] Supreme Court Decision 200Do444 decided Jan. 19, 2001 (Gong2001Sang, 578) Supreme Court Decision 2002Do1696 decided Jul. 22, 2002 (Gong2002Ha, 2100) Supreme Court Decision 2003Do686 decided Nov. 14, 2003 (Gong2003Ha, 2404) / [2] Supreme Court Decision 2005Do8652 decided Feb. 9, 2006 / [3] Supreme Court Decision 2004Do1465 decided May 28, 2004 (Gong204Ha, 1129) decided May 12, 2006

Defendant

Defendant and Prosecutor

Law Firm Woo et al.

Seoul High Court Decision 2008No2564 decided January 23, 2009

The part of the lower judgment against the Securities and Exchange Act is reversed, and that part of the case is remanded to the Seoul High Court. All remaining appeals by the Defendant and prosecutor are dismissed.

The defendant and prosecutor's grounds of appeal are also examined.

1. Violation of the Securities and Exchange Act

A. As to the assertion on the application of Article 188-4 (4) 1 of the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007 and repealed by the Financial Investment Services and Capital Markets Act of Feb. 4, 2009)

Article 188-4 (4) of the former Securities and Exchange Act provides that "No person shall commit any act falling under any of the following subparagraphs in connection with the sale and purchase or other transaction of securities," and subparagraph 1 provides that "the act of spreading intentionally a false market price or false fact or other rumor or using a deceptive scheme for the purpose of gaining unjust profits."

The purpose of the former Securities and Exchange Act to prohibit fraudulent unfair trading as above is to protect individual investors' interests in securities trading and to protect investors' trust in the general securities exchange (see Supreme Court Decision 2003Do686, Nov. 14, 2003, etc.) so that the securities exchange can contribute to the development of the national economy by protecting investors' interests (see, e.g., Supreme Court Decision 2003Do686, Nov. 14, 2003). In a case where an interview article, etc. on the business progress or prospects of an enterprise is reported through the media, it is not merely an opinion or evaluation related to the business but merely an expression of false facts, and whether such an act constitutes an act of spreading false facts, and whether such an act is to gain unfair profits, etc., in mind of the purport of the prohibition clause, shall be determined by taking into account various objective and comprehensive criteria, such as the status of the offender, the management status and share situation of the relevant enterprise, the overall purport of the expression and overall purport of the interview and report, the news instruments and its continuous reporting and its contents.

In addition, the intention as stipulated in the above provision means the subjective constituent elements that allow it, while recognizing that the actor satisfies the objective constituent elements of the act of spreading false prices or false facts or other rumors or using deceptive schemes.

Furthermore, in light of the purpose of the former Securities and Exchange Act and the legislative purport of the aforementioned provision, unjust profits stipulated in the said provision are not limited to the individual and tangible economic interests of an actor due to the disposal of securities. It is reasonable to interpret them as a comprehensive concept, including passive and active benefits such as acquisition of management rights, securing of control, and increase in status within the company, as well as passive benefits such as avoidance of losses, and all unrealistic future benefits. In addition, it is sufficient that there exists a purpose of gaining unjust benefits in the above comprehensive meaning at the time of the act of spreading false facts, and it does not have to be specific and conclusive for the purpose of obtaining profits by disposing of the future securities from the time of such act. Furthermore, the purpose of obtaining such unjust profits does not need to be the sole motive for the act. Thus, even if other purposes exist together with the above other purposes, it is not problematic as to which purpose is the principal cause of the act, and in such a case, it is reasonable to reasonably determine the existence or existence of such indirect facts or indirect factors in view of the nature of the objective.

The decision of the court below to the same purport is just and there is no illegality in the misapprehension of the legal principles as otherwise alleged in the ground of appeal. In light of the above legal principles, the defendant's act of making the representative director and the major shareholder of the non-indicted 1 corporation report to the press continuously and repeatedly different contents from the actual contents of the promotion status and prospects of the non-indicted 1 corporation, which is the major shareholder of the non-indicted 1 corporation, through interview, etc. of this case, on the ground that it constitutes an act of spreading false information to obtain unfair profits through the stock price increase of the non-indicted 1 corporation, and it does not constitute an act of spreading false information to obtain unfair profits through the market price increase of the non-indicted 1 corporation, and it does not constitute an unlawful act beyond the limit of free evaluation of evidence in violation of the logical rules and experience rules as to the evaluation of illegality or evidence, which are found to have not been proven to the extent that there is no reasonable doubt. The grounds of appeal on this part of the court below's fact-finding is not justified.

B. As to the assertion on the application of Article 188-4 (4) 2 of the former Securities and Exchange Act

Article 188-4 (4) 2 of the former Securities and Exchange Act prohibits “an act of seeking money or other benefits on property by inducing misunderstandings to others by making false representation on important matters or making use of document in which necessary facts are omitted” as well.

In light of the intent of eradicating such fraudulent unfair trading and protecting investors' interests and the trust on the securities market, thereby contributing to the development of the national economy, the term "material fact" in the above provision refers to the information that is identical to the "material information that is not disclosed to the general public" in Article 188-2 (2) of the former Securities and Exchange Act, which is a provision prohibiting the use of undisclosed information, which may have a significant impact on the property and management of the relevant corporation, or on the investment judgment as necessary for fair trade in securities and the protection of investors (Supreme Court Decision 2005Do8652 Decided February 9, 2006).

In addition, the act of actively utilizing false or defective documents with the knowledge that such documents may cause misunderstandings as to matters that may affect investors' investment judgment in a specific situation may be included in the use of documents stipulated in the said provision (see Supreme Court Decisions 2002Do5407, Dec. 10, 2002; 2003Do686, Nov. 14, 2003).

Furthermore, the language and text of the above provision is interpreted as follows: once a document containing false or false representation on important matters, such as “in order to obtain money or other property benefits by inducing misunderstanding of another person,” the crime of violation of the above provision is established immediately. Since the use of document does not require the actual “misunderstanding of another person” or “to obtain money or other property benefits.” Thus, the causal link between the use of false or false representation document and others does not affect the establishment of the above crime (Supreme Court Decision 2003Do6759 Decided April 14, 2006).

The decision of the court below to the same purport is just and there is no illegality in the misapprehension of the legal principles as otherwise alleged in the ground of appeal. In light of the above legal principles, the decision of the court below is just and there is no error in the misapprehension of the legal principles as otherwise alleged in the ground of appeal. In the situation where the interests of investors were concentrated on the intent and prospect to continue the progress of the KCA development project, which was promoted as a new project by the non-indicted 1 corporation that has gradually deteriorated its management situation on the grounds of various detailed reasons as decided by the court below, and the defendant did not know the circumstances that the defendant still disposes of the shares held by the defendant without any omission of borrowed stocks and submit an additional report which omitted the details of the report on the shares held by the officers and major shareholders, and thereby making investors know of the fact that the defendant disposes of the shares held by the defendant in succession without any influence on the share price, and it does not constitute an unlawful act in violation of Article 188-4 (4) 2 of the former Securities and Exchange Act by using the above report with false or inadequate statements.

Other grounds of appeal on this part of the lower court’s fact-finding by the prosecutor, or all of the grounds of appeal on this part, are merely the purport of disputing the fact-finding of the lower court without specifying the fact-finding in violation of the logical and empirical rules. This does not constitute legitimate grounds of appeal. The Defendant and the prosecutor’s grounds of appeal on this part are dismissed.

C. As to the assertion on the application of Articles 207-2 and 214 of the former Securities and Exchange Act

Article 207-2 (1) of the former Securities and Exchange Act provides that a person who violates the provisions of Article 188-4 of the same Act (subparagraph 2) shall be punished by imprisonment with prison labor for not more than 10 years or by a fine not exceeding 20 million won: Provided, That if the amount equivalent to three times the profit gained or loss avoided by the violation exceeds 20,000 won, he shall be punished by a fine not exceeding three times the profit or loss amount; and if the profit or loss avoided by the violation of the provisions of each subparagraph of paragraph (1) is more than 50,00 won, it shall be punished by a fine not exceeding 70,000 won; if the profit or loss amount avoided by the violation of Article 18-2 (2) of the former Securities and Exchange Act is 50,000,000 won or more, it shall be punished by a fine not less than 20,000 won, and if the violation of Article 2 (1) and (2) of the former Securities and Exchange Act shall be punished concurrently by a fine not more than two years:

Article 17 of the Criminal Act provides that "Any act is not connected to the risk which is an element of a crime, it shall not be punishable for the result." As such, Articles 207-2 and 214 of the former Securities and Exchange Act provide that "the profit acquired from the violation" as part of the element of the crime and provide a very aggravated punishment depending on the value of the crime. As such, the principle of balanced punishment or punishment that the appropriate balance between the crime and punishment should be achieved through strict and careful calculation of the value of the profit gained from the violation, should not be undermined (see, e.g., Supreme Court en banc Decision 2005Do7288, Apr. 19, 2007). In light of the legislative intent of Article 207-2 and Article 214 of the former Securities and Exchange Act, "the profit acquired from the violation" should be considered as part of the element of the crime, and if the prosecutor recognizes the causal relation between the gross profit acquired from the violation and the total profit generated from the violation, it should be considered that there is an unfair causal relation between the gross profit generated from the violation.

Furthermore, it is reasonable to view that illegal profits, which are property generated from a criminal act under Article 207-2 of the former Securities and Exchange Act, which is subject to confiscation or collection under Article 2 subparag. 1 [Attachment Table 16], subparag. 2(a), Article 8, and Article 10 of the former Act on the Regulation and Punishment of Criminal Proceeds Concealment, mean profits arising from a transaction related to a violation under Article 207-2 of the former Securities and Exchange Act and are recognized as having a causal relationship with the risk arising from the violation. Even if the causal relationship is recognized, the court should make a final decision on whether to confiscate or collect the illegal profits at its discretion in consideration of various circumstances.

On the other hand, the court below held that the profits under Articles 207-2 and 214 of the former Securities and Exchange Act can not be subject to collection under the former Securities and Exchange Act on the grounds that the scope of the profits having direct causal relationship cannot be specified on the ground that the profits cannot be subject to collection under the former Securities and Exchange Act on the grounds that the profits having direct causal relationship cannot be subject to collection under the former Securities and Exchange Act on the grounds that the profits having direct causal relationship cannot be specified on the grounds that the profits having direct causal relationship cannot be subject to collection under the former Securities and Exchange Act on the Regulation and Punishment of Criminal Proceeds Concealment Act. On the other hand, the court below erred by misapprehending the legal principles on the concept and limit of the profits arising from the violation of the above provisions.

The Supreme Court Decision 2004Do1628 Decided September 3, 2004 cited by the court below is related to the issue before the amendment of the Securities and Exchange Act by Act No. 6695 on April 27, 2002, which was amended by Act No. 6695, and Article 207-2 (2) of the Act was newly established, and the issue is whether the amount of profit as stated in the facts charged can be recognized as it is in the situation where part of the defendant's act of spreading false facts is judged not guilty. In addition, the Supreme Court Decision 2005Do632 Decided April 15, 2005 is related to the issue as to whether only some accounts are provided for the market price adjustment act, and even if other accounts are not provided, it can be viewed as a violation of the profit derived from the transaction using other accounts, even if so, the "profit obtained from the violation" itself is not limited to the profit directly related to the violation, and thus, it cannot be seen as a logical basis for the causal relationship between the violation.

Therefore, this part of the judgment of the court below cannot be maintained without examining the remainder of the grounds of appeal by the defendant and the prosecutor as to the specific judgment of the court below as to the relationship between the act of spreading false facts in this case and the use of false and false indication and its profits.

D. As to the assertion on the application of Article 188-2 of the former Securities and Exchange Act

Article 188-2 of the former Securities and Exchange Act prohibits any person, etc. who becomes aware of material information that is not disclosed to the public in the course of performing his/her duties from using or allowing any other person to use such information. Generally, material information generated inside a corporation is realized in the course of going through a variety of stages rather than being completed by itself, and the time of creation of material information is not necessarily the time when such information is created objectively, clearly and clearly completed, but it is not always the time when reasonable investors have objectively, clearly and clearly from a rational investor that it has material value in decision-making on securities transaction by comparing and evaluating the importance and probability of occurrence of such information (Supreme Court Decision 2008Do6219 Decided November 27, 2008). In addition, the use of material information prohibited under the above provision does not include any limitation or distinction between the use of material information for their own account or for another person's account, such as the disposition of treasury stocks that will accrue to the corporation (Supreme Court Decision 200Do3500 Decided Apr. 12, 2002).

The decision of the court below to the same purport is just and there is no illegality in the misapprehension of the legal principles as otherwise alleged in the ground of appeal, and in light of the above legal principles, the defendant's act of having the non-indicted 1 purchase of the shares of the non-indicted 1 corporation under the name of the non-indicted 2 in a situation where the acquisition of the shares of the non-indicted 2 corporation was decided or is anticipated at least clearly, as shown in the ground of appeal, falls under Article 188-2 (1) of the former Securities and Exchange Act as an use of undisclosed information, and it does not seem to be unlawful beyond the limit of free evaluation due to violation of the logical rules and experience rules as to the evaluation of illegality or evidence, which found the facts charged, unless it is based on evidence or it does not reach a reasonable doubt. Whether the above acquisition of shares is based on the calculation of whom does not affect the establishment of a crime liability. The grounds of appeal on this part of the court below's fact-finding is merely a legitimate ground of appeal, without specifying the facts in violation

E. As to the assertion on the application of Articles 188(6) and 200-2(1) of the former Securities and Exchange Act

The grounds for prosecutor’s appeal on this part of the lower court’s fact-finding are nothing more than the purport of disputing the fact-finding by the lower court without specifying the fact-finding in violation of the specific logical rules and experience rules. It does not constitute legitimate grounds for appeal.

2. Violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement) and the Public Official Election Act

The Defendant’s ground of appeal on this part of the lower court’s fact-finding is nothing more than the purport of disputing the lower court’s fact-finding without specifying a violation of the logical and empirical rules, and thus does not constitute a legitimate ground of appeal.

In addition, even if the court can recognize ex officio the minor criminal facts included in the criminal facts which are charged within the extent that the identity of the facts charged is recognized, if it does not punish them on the grounds that the facts charged are serious in comparison with the facts charged, and if it does not punish them on the grounds that the indictment has not been modified, it shall not be deemed illegal on the ground that the court did not recognize the facts charged ex officio (Supreme Court Decision 2007Do1220 Decided October 9, 2008). In the same purport, the judgment of the court below that there is no error of law in the judgment of the court of first instance which did not ex officio decide on the facts charged of breach of trust, and it is not unlawful as otherwise alleged in the grounds of appeal by the defendant and prosecutor. This part of the grounds of appeal are not accepted.

3. Scope of reversal

As seen earlier, the part of the judgment below that applied Articles 207-2(2) and 214 of the former Securities and Exchange Act to spread false facts and use of false and non-performing documentation, and cannot be subject to collection under the former Act on Regulation and Punishment of Punishment of Criminal Proceeds Concealment. Since the court below sentenced to one punishment for all violation of the Securities and Exchange Act, the part of the judgment below which convicted the violation of the Securities and Exchange Act cannot be exempted from all reversal. Furthermore, since the part which the court below acquitted the defendant of all of the violation of the Securities and Exchange Act is related to the part which judged the guilty guilty, the part of the judgment below in violation of the Securities and Exchange Act cannot be maintained.

4. Conclusion

Therefore, the part of the judgment of the court below regarding the violation of the Securities and Exchange Act shall be reversed, and that part of the case shall be remanded to the court below for a new trial and determination. The remaining appeals by the defendant and the prosecutor shall be dismissed. It is so decided as per Disposition by the assent

Justices Shin Young-chul (Presiding Justice)