[1] The meaning of "profit accrued from a violation" under the proviso of Article 207-2 (1) and Article 207-2 (2) and Article 214 (2) of the former Securities and Exchange Act, and whether the benefit accrued to a third party who did not participate in the crime is included (negative)

[2] In a case where the Defendant, the representative director of the Company A, was indicted for violating the former Securities and Exchange Act by purchasing shares of the Company C in the name of each of his/her and his/her children, using undisclosed information generated inside the Company C, the case holding that it is difficult to conclude that the profit accrued from the purchase of shares of the Company C through the above children’s account

[1] The "profit from a violation" under the proviso of Article 207-2 (1) and Articles 207-2 (2) and 214 (2) of the former Securities and Exchange Act (amended by Act No. 8635 of Aug. 3, 2007 and enforced as of Feb. 4, 2009) refers to the profit gained by the violator, and where multiple persons jointly commit the crime of prohibiting the use of undisclosed information, the profit from the crime refers to the profit acquired by the whole accomplice who participated in the crime, and does not include the profit accrued to a third party who does not participate in the crime.

[2] In a case where the defendant, the representative director of the corporation Gap, was prosecuted for violation of the former Securities and Exchange Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635, Aug. 3, 2007; hereinafter the same) on the ground that he purchased shares of the corporation Byung in his own and Eul's own account using undisclosed information generated inside the company, the court held that the court below erred by misapprehending the legal principles as to "profit from violation" under Article 207-2 of the former Securities and Exchange Act, since it is difficult to view that the above children were co-offenders of the defendant or co-offenders of the defendant, and the money used to purchase shares of the corporation Byung was deposited in the account in the name of the other children of the defendant and Eul, and that the money was likely to be the money of his children, and therefore it is difficult to conclude that it was the profit of the defendant by purchasing shares of the corporation Byung through the above children's account.

[1] Articles 207-2 (1) and (2) (see current Article 43 (1) and (2) (see current Article 443 (2) of the Financial Investment Services and Capital Markets Act) and 214 (2) (see current Article 447 (2) of the Financial Investment Services and Capital Markets Act) of the former Securities and Exchange Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635, Aug. 3, 2007) / [2] Article 188-2 (1) 1 and (3) (see current Article 174 (1) 1 and (2) 1 of the Financial Investment Services and Capital Markets Act, Article 207-2 (1) 1 and (2) (see current Article 43 (1) and (2) (see current Article 447 (2) of the Financial Investment Services and Capital Markets Act) of the former Securities and Capital Markets Act) / [2] Article 188-2 (1) 1 and (2 (2) 4 (2) 4 (2) of the current Financial Investment Services and Capital Markets Act

[1] Supreme Court Decision 2010Do7622 Decided April 28, 2011, Supreme Court Decision 2010Do11950 Decided April 28, 201, Supreme Court Decision 2011Do3180 Decided July 14, 201 (Gong2011Ha, 1686)

Defendant

Defendant

Law Firm Sejong, Attorneys Kim Hyun-tae et al.

Seoul Central District Court Decision 2011No1250 decided August 10, 2011

The part of the judgment of the court below regarding the defendant is reversed, and that part of the case is remanded to the Panel Division of the Seoul Central District Court.

The grounds of appeal are examined.

1. Determination as to whether the use of undisclosed information constitutes an act of using undisclosed information

For the reasons indicated in its reasoning, the lower court determined that the Defendant, as the representative director of Nonindicted Co. 1 (hereinafter “Nonindicted Co. 1”), was aware of the undisclosed information regarding the tender offer of the stocks of Nonindicted Co. 2 Co. 1 (hereinafter “Nonindicted Co. 2”) generated inside the Nonindicted Co. 1, and that the Defendant purchased the stocks of Nonindicted Co. 2 by using the undisclosed information prior to disclosure of the information.

The following circumstances revealed by the relevant legal principles and evidence duly adopted by the lower court, namely, ① the Defendant purchased shares of Nonindicted Company 2 prior to the division through the private equity fund established at the Gangnam PB of the National Bank (hereinafter “former Nonindicted Company 2”) on June 2008; ② the shares of Nonindicted Company 2 located in the said private equity fund were divided into the shares of Nonindicted Company 1 and the shares of Nonindicted Company 2; the Defendant terminated the said private equity fund on August 12, 2008, and purchased shares of Nonindicted Company 3 in the name of the Defendant and Nonindicted Company 3 (hereinafter “the instant children”), and the Defendant purchased shares of Nonindicted Company 2 with the same block account after the purchase of new shares in the name of Nonindicted Company 1, 208, and subsequently, purchased shares of Nonindicted Company 1 in the name of the Defendant and Nonindicted Company 3 (hereinafter “Nonindicted Company 1”) on the sole basis that the Defendant purchased shares in the name of Nonindicted Company 1 and Nonindicted Company 3’s shares in the e-mail account.

2. Determination as to the profits accrued from the use of undisclosed information

A. As to the assertion that it is not attributable to the defendant

(1) According to the reasoning of the judgment below, the court below held that the defendant may additionally collect the shares of the non-indicted 2 acquired in the name of the children of this case from the defendant, as long as the defendant purchased the shares of this case using non-indicted 3's non-indicted 3's non-indicted 3's non-indicted 3's own information regardless of the intention of the children of this case, and since Article 10 (1) of the Act on Regulation and Punishment of Punishment of Criminal Proceeds Concealment provides that "if it is deemed inappropriate to confiscate the properties to be confiscated pursuant to Article 8 (1) or due to the nature of the properties, the situation of the use, the right of a person other than the criminal of this case's property, or other circumstances, the equivalent value of the above shares may be collected from the criminal of this case, regardless of whether the above shares belong to the children of this case, if the defendant purchased the shares of this case using non-indicted 3's non-indicted 3's non-indicted 3's non-indicted 3's relationship, and the defendant and non-indicted 3 acquired the shares of this case.

(2) However, the lower court’s determination is difficult to accept for the following reasons.

The term “profit derived from a violation” under the proviso of Article 207-2(1) and Articles 207-2(2) and 214(2) of the former Securities and Exchange Act (amended by Act No. 8635, Aug. 3, 2007; hereinafter the same shall apply) means the profit gained by the violator, and where multiple persons jointly commit a crime of prohibiting the use of undisclosed information, profit arising from the crime refers to the profit acquired by the accomplice who was involved in the crime, and such profit shall not be included in the profit accrued to a third party who was not involved in the crime (see, e.g., Supreme Court Decisions 201Do762, Apr. 28, 201; 201Do3180, Jul. 14, 2011; 201Do3180, Jun. 27, 2007).

Therefore, in order to be found guilty of the facts charged in violation of the Securities and Exchange Act regarding the profits that the Defendant and his children acquired through an account in the name of their children are in co-offenders, and the profits accrued from the purchase of shares through the account were entirely attributed to the Defendant, or the children of this case were merely lent the name of the account. It is difficult to deem that the children of this case are co-offenders with the Defendant or borrowed the name of the account to the Defendant. Moreover, even according to the reasoning of the lower judgment, the money used for the purchase of shares of Nonindicted Co. 2 was the money deposited by the Defendant and Nonindicted Co. 3 in the account in the name of their children in the form of cross-loan lending to each other, and it is highly probable that the money was the money of the children of this case, regardless of whether the Defendant and Nonindicted Co. 3 lent or donated, it is difficult to conclude that the profits accrued from the Defendant’s purchase of shares of Nonindicted Co. 2 through the account in the name of their children

Nevertheless, the lower court determined otherwise by misapprehending the legal doctrine on “profit from a violation” under Article 207-2 of the former Securities and Exchange Act to have accrued from the purchase of shares through an account in the name of the child of this case. The lower court should further deliberate on whether the Defendant and the child of this case are co-offenders, and whether the benefit accrued from the purchase of shares through an account in the name of the children of this case reverts to the Defendant. The lower court should calculate the profit accrued to the Defendant by further examining whether

B. As to the assertion that it cannot be additionally collected because it is an unrealized profit

The appellate court shall judge without any need to examine whether a complaint is filed in relation to the grounds for ex officio examination, if the appeal is lawful, or whether the grounds for appeal are included in the grounds for appeal. However, with respect to matters other than the grounds for ex officio examination, it may be decided ex officio only where they are entered in the petition of appeal or included in the grounds for appeal submitted within the prescribed period. However, even if they are not included in the grounds for appeal only for the reasons affecting the conclusion of the judgment, it may be decided ex officio. Meanwhile, even if the defendant or defense counsel stated matters not included in the grounds for appeal in the appellate court in the grounds for appeal in the appellate court, such circumstance alone does not constitute grounds for appeal as alleged in the statement (see Supreme Court Decision 2006Do8488, May 31, 2007). Since the appellate court ex post facto examines the judgment, matters not subject to the appellate court's judgment are not within the scope of the judgment of the court for final appeal, it cannot be viewed as grounds for appeal with respect to matters other than those which the defendant did not claim in the grounds for appeal or ex officio.

According to the records, although the defendant submitted the statement of reasons for appeal on May 20, 201, which was within the submission period, on which May 20, 201, the defendant did not assert that the collection cannot be made because he was unrealizedable benefits in the statement of reasons for appeal. After that, on June 24, 2011, the court below's first trial date, which was in progress on June 24, 2011, asserted that the collection can be ordered as a penalty for unrealized interests, and the appellate court did not ex officio consider it as a subject of adjudication. In light of the above legal principles, the argument that the collection cannot be made because it is unrealized interests cannot be a legitimate ground for appeal. Furthermore, it cannot be said that

3. Scope of reversal

Of the facts charged as to the violation of the Securities and Exchange Act due to the use of undisclosed information against the Defendant, insofar as it is impossible to maintain the part concerning the purchase of shares through the account in the name of the children of this case, the facts charged as to the purchase of shares through the account in the name of Nonindicted 3, which is a single crime, cannot be exempted. Since the part concerning the violation of the Securities and Exchange Act relating to the violation of the obligation to report, which the court below found guilty, was sentenced to a single punishment in the concurrent crime under the former part

4. Conclusion

Therefore, the part of the lower judgment regarding the Defendant is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)