[1] Details of the duty to explain to the customer of an executive officer or employee of an investment trust company, and whether it can be determined that an investment trust company violated the duty to explain on the ground that it provided general information through the provision of the product guide, etc. without directly presenting or delivering the investment trust manual, terms, etc.

[2] The case holding that a truster company's failure to take a measure of price adjustment or prompt disposition for securities, etc. whose credit assessment has fallen below the standard credit rating under all circumstances does not constitute a violation of the trust company's general duty of care or duty of loyalty, etc.

[3] The standards for calculating the amount of damages sustained by investors due to the violation of the incorporation of the truster company's non-investment-free securities or incorporation of the same item into more than 10% of the total assets

[1] When an executive or employee of an investment trust company solicits a customer to purchase investment trust goods, he/she has the duty of care to protect the customer so that the customer may make a reasonable investment decision based on the relevant information by explaining the characteristics and major contents of the investment trust, including the risks associated with the investment. In such a case, considering the characteristics and risk level of the goods subject to investment that should be explained to the customer, the customer’s investment experience and ability, and whether the investor is an institutional investor, etc. In addition, if he/she provides outlined information on matters stipulated in the terms and conditions of the investment trust through the delivery of the product guide, etc., it cannot be concluded that the investment trust manual, terms and conditions, etc. did not directly

[2] The case holding that a truster company's failure to take a measure of price adjustment or prompt disposition for securities, etc. whose credit assessment has fallen below the standard credit rating under all circumstances does not constitute a violation of general duty of care or duty of loyalty to the beneficiary of the truster company

[3] A truster company shall be liable for damages suffered by investors due to an illegal act, such as the incorporation of non-investment-free securities, or incorporation of the same type of securities in comparison with the total assets of trust property, which is prohibited under the former Securities Investment Trust Business Act (repealed by Act No. 6987, Oct. 4, 2003) or the terms and conditions of investment trust, by a truster company, in excess of 10% of the total assets of trust property. However, the illegal act in this case is established individually for each act of management instruction of trust property in violation of the above restrictions, and the calculation of damages shall be based on the securities at the time of incorporation by each illegal act of management instruction.

[1] Articles 17(1) and 27 (see current Article 86 of the Indirect Investment Trust Business Act) of the former Securities Investment Trust Business Act (amended by Act No. 6179, Jan. 21, 2000); Article 13 (see current Article 54 of the Enforcement Decree of the Indirect Investment Asset Management Business Act) of the former Enforcement Decree of the Securities Investment Trust Business Act (repealed by Article 3 of the Addenda to the Enforcement Decree of the Indirect Investment Trust Business Act, No. 18325, Mar. 22, 2004) / [2] Article 17(1) of the former Securities Investment Trust Business Act (amended by Act No. 6179, Jan. 21, 200) / [3] Article 33(1)1 of the former Securities Investment Trust Business Act (amended by Act No. 6179, Jan. 21, 200); Article 88(1)2(3) of the former Enforcement Decree of the Securities Investment Trust Business Act (see current Article 75(3) of the Civil Act)

[1] Supreme Court Decision 2001Da11802 Decided July 11, 2003 (Gong2003Ha, 1699) Supreme Court Decision 2002Da46515 Decided July 25, 2003 / [3] Supreme Court Decision 2003Da56496 Decided September 23, 2004

Plaintiff Co., Ltd. (Attorney Kim Shin-ok, Counsel for the plaintiff-appellant)

Defendant Co., Ltd. (Law Firm Sejong, Attorneys O Jong-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2003Na5353 delivered on August 26, 2003

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

The grounds of appeal are examined (if the supplemental appellate brief was not timely filed on December 20, 2003, to the extent that it supplements the grounds of appeal).

1. Regarding ground of appeal No. 1

When an executive or employee of an investment trust company solicits a customer to purchase investment trust goods, he/she has the duty to protect the customer by explaining the characteristics and major contents of the investment trust, including the risks associated with the investment, so that the customer may make a reasonable investment decision based on the information. In such a case, comprehensively taking into account the characteristics and risk level of the goods subject to investment, the customer’s investment experience and ability, and whether the investor is an institutional investor. In cases where he/she provided outline information on the concepts and methods of operation of the investment trust and matters prescribed in the terms and conditions of the trust through the delivery of the product guide, etc., it cannot be readily concluded that the investment trust manual, terms and conditions, etc. have not been directly presented or delivered, thereby violating the duty to explain (see Supreme Court Decisions 2002Da46515, Jul. 25, 2003; 2002Da49163, Aug. 19, 2003).

According to records and relevant Acts and subordinate statutes, Article 27 of the former Securities Investment Trust Business Act (amended by Act No. 6179, Jan. 21, 200; hereinafter the “Trust Business Act”) provides a truster company with an operating statement of the trust property to a person intending to acquire beneficiary certificates, and provides an existing beneficiary of the trust property with an operating report of the trust property. However, the operating report of the trust property is not for new investors unless it is provided to the beneficiary within the prescribed period from the end of the trust accounting period, the end of the trust contract period, and the termination date of the trust contract, but it is not for new investors. An investment trust explanatory statement provides a comprehensive explanation of the operating concept and method of the investment trust (hereinafter “securities”) to a person intending to acquire beneficiary certificates, which are invested in the trust property, and credit assessment of the issuing company of the securities incorporated in the investment trust after the investment trust is also required to be stated in the investment trust company’s operating instruction or at any time according to the investment trust company’s investment trust asset management instruction, and it is also necessary to provide the above information or information.

According to the above, it cannot be deemed that there is an obligation under the statutes, contracts, or good faith principle to specify and explain in the investment trust manual the circumstances where an affiliate company of the Treatment Group was incorporated into the investment trust of this case after meeting the standard credit rating at the time of initial incorporation of the Plaintiff’s beneficiary certificates, but below the standard credit rating at a certain credit rating agency before and after the Plaintiff’s acquisition of the Plaintiff’s beneficiary certificates (hereinafter “treatment bonds”). Furthermore, under the above circumstances, the Defendant’s failure to notify the Plaintiff of the inclusion in the investment trust of the above non-investment-listed securities in a separate manner does not constitute a violation of the trust company’s general fiduciary duty or fiduciary duty against the beneficiary of the trust company. The judgment of the court below which

2. Regarding ground of appeal No. 2

Article 49(6) of the Securities Investment Trust Business Supervision Regulations, which provides for the price adjustment and prompt disposal of securities below the standard credit rating among the trust property, as seen above, shall be based on the date of incorporation into the credit rating of the incorporated bonds as stipulated in Article 20(1) of the instant investment trust agreement. According to the records and relevant statutes, Article 49(6) of the Securities Investment Trust Business Supervision Regulations, which provides for the price adjustment and prompt disposal of securities below the standard credit rating among the trust property, was newly established at the time of the amendment of the above supervisory regulations (Article 54-3(2) at the time of the above introduction, and there was no such provision in relation to the management of the trust property of this case, around May 15, 1999 and around August 19, 199, which was subject to the Trust Business Act at the time of the instant investment trust agreement, and there was no other provision in the securities investment trust agreement prior to the postponement of redemption as a large-scale redemption method, but there was no other provision in the securities market prior to redemption of bonds.

According to this, at the time of this case, the existence of legal or contractual obligations concerning the price adjustment or prompt disposal of securities below the standard credit rating as stipulated in the current Securities Investment Trust Business Supervision Regulations cannot be recognized at the time of this case, and in light of the market situation before and after the measure of postponement of redemption of the above treatment bonds and the relevant statutes and terms and conditions concerning the appraisal method of the redemption price, etc., it is difficult to see that the Defendant’s failure to take a measure of price adjustment or prompt disposition for the treatment bonds whose credit rating was lower below the standard credit rating at that time constitutes a violation of the trust company’s general duty of good faith or duty of loyalty. The judgment of the court below affirming the first instance judgment to the same purport is justifiable, and there is no error in the misapprehension

3. As to grounds of appeal Nos. 3 and 4

The truster company committed an illegal act such as inclusion of non-investment-free securities or inclusion of more than 10% of the total assets of the trust property in excess of the same issue as the trust property, which is prohibited by the Trust Business Act or the terms and conditions of investment trust, but, on August 12, 1999, the truster company is liable for compensation for losses suffered by investors due to the delayed redemption of treatment bonds due to the occurrence of market price settlement. However, the tort at this time is established individually for each act of management instruction of each trust property in violation of each of the above restrictive provisions, and the calculation of damages shall be based on the securities at the time of incorporation by each illegal act of management instruction (see Supreme Court Decision 2003Da56496, Sept. 23, 2004).

Upon citing the judgment of the court of first instance to the same purport, the court below rejected the plaintiff's assertion that when calculating the amount of damages suffered by the plaintiff as a result of the defendant's incorporation of treatment bonds into an investment trust in violation of the above restriction provisions after the plaintiff's acquisition of beneficiary certificates in violation of the above restriction provisions, the base point of time for the above 10% restriction provision should be August 12, 1999 when the measure to postpone redemption of treatment bonds should be August 12, 1999 when the above 10% restriction provision was enforced. On the other hand, the court below rejected the plaintiff's claim for damages as to the portion where the ratio of incorporation into an investment trust of treatment Heavy Industries Securities issued in violation of the above 10% restriction provision exceeds the above 10% restriction provision in the course of selling securities other than the beneficiary's claim for redemption by the beneficiary. Such judgment of the court below is justifiable in light of the above legal principles and records. There is no

4. Conclusion

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

Justices Yang Sung-tae (Presiding Justice)