Plaintiff 1 and four others (Attorney Ansan-ho, Counsel for the plaintiff-appellant)

Seoul High Court Decision 201Na1448 delivered on May 1, 201

June 3, 2011

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

The Defendants jointly and severally pay to the Plaintiffs 1 and 2 129,60,000 won and its corresponding KRW 149,090,000 and 149,09,000 to the Plaintiff 3 from December 9, 2009, and 73,970,000 won to the Plaintiff 4 from October 30, 2009, 97,50,000 won to the Plaintiff 5 from December 14, 2009 to the delivery date of a copy of each complaint, and 20% interest per annum from the next day to the full payment date.

1. Basic facts

A. The Defendant Company Earmato Co., Ltd. (hereinafter “Defendant Company”) is a company which has completed a report on quasi-investment advisory business under the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”), and is engaged in the business of providing information on investment by receiving fees from customers on the Internet site (Internet address omitted; hereinafter “instant site”). Defendant 2 was allocated 50% of the subscription fees paid by the Defendant Company to customers.

B. The Plaintiffs agreed to and subscribed to the terms and conditions of the instant site (hereinafter “instant terms and conditions”) and concluded a contract for use with the Defendant Company. Of the above sites, the Plaintiffs paid a fee of KRW 800,000 per month to the investment clubs operated by Defendant 2 during the period specified in the table below, and received various investment information from Defendant 2 (including the part that joined Defendant 2 investment clubs) (hereinafter “instant contract”).

Plaintiff 2, 3 Plaintiff 4 Plaintiff 5’s insurance coverage period from August 27, 2009 to December 4, 2009, to December 25, 2009, to December 9, 2009, respectively.

C. The Plaintiffs, based on the information provided by Defendant 2, invested in Korea 9460KOSP20 call from September 2010 to 9347 unit securities [referring to securities with rights to live in the price (the price of exercise of rights) set in advance at the future time (the due date) set in advance, and stocks and other derivatives; hereinafter referred to as “Korea call, etc.”) and derivatives. As the above Korea call, etc. was replaced by the due date on November 18, 2009, the Plaintiffs, such as Korea Call, etc., became 0 won.

[Ground of recognition] Facts without dispute, entry of Gap 4 through 7 evidence (including each number if there is a tentative number) and the purport of the whole pleadings

2. Claims for damages arising from nonperformance, etc. of investment advisory contracts;

A. The plaintiffs' assertion

Although Defendant Company was an investment advisory business entity that reported quasi-investment advisory business with the Plaintiffs, Defendant Company, who was an employee of Defendant Company, provided a conclusive judgment on uncertain matters to the Plaintiffs, and actively solicited them to invest in ELW, thereby incurring damages to the Plaintiffs in violation of the duty of investment advisory business under the Capital Markets Act, and thus, Defendants who distribute subscription fees paid by the Plaintiffs are jointly and severally liable for damages arising from nonperformance of obligations under the Investment advisory contract or nonperformance of obligations under the Capital Markets Act.

B. Determination

1) Whether a violation of the Financial Investment Services and Capital Markets Act is committed

(A) The nature of the instant contract

The term “investment advisory business” under the Financial Investment Services and Capital Markets Act means the business of providing advice on the value of financial investment instruments or on the investment judgment (referring to the judgment on kinds, items, acquisition and disposition, methods of acquisition and disposition, quantity, price, timing, etc.; hereinafter the same shall apply) on financial investment instruments (Article 6(6)). Meanwhile, the term “investment advisory business” means the business prescribed by Presidential Decree as a advice on the investment judgment on financial investment instruments or the value of financial investment instruments by means of publications, electronic mail, etc. issued for a large number of unspecified persons (Article 101(1)). Article 102 of the Enforcement Decree of the said Act provides that “a business prescribed by Presidential Decree” means an investment advice given by a person other than an investment advisory business entity for a certain amount of consideration through publications, publications, correspondence materials, broadcasting, etc. issued or transmitted to a large number of unspecified persons.”

Comprehensively taking account of the overall purport of the arguments in the statement of Gap evidence Nos. 13 through 17, Eul evidence Nos. 3, 4, and 5 (including each number number), the terms of the contract of this case provide that the service provided through the service contract is an act of providing user members with reference information for securities transaction within the scope permitted by the relevant laws and regulations, and defendant Nos. 2 provides a service of responding to individual questions of the members at the investment club of the defendant No. 2, but the main service is a securities broadcasting service for the general members who have joined the investment club of the defendant No. 2.

In full view of the contents of the instant contract, the terms and conditions of the instant contract, the number of subscription members, and membership fees, etc., it is reasonable to deem that the instant contract concluded between the Defendant Company and the Plaintiffs is an investment advice service provided unilaterally by means of broadcasting, etc. by experts belonging to the Defendant Company. The nature of the contract is not an investment advisory contract under the Capital Markets Act, but an investment advisory contract, and thus, the Plaintiffs’ assertion premised on the premise that the instant contract is an investment advisory contract

(B) Whether the Defendants violated the Capital Markets Act

The plaintiffs asserts that even if the contract of this case is similar investment advisory contract, the defendant company bears the duty of investment advisory business entity under the Financial Investment Services and Capital Markets Act.

The Financial Investment Services and Capital Markets Act imposes various obligations on investment advisory business entities; however, Article 101(1) of the said Act provides that a quasi-investment advisory business entity shall report to the Financial Services Commission (Article 101(3) and Article 7(3) of the said Act provides that “a business entity shall not be deemed an investment advisory business if it provides advice through publications, publications, correspondence materials, or broadcasts that are issued or transmitted to a large number of unspecified persons and that many and unspecified persons may purchase or receive at any time.” In light of the fact that it separates the investment advisory business from the investment advisory business, it is difficult to readily conclude that the Defendant Company is liable to bear the obligations under the Financial Investment Services and Capital Markets Act that the investment advisory business entity bears. Furthermore, there is no disposition document or any other evidence that the Plaintiffs

(ii) Other default;

In Defendant 2’s guidance for membership of an investment club, the Plaintiffs advertised that “all items of recommendation shall be accurately informed of the accurate weight, purchase, sale, and loss amount in real time,” and “the time of sale and purchase pursuant to unconditional crowdfunding”. However, the Plaintiffs, who are ordinary investors, actively encourage the Plaintiffs to make an ELW investment which is highly dangerous, and did not inform the Plaintiffs of the accurate loss amount, and thus, the Defendants jointly and severally claim that they should compensate the Plaintiffs for damages due to nonperformance.

In light of the characteristics of the stock market where risk cannot be caused by Defendant 2’s failure to accurately forecast the future market situation as an expert, the obligation to be borne by Defendant 2 under the instant contract is an expert who is merely an obligation to provide investment information in good faith, and cannot be deemed an obligation to pay certain profits. In light of the characteristics of the stock market where it is impossible for Defendant 2 to accurately forecast the future market, it is difficult to view that there is a causal relationship with the loss

3. Claim for damages caused by deception;

A. The plaintiffs' assertion

The Plaintiffs entered into the instant contract with Defendant 2’s investment club with the belief that “I will not accurately inform the accurate weight, purchase, sale, and loss cost of all issues, and will not recommend a ratical category.” In fact, Defendant 2 did not have an expert capable of providing accurate information, such as purchase and sale, thereby inducing the Plaintiffs to enter into a contract by deceiving the Plaintiffs, and caused damages to the Plaintiffs by doing so without any principle. As such, Defendant 2 asserts that Defendant 2 is liable for damages on the ground of tort.

B. Determination

Even if there is a little exaggeration or falsity in advertising and advertising of goods, if it is possible to take place in light of the general commercial practice and the good faith principle, it shall not be deemed to have been deceptioned, and if the specific facts about important matters in trading are falsely notified in a manner to the extent to be criticized in light of the good faith duty, it constitutes deception (see Supreme Court Decision 2008Da56118, Nov. 27, 2008).

In full view of the purport of the argument in Gap evidence No. 1, it is recognized that the advertisement was made on the membership screen of defendant 2's investment club of this case, "I will trade without any condition," and "I will inform the correct weight and purchase, sale, and loss price in real time, and will not recommend a type of product." On the other hand, it is difficult to view that the damage suffered by the plaintiffs occurred as a result of direct investment under the judgment of the plaintiffs on the basis of the investment information provided by defendant 2, and that there is a proximate causal relation with the deception by defendant 2.

4. Claims for damages arising from illegal acts violating the Capital Markets Act

A. The plaintiffs' assertion

The Plaintiffs asserted that Defendant Company, as a quasi-investment advisory business, did not register an investment advisory business with the Financial Supervisory Commission, actively recommended the Plaintiffs to purchase Korean call, etc., and Defendant 2 violated the Financial Investment Services and Capital Markets Act, i.e., selling Korean call, etc. to the Plaintiffs who feel unstable, such as decline in the price of Korean call, etc., and that the Plaintiffs were liable for compensating the Plaintiffs for damages caused by tort.

B. Determination

As a result of the commission of document forwarding to the Seoul Southern District Court chief, in full view of the purport of the entire pleadings, the Defendants violated the Capital Markets Act by providing the investment advisory business by providing Internet broadcasting services at Defendant 2’s investment clubs without registering the investment advisory business at the Financial Supervisory Commission. At the same time, Defendant 2 provided individual inquiries to the members of the investment clubs through hosting, etc., and providing individual answers.

Meanwhile, comprehensively taking account of the statements in Gap evidence 4-1 through 4, Gap evidence 5-3, 4, 5-5, Gap evidence 6-3, 4-4, and 7-3 through 5, the plaintiffs asked the defendant 2 to sell and purchase Korean call, etc. from the end of September 2009 to the end of October 2009, since it is reasonable to view that the plaintiffs sold and purchased Korean call, etc. under the judgment of the defendant 2, considering the information provided by the defendant 2 as well as the information provided by the defendant 2, it is difficult to recognize causation between the defendants' illegal act and the damages suffered by the plaintiffs. Thus, the above plaintiffs' assertion is not reasonable.

5. Claim for damages caused by false or exaggerated advertisements;

A. The plaintiffs' assertion

The plaintiffs are entitled to pay a large amount of profit when they join their own investment clubs, and as an expert, the plaintiffs violated the Act on Fair Labeling and Advertising by making false or exaggerated advertisements as if they will accurately inform about the point of time of sale by hand, and the defendant company took part in illegal acts, such as aiding and abetting the advertisement of the defendant 2. The defendants claim that they are liable for damages due to joint illegal acts.

B. Determination

"False or exaggerated advertisements" referred to in Article 3 (1) 1 of the Act on Fair Labeling and Advertising refers to advertisements that are likely to deceive or mislead consumers by falsely advertising facts or excessively unfasible facts, and that are likely to undermine fair trade order. Whether an advertisement is likely to deceive or mislead consumers should be objectively determined on the basis of the overall and extreme increase that ordinary consumers receive the relevant advertisement (see Supreme Court Decision 2002Du6965, Jun. 27, 2003, etc.).

Defendant 2’s investment club is subject to the purchase and sale under unconditional trading; “All items of recommendation shall be informed of the accurate weight and purchase, sale, and loss amount in real time, and shall not be recommended by Na-type items.” Defendant 2 is aware of the fact that “Defendant 2 is making an advertisement to the effect that it is possible for experts to accurately estimate the investment of stocks (the above facts and evidence No. 4) but it is impossible for them to accurately estimate the investment of stocks. Furthermore, considering that it is impossible to guarantee only a large amount of profit without any loss in stock investment, it is difficult to conclude that the above advertising phrase alone belongs to consumers with ordinary caution or mislead consumers. Therefore, the plaintiffs’ assertion is without merit.

6. Conclusion

Thus, the plaintiffs' claim of this case is dismissed as it is without merit.

【Attachment-Related Provisions omitted】

Judges Kim Il-il (Presiding Judge)