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FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT

Act No. 8635, Aug. 3, 2007

Amended by Act No. 8863, Feb. 29, 2008

Act No. 8852, Feb. 29, 2008

Act No. 9407, Feb. 3, 2009

Act No. 9408, Feb. 3, 2009

Act No. 9625, Apr. 22, 2009

Act No. 9784, jun. 9, 2009

Act No. 10063, Mar. 12, 2010

Act No. 10303, May 17, 2010

Act No. 10361, jun. 8, 2010

Act No. 10366, jun. 10, 2010

Act No. 10580, Apr. 12, 2011

Act No. 10629, May 19, 2011

Act No. 10866, Jul. 21, 2011

Act No. 10924, Jul. 25, 2011

Act No. 11040, Aug. 4, 2011

Act No. 11758, Apr. 5, 2013

Act No. 11845, May 28, 2013

Act No. 12102, Aug. 13, 2013

Act No. 12383, Jan. 28, 2014

Act No. 12947, Dec. 30, 2014

Act No. 13448, Jul. 24, 2015

Act No. 13453, Jul. 31, 2015

Act No. 13782, Jan. 19, 2016

Act No. 14075, Mar. 18, 2016

Act No. 14129, Mar. 29, 2016

Act No. 14130, Mar. 29, 2016

Act No. 14242, May 29, 2016

Act No. 14458, Dec. 20, 2016

Act No. 14827, Apr. 18, 2017

Act No. 14817, Apr. 18, 2017

PART I GENERAL PROVISIONS
 Article 1 (Purposes)
The purpose of this Act is to contribute to the development of the national economy by facilitating financial innovation and fair competition in the capital market, as well as protecting investors and fostering the development of the financial investment business, thereby heightening the fairness, reliability, and efficiency of the capital market.
 Article 2 (Applicability to Activities Conducted Abroad)
Any activities conducted in a foreign country the effects of which extend to the territory of the Republic of Korea shall be governed by this Act.
 Article 3 (Financial Investment Instruments)
(1) The term “financial investment instrument” in this Act means a right acquired by an agreement to pay money or any other thing with property value (hereinafter referred to as "money, etc.") at a specific point in the present or in the future, with intent to earn a profit or avoid a loss, where there is a risk (hereinafter referred to as "investment risk") that the total amount of such money, etc., paid or payable, to acquire that right (excluding sums specified by Presidential Decree, such as sales commissions) may exceed the total amount of money, etc. already recovered or recoverable from such right (including sums specified by Presidential Decree, such as termination fees): Provided, That the following instruments shall be excluded herefrom: <Amended by Act No. 10924, Jul. 25, 2011; Act No. 11845, May 28, 2013>
1. Negotiable certificates of deposit denominated in Korean won;
2. Beneficial interests in any of the following trusts which are not beneficiary certificate issued as provided for in Article 78 (1) of the Trust Act (excluding the acceptance of the property prescribed in Article 103 (1) 1 for trust, but including the exercise of the authority to dispose of the trust property pursuant to Articles 46 through 48 of the Trust Act by a trustee; hereinafter referred to as "managerial trust"):
(a) A trust where trust property can be disposed of only by the instruction of the trustor (including beneficiaries with the authority to dispose of trust property under a trust contract);
(b) A trust which permits an act of preserving trust property or an act of using or improving trust property to the extent not changing the nature of the trust property under a trust contract;
3. Other financial investment instruments prescribed by Presidential Decree as unlikely to undermine the protection of investors or sound trading practices, even if the relevant financial investment instruments are excluded from the financial investment instruments taking the characteristics of the relevant financial investment instruments into consideration.
(2) The financial investment instruments as defined in paragraph (1) are classified as follows:
1. Securities;
2. Derivatives:
(a) Exchange-traded derivatives;
(b) Over-the-counter derivatives.
 Article 4 (Securities)
(1) The term "securities" in this Act means financial investment instruments issued by a Korean national or a foreigner, for which an investors does not owe any obligation to make any additional payment on any ground, in addition to the money, etc. that the investor paid at the time he/she acquires such instruments (excluding obligation of payment that the investor assumes by exercising a right to effectuate the trading of an underlying asset): Provided, That any of the following securities shall be deemed to be securities only for the purposes of Chapter 5 of Part II, Chapter 1 of Part III (including the part concerning the violation of obligation prescribed in Chapter 5 of Part II and Chapter 1 of Part III among the provisions of Parts VIII through X), Articles 178 and 179: <Amended by Act No. 11845, May 28, 2013; Act No. 13448, Jul. 24, 2015>
1. Investment contract securities;
2. Securities prescribed by Presidential Decree, taking into comprehensive account related issues, such as the possibility of circulation, the existence of any regulation under this Act or finance-related statutes, etc. among equity securities, beneficiary certificates or depositary receipts.
(2) The securities as defined in paragraph (1) are classified as follows:
1. Debt securities;
2. Equity securities;
3. Beneficiary certificates;
4. Investment contract securities;
5. Derivatives-linked securities;
6. Depositary receipts.
(3) The term "debt securities" in this Act means state bonds, local government bonds, special purpose bonds (referring to bonds issued by a corporation established by direct operation of an Act; hereinafter the same shall apply), corporate bonds (limited to the bonds falling under paragraph (7) 1, if they fall under Article 469 (2) 3 of the Commercial Act; hereinafter the same shall apply), corporate commercial paper (referring to promissory notes issued by a company for raising funds required for its business, which shall meet the requirements prescribed by Presidential Decree; hereinafter the same shall apply), and other similar instruments, which bear the indication of a right to claim the payment. <Amended by Act No. 11845, May 28, 2013>
(4) The term "equity securities" in this Act means stock certificates, instruments representing a preemptive right to new stocks, investment securities issued by a corporation established by direct operation of an Act, equity shares in contribution to a limited partnership company, limited liability company, limited company, limited partnership, or undisclosed association established under the Commercial Act, equity shares in contribution to an association under the Civil Act, and other similar instruments, which bear the indication of equity shares in contribution or a right to acquire the equity shares. <Amended by Act No. 11845, May 28, 2013>
(5) The term "beneficiary certificates" in this Act means beneficiary certificates provided for in Article 110, beneficiary certificates provided for in Article 189, and other similar instruments, which bear the indication of a beneficial interest in a trust.
(6) The term "investment contract securities" in this Act means instruments bearing the indication of a contractual right under which a specific investor is entitled to the profits earned, or liable for losses sustained, depending upon the results of a joint venture in which the specific investor invests money, etc. jointly with a third person (including other investors; hereafter the same shall apply in this paragraph) and which is to be run mainly by the third person.
(7) The term "derivatives-linked securities" in this Act means instruments bearing the indication of a right under which money, etc. payable or recoverable shall be determined according to a predetermined formula linked to fluctuations in the price of any underlying assets, an interest rate, an indicator, a unit, an index based upon any of the aforementioned, or any other similar factor: Provided, That any of the following securities shall be excluded herefrom: <Amended by Act No. 11845, May 28, 2013; Act No. 14129, Mar. 29, 2016; Act No. 14817, Apr. 18, 2017>
1. Securities linked to fluctuations in the prices of the relevant underlying assets, an interest rate, an indicator, a unit, or an index based upon any of the aforementioned, or any other similar factor only in respect of the interest on money, etc. paid by an investor simultaneously upon the issuance thereof and other proceeds;
2. Rights under a contract prescribed in Article 5 (1) 2 (excluding financial investment instruments prescribed in the proviso to Article 5 (1));
3. Bonds issued by a stock-listed corporation pursuant to Article 165-11 (1) on the condition that they be converted to stocks or granted an exemption from the obligation to redeem such bonds and to pay interest thereon, if any trigger event occurs which has been pre-specified in accordance with objective and rational standards as at the time of issuance of such bonds;
3-2. Contingent capital securities subject to write-down, contingent capital securities subject to conversion to stocks of a bank, and contingent capital securities subject to conversion to stocks of a bank holding company as provided for in Article 33 (1) 2 through 4 of the Banking Act;
3-3. Contingent capital securities subject to write-down or convertible contingent capital securities under Article 15-2 (1) 2 or 3 of the Financial Holding Companies Act;
4. Bonds provided for in Articles 469 (2) 2, 513 and 516-2 of the Commercial Act;
5. Other financial investment instruments prescribed by Presidential Decree, which are similar to the financial investment instruments provided for in subparagraphs 1 through 3, 3-2, 3-3 and 4.
(8) The term "depositary receipts" in this Act means instruments issued by an entity with whom any of the securities referred to in paragraph (2) 1 through 5 are deposited, in a country other than the country where such securities were issued, which bear the indication of a right related to the deposited underlying securities.
(9) The rights that may or must be indicated on any of the securities referred to in the subparagraphs of paragraph (2) shall be deemed securities, although no certificate representing such rights is issued in a physical form.
(10) The term "underlying assets" in this Act means any of the following:
1. Financial investment instruments;
2. Currency (including any foreign currency);
3. Ordinary commodities (referring to agricultural products, livestock products, fisheries products, forestry products, mining products, energy, goods manufactured or processed with such products as raw materials, and other similar goods);
4. Credit risk (referring to a change in credit due to a change in the credit rating, bankruptcy, debt readjustment, etc. of a party or third party);
5. Other risk that is natural, environmental, or economic phenomena, which can be computed or assessed by price, interest, indicator, or unit in a reasonable and appropriate manner.
 Article 5 (Derivatives)
(1) The term "derivatives" in this Act means any of the following contractual rights: Provided, That the same shall not apply to financial investment instruments prescribed by Presidential Decree as appropriate to regulate them as securities taking into consideration the possibility of circulation, parties to contracts, grounds for issuance, etc. of the relevant financial investment instruments: <Amended by Act No. 11845, May 28, 2013>
1. A contract in which it is agreed to deliver money, etc. at a certain point in the future, which shall be computed on the basis of underlying assets, the price of the underlying assets, an interest rate, an indicator, a unit, or an index based on any of the aforesaid factors;
2. A contract in which the parties agree to grant, by either party's unilateral expression of willingness, a right to effectuate a transaction of delivering and accepting money, etc., which shall be computed on the basis of underlying assets, the price of the underlying assets, an interest rate, an indicator, a unit, or an index based on any of the aforesaid factors;
3. A contract in which the parties agree to exchange money, etc. which shall be computed on the basis of underlying assets, the price of the underlying assets, an interest rate, an indicator, a unit, or an index based on any of the aforesaid factors, during a certain period in the future at a predetermined price;
4. A contract prescribed by Presidential Decree, which is similar to contracts referred to in subparagraphs 1 through 3.
(2) The term "exchange-traded derivatives" in this Act means any of the following derivatives: <Amended by Act No. 11845, May 28, 2013>
1. Derivatives traded in the domestic derivatives market;
2. Derivatives traded in an overseas derivatives market (referring to a market in a foreign country, which is similar to the domestic derivatives market and a market where foreign derivatives prescribed by Presidential Decree are traded);
3. Other derivatives traded in the financial investment instruments market in accordance with the standards and method determined by a person who has opened and operates the financial investment instruments market.
(3) The term "over-the-counter derivatives" in this Act means the derivatives that are not exchange-traded derivatives.
(4) The execution of a contract that falls within any of the subparagraphs of paragraph (1) which is not a sales contract, shall be deemed a sales contract for the purposes of this Act.
 Article 6 (Financial Investment Business)
(1) The term "financial investment business" in this Act means any business specified below, which is an act conducted continuously or repeatedly for earning a profit:
1. Investment trading business;
2. Investment brokerage business;
3. Collective investment business;
4. Investment advisory business;
5. Discretionary investment business;
6. Trust business.
(2) The term "investment trading business" in this Act means the business of selling and purchasing financial investment instruments, issuing and underwriting securities, inviting offers, offering, and accepting offers for securities on its own account in whosever named.
(3) The term "investment brokerage business" means the business of selling and purchasing financial investment instruments, inducing brokerage thereof or inviting offers, offering and accepting offers for such instruments, or inviting offers, offering, and accepting offers for the issuance and underwriting of securities on the account of any other person in whosever named. <Amended by Act No. 11845, May 28, 2013>
(4) The term "collective investment business" in this Act means the business of making collective investments.
(5) The term "collective investment" in paragraph (4) means the business of investing the money, etc. pooled from at least two investors, or any surplus funds administered under Article 81 of the National Finance Act to acquire, dispose of, and manage by any other method investable assets with property value in a manner that does not receive ordinary management instructions from the investors or fund management entities, and distributing the yields therefrom to vest in the investors or fund management entities: Provided, That such collective investment shall not include the following: <Amended by Amended by Act No. 11845, May 28, 2013>
1. Where money, etc. is pooled through private placement for management and distribution in accordance with the Acts specified by Presidential Decree, and the total number of investors specified by Presidential Decree is not greater than that prescribed by Presidential Decree;
2. Where money, etc. is pooled for management and distribution in accordance with an asset-backed securitization plan established under Article 3 of the Asset-Backed Securitization Act;
3. Any case prescribed by Presidential Decree, taking into account the nature of the activities, the need to protect investors, etc.
(6) The term "investment advisory business" in this Act means the business of providing advice on the values of financial investment instruments and other investable assets prescribed by Presidential Decree (hereinafter referred to as "financial investment instruments, etc.") or on the judgments on investment (referring to judgments over class, item, acquisition, disposition, methods of acquisition or disposition, quantity, price, timing, etc.; hereinafter the same shall apply) in financial investment instruments, etc. <Amended by Act No. 11845, May 28, 2013>
(7) The term "discretionary investment business" in this Act means the business of acquiring, disposing of, and managing financial investment instruments, etc. classifying them for investors taking into account the financial standing, purposes of investment, etc. of the investors, with authorization from such investors for discretionary judgment, entirely or partially, over the financial investment instruments, etc. <Amended by Act No. 11845, May 28, 2013>
(8) The term "trust business" in this Act means the business of dealing in trusts.
(9) The term "prime brokerage business" in this Act means the business of providing any of the following services for a hedge fund as defined in Article 9 (19) 2 and other investors prescribed by Presidential Decree (hereafter referred to as "hedge fund, etc." in this Article and Article 77-3) for efficient credit offering, management of collateral, etc. by linking them in a manner prescribed by Presidential Decree: <Newly Inserted by Act No. 11845, May 28, 2013; Act No. 13448, Jul. 24, 2015>
1. Lending securities; or brokerage, mediation or agent services therefor;
2. Providing loans and other credit offering services;
3. Keeping or managing assets invested by the hedge fund, etc.;
4. Other services prescribed by Presidential Decree, necessary to support the efficient business administration of the hedge fund, etc.
 Article 7 (Exception of Financial Investment Business from Application)
(1) No business shall be deemed investment trading business when it issues its own securities: Provided, That the same shall not apply to any of the following securities: <Amended by Act No. 11845, May 28, 2013>
1. Beneficiary certificates of an investment trust;
2. Derivatives-linked securities prescribed by Presidential Decree;
3. Securities issued under a contract prescribed by Presidential Decree or a deposit contract with investment risk as provided for in Article 77 (1);
4. Securities issued under an insurance contract with investment risk as provided for in Article 77 (2).
(2) No business shall be deemed investment brokerage business when an investment solicitor as defined in Article 51 (9) acts as an agent for recommending investments.
(3) No business shall be deemed investment advisory business when it provides advice through a periodical, publication, correspondence, broadcast or any other medium that is issued or transmitted to an unspecified number of people, and which is available to an unspecified number of people for purchase or receipt frequently.
(4) No business shall be deemed discretionary investment business when it is necessary for an investment broker to be authorized to make discretionary judgments, entirely or partially, over investments in financial investment instruments in the course of dealing with orders received from investors for trading, in cases prescribed by Presidential Decree.
(5) Neither trust business for secured bond under the Secured Bond Trust Act, nor copyright trust management business under the Copyright Act shall be deemed trust business. <Amended by Act No. 9625, Apr. 22, 2009>
(6) Except as provided in paragraphs (1) through (5), none of the following shall be deemed financial investment business prescribed in the subparagraphs of Article 6 (1), as prescribed by Presidential Decree: <Amended by Act No. 11845, May 28, 2013; Act No. 13448, Jul. 24, 2015>
1. Where an exchange as defined in Article 8-2 (2) establishes and operates a securities market or derivatives market;
2. Where it sells or buys financial investment instruments directly to or from an investment trader or through an investment broker;
3. Where a hedge fund investment business entity as defined in Article 9 (29) sells collective investment securities of a hedge fund as defined in Article 9 (19) 2 managed by it;
4. Where it is necessary to exclude the business from financial investment business in cases prescribed by Presidential Decree, taking into account the nature of its activities, the need to protect investors, etc.
 Article 8 (Financial Investment Business Entities)
(1) The term "financial investment business entity" in this Act means an entity engaging in financial investment business referred to in each subparagraph of Article 6 (1) with authorization from, or a registration with, the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The term "investment trader" in this Act means an entity engaging in investment trading business.
(3) The term "investment broker" in this Act means an entity engaging in investment brokerage business.
(4) The term "collective investment business entity" in this Act means a financial investment business entity engaging in collective investment business.
(5) The term "investment advisory business entity" in this Act means a financial investment business entity engaging in investment advisory business.
(6) The term "discretionary investment business entity" in this Act means a financial investment business entity engaging in discretionary investment business.
(7) The term "trust business entity" in this Act means a financial investment business entity engaging in trust business.
(8) The term "comprehensive financial investment business entity" in this Act means an entity designated by the Financial Services Commission under Article 77-2 from among investment traders or investment brokers. <Newly Inserted by Act No. 11845, May 28, 2013>
(9) The term "concurrently-run financial investment entity" in this Act means any of the following entities concurrently engaging in different types of financial investment business: <Newly Inserted by Act No. 13453, Jul. 31, 2015; Act No. 14242, May 29, 2016>
1. A bank as defined in Article 2 of the Banking Act (hereinafter referred to as "bank");
2. An insurance company as defined in Article 2 of the Insurance Business Act (hereinafter referred to as "insurance company");
3. Other financial institutions, etc. prescribed by Presidential Decree.
 Article 8-2 (Financial Investment Instruments Market, etc.)
(1) The term "financial investment instruments market" in this Act means a market where securities or exchange-traded derivatives are traded.
(2) The term "exchange" in this Act means an entity that establishes a financial investment instruments market upon obtaining permission from the Financial Services Commission pursuant to Article 373-2 to promote the fair price formation and trading of securities and exchange-traded derivatives as well as stability and efficiency of other trades.
(3) The term "exchange market" in this Act means a financial investment instrument market established by an exchange.
(4) Exchange markets shall be classified as follows:
1. Securities market: A market established by an exchange for trading securities;
2. Derivatives market: A market established by an exchange for trading exchange-traded derivatives.
(5) The term "alternative trading system" in this Act means an investment trader or investment broker engaging in the trade of stock certificates listed on a securities market or any other securities prescribed by Presidential Decree (hereinafter referred to as "instruments for trade contract") or in the brokerage, mediation or agent service therefor (hereinafter referred to as "alternative trading services") simultaneously with multiple number of persons as parties to the trade or as respective parties, by using an information and communications network or electronic data processing system, employing any of the following methods in deciding a trade price:
1. Competitive trading method (limited to where the trade volume of instruments for trade contract does not exceed the criteria prescribed by Presidential Decree;
2. Method of using trade prices established in a securities market established by the relevant exchange, if the instruments for trade contract are listed securities;
3. Other methods prescribed by Presidential Decree as means for forming fair trade prices and securing stability, efficiency, etc. of trade contracts.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 9 (Other Definitions)
(1) The term "major shareholder" in this Act, means a shareholder as defined in subparagraph 6 of Article 2 of the Act on Corporate Governance of Financial Companies. In such cases, "finance company" shall be deemed to be "corporation". <Amended by Act No. 13453, Jul. 31, 2015>
(2) The term "executive officer" in this Act means a director and an auditor.
(3) The term "outside director" in this Act means a director who does not engage in ordinary business affairs of a company, and is appointed pursuant to Article 17 of the Act on Corporate Governance of Financial Companies. <Amended by Act No. 13453, Jul. 31, 2015>
(4) The term "investment recommendation" in this Act means the act of making a recommendation to a specific investor to a contract for trading financial investment instruments, investment advisory services, discretionary investment services, or a trust (excluding a managerial trust contract and a trust contract with no investment risk). <Amended by Act No. 11845, May 28, 2013>
(5) The term "professional investor" in this Act means any of the following entities who has an ability to take risks accompanying an investment in light of expertise held in connection with financial investment instruments, the scale of assets owned, etc.: Provided, That when a professional investor prescribed by Presidential Decree gives written notice to a financial investment business entity of its intention to be treated as an ordinary investor, the financial investment business entity shall give consent to the professional investor, unless good cause exists, and the professional investor shall be treated as an ordinary investor if consent is given by the financial investment business entity: <Amended by Act No. 9407, Feb. 3, 2009>
1. The State;
2. The Bank of Korea;
3. Financial institutions specified by Presidential Decree;
4. Stock-listed corporations: Provided, That where a stock-listed corporation trades over-the-counter derivatives with a financial investment business entity, it shall be deemed a professional investor where it gives written notice to the financial investment business entity of its intention to be treated as a professional investor;
5. Other entities specified by Presidential Decree.
(6) The term "ordinary investor" in this Act means any investor other than professional investors.
(7) The term "public offering" in this Act means an invitation of at least 50 investors, as computed by a formula prescribed by Presidential Decree, to make offers to acquire newly issued securities.
(8) The term "private placement" in this Act means an invitation of people to acquire newly issued securities without placing them for public offering.
(9) The term "public sale" in this Act means an invitation of at least 50 investors, as computed by a formula prescribed by Presidential Decree, to make offers to sell or purchase securities already issued.
(10) The term "issuer" in this Act means an entity that has issued or intends to issue securities: Provided, That this term means an entity that has issued or intends to issue the securities that underlie depositary receipts in the context of issuing depositary receipts.
(11) The term "underwriting" in this Act means any of the following acts conducted with an intent to cause a third party to acquire securities, or public offering, private placement, or public sale of securities conducted on the premise of such acts for the issuer or seller of such securities: <Amended by Act No. 11845, May 28, 2013>
1. Acquiring all or some of such securities, or concluding a contract with the content to acquire all or some of such securities;
2. Concluding a contract with the content to acquire remaining balance of all or some of such securities, if no one acquires them.
(12) The term "underwriter" in this Act means an entity that underwrites securities in cases of public offering, private placement, or public sale of the securities. <Amended by Act No. 11845, May 28, 2013>
(13) The term "intermediary" in this Act means a person engaged in the public offering, private placement, or sale of the relevant securities, other than acts prescribed in paragraph (11), for the issuer or seller of such securities, or who share directly or indirectly the responsibilities of public offering, private placement, or sale of securities. <Amended by Act No. 11845, May 28, 2013>
(14) The term "seller" in this Act means an owner of securities who has sold, or intends to sell, securities by him/her or through underwriters or intermediaries. <Amended by Act No. 11845, May 28, 2013>
(15) The terms "listed corporation," "unlisted corporation," "stock-listed corporation" and "stock-unlisted corporation" in this Act refer to the following entities respectively: <Amended by Act No. 9407, Feb. 3, 2009>
1. A listed corporation: A corporation that has issued securities listed on the securities market (hereinafter referred to as "listed securities");
2. An unlisted corporation: Any corporation other than listed corporations;
3. A stock-listed corporation: Any of the following corporations:
(a) A corporation that has issued stock certificates listed on the securities market;
(b) Where depositary receipts that are related to stock certificates are listed on the securities market, a corporation that has issued the stock certificates;
4. A stock-unlisted corporation: Any corporation other than stock-listed corporations.
(16) The term "foreign corporation, etc." in this Act means any of the following entities:
1. A foreign government;
2. A foreign local government;
3. A foreign public institution;
4. A foreign company established pursuant to statutes of a foreign country;
5. An international organizations specified by Presidential Decree;
6. An entity specified by Presidential Decree among other corporations, etc. in foreign countries.
(17) The term "institutions related to financial investment business" in this Act means the following entities: <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11758, Apr. 5, 2013; Act No. 11845, May 28, 2013>
1. Korea Financial Investment Association established pursuant to Article 283 (hereinafter referred to as the "Association");
2. Korea Securities Depository established pursuant to Article 294 (hereinafter referred to as the "Securities Depository");
2-2. An entity that has obtained authorization under Article 323-3 (hereinafter referred to as "central counterparty");
3. An entity that has obtained authorization under Article 324 (1) (hereinafter referred to as "securities finance company");
3-2. An entity that has obtained authorization under Article 335-3 (hereinafter referred to as "credit rating company");
4. A merchant bank provided for in Article 336;
5. An entity that has obtained under Article 355 (1) (hereinafter referred to as "fund brokerage company");
6. An entity that has obtained under Article 360 (1) (hereinafter referred to as "short-term finance company");
7. An entity registered under Article 365 (1) (hereinafter referred to as "transfer agent");
8. An organization related to financial investments, established pursuant to Article 370.
(18) The term "collective investment scheme" in this Act means any of the following schemes established for making collective investments: <Amended by Act No. 11845, May 28, 2013>
1. A collective investment scheme in the form of a trust, in which a trustor, who is a collective investment business entity, requires a trust business entity to invest and manage the property entrusted to the trust business entity in accordance with instructions by the collective investment business entity (hereinafter referred to as "investment trust");
2. A collective investment scheme in the form of a stock company incorporated under the Commercial Act (hereinafter referred to as "investment company");
3. A collective investment scheme in the form of a limited company incorporated under the Commercial Act (hereinafter referred to as "investment limited company");
4. A collective investment scheme in the form of a limited partnership company incorporated under the Commercial Act (hereinafter referred to as "investment limited partnership company");
4-2. A collective investment scheme in the form of a limited liability company incorporated under the Commercial Act (hereinafter referred to as "investment limited liability company");
5. A collective investment scheme in the form of a limited partnership incorporated under the Commercial Act (hereinafter referred to as "investment limited partnership");
6. A collective investment scheme in the form of an undisclosed association incorporated under the Commercial Act (hereinafter referred to as "undisclosed investment association");
7. Deleted. <by Act No. 13448, Jul. 24, 2015>
(19) The term "privately placed fund" in this Act means a collective investment scheme that issues collective investment securities only through private placement, in which the total number of the investors specified by Presidential Decree shall be not exceed the number prescribed by Presidential Decree, and is classified as follows: <Amended by Act No. 13448, Jul. 24, 2015>
1. A privately placed fund which is an investment limited partnership company that invests in and manages equity securities, etc. to participate in the management right or to improve the business structure or governance structure (hereinafter referred to as "private equity fund");
2. A privately placed fund (hereinafter referred to as "hedge fund"), except private equity funds.
(20) The term "collective investment property" in this Act means the property of a collective investment scheme, which means the property of an investment trust, the property of an investment company, the property of an investment limited company, the property of an investment limited partnership company, the property of an investment limited liability company, the property of an investment limited partnership, or the property of an undisclosed investment association. <Amended by Act No. 11845, May 28, 2013>
(21) The term "collective investment securities" in this Act means instruments on which the equity shares in a collective investment scheme (referring to the beneficial interest in the case of an investment trust) are indicated.
(22) The term "collective investment agreement" in this Act means an agreement that provides for the organization and management of a collective investment scheme, and the rights and duties of investors therein, which means the trust contract of an investment trust, the articles of incorporation of an investment company, an investment limited company, an investment limited partnership company, or an investment limited liability company, or the partnership agreement of an investment limited partnership or the association agreement of an undisclosed investment association. <Amended by Act No. 11845, May 28, 2013>
(23) The term "general meeting of collective investors" in this Act means a decision-making body comprised of all investors in a collective investment scheme, which means the general meeting of beneficiaries, the general meeting of shareholders, the general meeting of members, or the general meeting of undisclosed members.
(24) The term "trust" in this Act means a trust as defined in Article 2 of the Trust Act. <Amended by Act No. 10924, Jul. 25, 2011>
(25) The term "central counterparty clearing business" in this Act means a business of bearing obligations incurred by a financial investment entity and a person prescribed by Presidential Decree (hereinafter referred to as "business entity subject to clearing") in trading a financial investment instrument prescribed by Presidential Decree (hereinafter referred to as "trade subject to clearing"), through assumption of the obligations, novation, or through an analogous legally binding arrangement. <Newly Inserted by No. 11758, Apr. 5, 2013>
(26) The term "credit rating business" in this Act means the business of assessing credit standing (hereinafter referred to as "credit assessment") of the following entities, and assigning a credit rating represented by symbols, numbers, etc. (hereinafter referred to as "credit rating"), and providing such credit rating to the issuer, underwriter, investors, and other interested persons, or allowing them to inspect such credit rating: <Newly Inserted by Act No. 11845, May 28, 2013>
1. Financial investment instruments;
2. Enterprises, collective investment schemes, and other entities prescribed by Presidential Decree.
(27) The term "crowdfunding broker" in this Act means an investment broker engaging in the online brokerage of public offering or sale of debt securities, equity securities and investment contract securities issued by the following persons, on another person's account in whosever named by the method prescribed by Presidential Decree (hereinafter referred to as "crowdfunding brokerage"): <Newly Inserted by Act No. 13448, Jul. 24, 2015>
1. A person prescribed by Presidential Decree from among business starters as defined in subparagraph 2 of Article 2 of the Support for Small and Medium Enterprise Establishment Act;
2. Any other person who meets the requirements prescribed by Presidential Decree.
(28) The term "hedge fund investment business" in this Act means the business of making collective investments through hedge funds among the collective investment business. <Newly Inserted by Act No. 13448, Jul. 24, 2015>
(29) The term "hedge fund investment business entity" in this Act means a collective investment business entity engaging in hedge fund investment business. <Newly Inserted by Act No. 13448, Jul. 24, 2015>
 Article 10 (Relation to other Acts)
(1) Except as specifically provided for in other Acts, all financial investment businesses shall be governed by the provisions of this Act.
(2) Article 246 of the Criminal Act shall not apply to a financial investment business entity in the carrying out of its financial investment business activities.
(3) Article 6-2 of the Issuance and Distribution of Electronic Bills Act shall not apply to cases where corporate commercial papers are issued. <Newly Inserted by Act No. 10063, Mar. 12, 2010>
PART II FINANCIAL INVESTMENT BUSINESS
CHAPTER I AUTHORIZATION AND REGISTRATION OF FINANCIAL INVESTMENT BUSINESS
SECTION 1 Requirements and Procedure for Authorization
 Article 11 (Prohibition against Business Activities without Authorization)
No one shall engage in financial investment business (excluding investment advisory business, discretionary investment business and hedge fund investment business; hereafter the same shall apply in this Section) without authorization (including authorization for changes) required to engage in such financial investment business under this Act. <Amended by Act No. 13448, Jul. 24, 2015>
 Article 12 (Authorization for Financial Investment Business)
(1) An entity that wishes to engage in financial investment business shall select all or any part of its business units defined by Presidential Decree (hereinafter referred to as "authorized business unit"), by specifying the following constituents, and shall obtain authorization for each financial investment business from the Financial Services Commission: <Amended by Act No. 8863, Feb. 29, 2008>
1. The type of financial investment business (referring to investment trading business, investment brokerage business, collective investment business, and trust business, and also including underwriting business in the category of the investment trading business);
2. The range (referring to securities, exchange-traded derivatives, and over-the-counter derivatives, including state bonds, corporate bonds, and other instruments specified by Presidential Decree in the category of securities, and also including derivatives based on underlying assets of stocks and other instruments specified by Presidential Decree in the category of derivatives) of financial investment instruments (referring to the types of collective investment schemes classified under Article 229 in cases of collective investment business, or referring to the trust property specified in the subparagraphs of Article 103 (1) in cases of trust business);
3. The types of investors (referring to the classification of professional investors and ordinary investors; hereinafter the same shall apply).
(2) An entity that wishes to obtain authorization to engage in financial investment business under paragraph (1) shall satisfy each of the following requirements: <Amended by Act No. 10063, Mar. 12, 2010; Act No. 11845, May 28, 2013; Act No. 13453, Jul. 31, 2015>
1. The entity shall be either of:
(a) A stock company incorporated under the Commercial Act or a financial institution specified by Presidential Decree;
(b) A foreign financial investment business entity (referring to an entity that engages in any business equivalent to financial investment business in a foreign country in accordance with the statutes of the foreign country), who has established a branch office or any other business office necessary for conducting financial investment business corresponding to the business it currently runs in the foreign country;
2. Its equity capital shall not be less than the amount prescribed by Presidential Decree, which shall be at least 500 million won for each authorized business unit;
3. Its business plan shall be feasible and sound;
4. It shall have human resources, electronic computer systems and other physical facilities sufficient to protect investors and conduct the financial investment business in which it intends to engage;
5. None of its executive officers shall be those provided for in Article 5 of the Act on Corporate Governance of Financial Companies;
6. Its major shareholders or the foreign financial investment business entity shall meet the following requirements:
(a) In cases of subparagraph 1 (a), its major shareholders (including shareholders who are related persons of the largest shareholder; where the largest shareholder is a corporation, a person specified by Presidential Decree, exercising de facto control over the matters material to the management of the corporation, shall be included herein) shall have sufficient investment capabilities, good financial standing and social credibility;
(b) In cases of subparagraph 1 (b), the foreign financial investment business entity shall have sufficient investment capabilities, good financial standing and social credibility;
6-2. It shall have good financial standing and social credibility prescribed by Presidential Decree;
7. It shall have a system for preventing conflicts of interest between the financial investment business entity and investors, as well as between a specific investor and other investors.
(3) Further details necessary for fulfilling requirements for authorization under paragraph (2) shall be prescribed by Presidential Decree.
 Article 13 (Application for Authorization and Examination)
(1) An entity that wishes to obtain authorization for a financial investment business under Article 12 (1) shall file an application for authorization with the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission shall, within three months of receiving an application filed in accordance with paragraph (1) (or within one month where a preliminary authorization has been granted pursuant to Article 14), examine the application to determine whether authorization for financial investment business shall be granted, and shall notify the applicant in writing of its decision and the grounds therefor, without delay. In such cases, the Commission may demand that the applicant make a supplementary correction, if any deficiency exists in the application for authorization. <Amended by Act No. 8863, Feb. 29, 2008>
(3) In calculating the examination period provided under paragraph (2) and the latter part of paragraph (5), the duration for making a supplementary correction of a deficiency in the application for authorization, or other duration specified by Ordinance of the Prime Minister shall not be included in the examination time period. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
(4) The Financial Services Commission may, where granting authorization for financial investment business pursuant to paragraph (2), attach conditions as may be necessary for ensuring soundness in management and protecting investors. <Amended by Act No. 8863, Feb. 29, 2008>
(5) An entity that has obtained authorization for a financial investment business with conditions attached thereto pursuant to paragraph (4) may file an application for revocation of, or revision to, such conditions with the Financial Services Commission, if any change in circumstances or any other justifiable ground occurs. In such cases, the Financial Services Commission shall render a decision within two months on whether to revoke or revise the attached conditions, and shall notify the applicant in writing of its decision without delay. <Amended by Act No. 8863, Feb. 29, 2008>
(6) The Financial Services Commission shall, whenever it grants authorization for a financial investment business pursuant to paragraph (2), or revokes or revises the conditions attached to such authorization pursuant to paragraph (5), announce public notice of the following matters on the Official Gazette, its website, or any other medium: <Amended by Act No. 8863, Feb. 29, 2008>
1. The contents of authorization for the financial investment business;
2. The conditions attached to authorization for the financial investment business (limited to cases where such conditions are attached thereto);
3. If the conditions attached to authorization for the financial investment business are revoked or revised, the details thereof (limited to cases where such conditions have been revoked or revised).
(7) Matters concerning an application for authorization, or revocation or revision of conditions, such as the mandatory descriptions in the application for authorization, or for revocation or revision of the conditions, and its accompanying documents under paragraphs (1) through (6), and method and procedure of examination, and other necessary matters shall be prescribed by Presidential Decree. <Amended by Act No. 11845, May 28, 2013>
 Article 14 (Preliminary Authorization)
(1) An entity that wishes to obtain authorization for a financial investment business under Article 12 (hereafter in this Article referred to as "final authorization") may file an advance application for a preliminary authorization with the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission, within two months of receiving an application for preliminary authorization, shall examine the application to determine whether the applicant meets the requirements provided for in the subparagraphs of Article 12 (2) and thereby determine whether to grant the preliminary authorization; and shall promptly notify the applicant in writing of its decision and the grounds therefor. In such cases, the Commission may demand that the applicant cure any defect in the application for preliminary authorization. <Amended by Act No. 8863, Feb. 29, 2008>
(3) In calculating the examination time period provided for in paragraph (2), the duration for curing any defect in the application for preliminary authorization, or other duration specified by Ordinance of the Prime Minister shall not be included in the examination time period. <Amended by Act No. 8863, Feb. 29, 2008>
(4) The Financial Services Commission may, when granting a preliminary authorization pursuant to paragraph (2), attach conditions as may be necessary for ensuring soundness in management and protecting investors. <Amended by Act No. 8863, Feb. 29, 2008>
(5) The Financial Services Commission shall, upon receipt of an application for final authorization from an entity to whom a preliminary authorization has been granted, verify whether the applicant has fulfilled the conditions attached to the preliminary authorization under paragraph (4); and whether the applicant meets all the requirements provided for in the subparagraphs of Article 12 (2) in order to determine whether to grant the final authorization. <Amended by Act No. 8863, Feb. 29, 2008>
(6) Matters concerning an application for preliminary authorization under paragraphs (1) through (5), including mandatory descriptions in the application and its accompanying documents, and other necessary matters, including the method and procedure for preliminary authorization, shall be prescribed by Presidential Decree.
 Article 15 (Meeting with Requirements for Authorization)
Each financial investment business entity shall continue to meet the requirements for authorization provided for in the subparagraphs of Article 12 (2) (excluding Article 12 (2) 6 (a) and 6-2, referring to the relaxed requirements prescribed by Presidential Decree in the case of subparagraph 12 (2) 2 and 6 (b)), while engaging in financial investment business with authorization granted under Article 12. <Amended by Act No. 10063, Mar. 12, 2010; Act No. 13453, Jul. 31, 2015>
 Article 16 (Addition of Business Activities and Revision to Authorization)
(1) Each financial investment business entity shall, whenever it wishes to engage in financial investment business for any other business units subject to authorization in addition to the business unit already authorized pursuant to Article 12, obtain authorization on changes from the Financial Services Commission in accordance with Articles 12 and 13. In such cases, Article 14 shall apply. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
(2) In granting authorization on changes pursuant to paragraph (1), the mitigated requirements prescribed by Presidential Decree shall apply to the requirements for authorization of Article 12 (2) 6, notwithstanding the provisions of the said subparagraph. <Newly Inserted by Act No. 10063, Mar. 12, 2010>
SECTION 2 Requirements and Procedure for Registration
 Article 17 (Prohibition against Unregistered Business Activities)
No one may engage in investment advisory business or discretionary investment business, without registration (including registration of revision) for the financial investment business under this Act.
 Article 18 (Registration of Investment Advisory Business or Discretionary Investment Business)
(1) An entity that wishes to engage in investment advisory business or discretionary investment business shall select all or part of the business units defined by Presidential Decree (hereinafter referred to as "registered business units"), specifying the following constituents, and shall apply for registration of each financial investment business with the Financial Services Commission: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
1. Investment advisory business or discretionary investment business;
2. The range of financial investment instruments (referring to securities, exchange-traded derivatives, over-the-counter derivatives, and other investable assets prescribed by Presidential Decree);
3. The types of investors.
(2) An entity that wishes to apply for registration of financial investment business under paragraph (1) shall satisfy each of the following requirements: <Amended by Act No. 10063, Mar. 12, 2010; Act No. 11040, Aug. 4, 2011; Act No. 11845, May 28, 2013; Act No. 13453, Jul. 31, 2015>
1. The entity shall be any of the following: Provided, That the same shall not apply to any foreign investment advisory business entity (referring to an entity that engages in any business equivalent to investment advisory business in a foreign country in accordance with the statutes of the foreign country; hereinafter the same shall apply) or a foreign discretionary investment business entity (referring to an entity that engages in any business equivalent to discretionary investment business in a foreign country in accordance with the statutes of the foreign country; hereinafter the same shall apply) who runs business directly for those living in Korea in a foreign country or who runs investment advisory business or discretionary investment business, via any means of telecommunications:
(a) A stock company incorporated under the Commercial Act or a financial institution prescribed by Presidential Decree;
(b) A foreign investment advisory business entity that has established a branch office or any other business office necessary for conducting investment advisory business;
(c) A foreign discretionary investment business entity that has established a branch office or any other business office necessary for conducting discretionary investment business;
2. Its equity capital shall not be less than the amount prescribed by Presidential Decree, which shall be at least 100 million won for each registered business unit;
3. It shall retain professional advisors for investment recommendation (referring to the investment advisors as defined in Article 286 (1) 3 (a); hereinafter the same shall apply) or fund managers (referring to the fund managers as defined in Article 286 (1) 3 (c); hereinafter the same shall apply) according to the following classification. In such cases, any entity specified in the proviso to subparagraph 1 above shall be deemed to have met all of the relevant requirements, if it retains human resources equivalent to professional advisors for investment recommendation or fund managers in its own country, at least in the number of persons specified in each of the following:
(a) An investment advisory business entity shall retain professional advisors for investment recommendation, in at least the number prescribed by Presidential Decree;
(b) A discretionary investment business entity shall retain fund managers, in at least the number prescribed by Presidential Decree;
4. None of its executive officers shall be those provided for in Article 5 of the Act on Corporate Governance of Financial Companies;
5. Its major shareholders or the foreign investment advisory business entity or foreign discretionary investment business entity shall meet the following requirements:
(a) In cases of subparagraph 1 (a), the major shareholders (referring to the major shareholders as defined in Article 12 (2) 6 (a)) shall have good social credibility prescribed by Presidential Decree;
(b) In cases of the proviso to subparagraph 1 above and items (b) and (c) of the same subparagraph, the foreign investment advisory business entity or foreign discretionary investment business entity shall have good social credibility prescribed by Presidential Decree;
5-2. It shall have good financial standing and social credibility prescribed by Presidential Decree;
6. It shall have a system for preventing conflicts of interest between the financial investment business entity and investors, as well as between a specific investor and other investors, in compliance with the requirements prescribed by Presidential Decree.
 Article 19 (Application for Registration, etc.)
(1) An entity that wishes to be registered to engage in financial investment business under Article 18, shall file an application for registration with the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(2) Upon receipt of an application for registration filed under paragraph (1), the Financial Services Commission shall examine the contents of the application; determine whether to approve the registration of financial investment business within two months, and give written notice of its determination and the grounds for such determination to the applicant without delay. In this case, the Financial Services Commission may request that the applicant correct his/her application for registration, if such application is incomplete. <Amended by Act No. 8863, Feb. 29, 2008>
(3) The duration for correcting an incomplete application for registration or other duration specified by Ordinance of the Prime Minister shall be disregarded for the purposes of calculating the period for examination under paragraph (2). <Amended by Act No. 8863, Feb. 29, 2008>
(4) In determining whether to approve a registration of financial investment business under paragraph (2), the Financial Services Commission shall not reject the registration, unless any of the following grounds exists: <Amended by Act No. 8863, Feb. 29, 2008>
1. Where the applicant fails to meet any of the requirements for registration of financial investment business provided for in Article 18 (2);
2. Where the application for registration filed under paragraph (1) contains false information;
3. Where the applicant fails to correct his/her application as requested under the latter part of paragraph (2).
(5) Upon having determined to approve a registration of financial investment business under paragraph (2), the Financial Services Commission shall enter the necessary matters in the register of investment advisory business entities or in the register of discretionary investment business entities and shall give public notice of the details of such registration on the Official Gazette, its website, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(6) Matters concerning filing applications for registration under paragraphs (1) through (5), including mandatory descriptions, accompanying documents, and the method and procedure for the examination of applications, other necessary matters, shall be prescribed by Presidential Decree.
 Article 20 (Maintenance of Requirements for Registration)
Each investment advisory business entity or discretionary investment business entity shall continue to meet the requirements of the subparagraphs of Article 18 (2) (excluding subparagraph 5-2 of the same paragraph of the same Article and, in cases of subparagraphs 2 and 5 of the same paragraph, referring to the mitigated requirements pursuant to Presidential Decree), while carrying out financial investment business after registration. <Amended by Act No. 10063, Mar. 12, 2010>
 Article 21 (Addition of Business Activities and Revision to Registration)
(1) Each financial investment business entity shall, whenever it wishes to add another business unit subject to registration to the business unit already registered pursuant to Article 18 while carrying out the financial investment business, make a revised registration with the Financial Services Commission in accordance with Articles 18 and 19. <Amended by Act No. 8863, Feb. 29, 2008>
(2) In making a revised registration pursuant to paragraph (1), the mitigated requirements prescribed by Presidential Decree shall apply to requirements for registration under Article 18 (2) 5, notwithstanding the provisions of the said subparagraph. <Newly Inserted by Act No. 10063, Mar. 12, 2010>
CHAPTER II GOVERNANCE OF FINANCIAL INVESTMENT BUSINESS ENTITY
 Articles 22 through 28 Deleted. <by Act No. 13453, Jul. 31, 2015>
 Article 28-2 (Person in Charge of Derivatives Business)
(1) A financial investment business entity prescribed by Presidential Decree, taking into account the size of assets, types of financial investment business, etc. (including a concurrently-run financial investment entity) shall appoint at least one person to take charge of derivatives business prescribed by Presidential Decree as a full-time executive officer (including persons referred to in the subparagraphs of Article 401-2 (1) of the Commercial Act). <Amended by Act No. 13453, Jul. 31, 2015; Act No. 14130, Mar. 29, 2016>
(2) A person in charge of derivatives business referred to in paragraph (1) shall perform the following duties:
1. Management and supervision of the establishment and implementation of procedures and standards necessary to protect investors in derivatives;
2. Approval of transactions of over-the-counter derivatives;
3. Other duties prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 29 Deleted. <by Act No. 13453, Jul. 31, 2015>
CHAPTER III MAINTENANCE OF SOUND BUSINESS MANAGEMENT
SECTION 1 Supervision over Soundness in Business Management
 Article 30 (Maintenance of Financial Soundness)
(1) A financial investment business entity (excluding concurrently-run financial investment entities and other financial investment business entities specified by Presidential Decree; hereafter the same shall apply in this Article) shall maintain the enumerated amounts, calculated by subtracting the sum of subparagraph 2 from the sum of subparagraph 1 (hereinafter referred to as "net operating capital"), to the level of the amount equivalent to or more than the aggregate of the risks inherent to the assets and liabilities of the financial investment business entity and accompanying its business, as converted into a monetary value (hereinafter referred to as "gross risks"): <Amended by Act No. 8863, Feb. 29, 2008>
1. Capital, reserves, and other amount prescribed by Ordinance of the Prime Minister;
2. Fixed assets and assets specified by Ordinance of the Prime Minister, which cannot be made liquid in a short term.
(2) Further specific guidelines and formula for calculation of the net operating capital and gross risks provided for in paragraph (1) shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(3) A financial investment business entity shall file a written report stating the amount calculated by subtracting gross risks from net operating capital as of the end of each quarter with the Financial Services Commission within the period specified by Presidential Decree, not exceeding 45 days from the end of that quarter, and keep it in its head office, branch offices, and other business offices for three months from the deadline for reporting, and disclose it to the public on its website, etc. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 31 (Guidelines for Soundness in Business Management)
(1) A financial investment business entity (excluding concurrently-run financial investment entities; hereafter the same shall apply in this Section) shall comply with guidelines for soundness in business management prescribed and publicly notified by the Financial Services Commission, in relation to the following matters to maintain soundness in its business management, and shall establish and implement a system appropriate for such compliance: <Amended by Act No. 8863, Feb. 29, 2008>
1. Capital adequacy ratio and other matters concerning capital adequacy;
2. Matters concerning the soundness of assets;
3. Matters concerning liquidity;
4. Other matters prescribed by Presidential Decree as necessary to ensure soundness in business management.
(2) In establishing guidelines for soundness in business management pursuant to paragraph (1), the Financial Services Commission may prescribe different guidelines applicable to each financial investment business, considering the type, etc. of financial investment business run by each business entity. <Amended by Act No. 8863, Feb. 29, 2008>
(3) The Financial Services Commission may evaluate the actual status of business management and risks to secure the soundness in business management of each financial investment business entity: Provided, That the Financial Service commission must conduct evaluations of financial investment business entities prescribed by Presidential Decree, taking into account the size of assets, etc. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb 3, 2009>
(4) If a financial investment business entity fails to meet any of the guidelines prescribed under paragraphs (1) and (2) or violates Article 30 (1) or (2), the Financial Services Commission may order the financial investment business entity to take measures necessary to secure soundness in its business management, such as increasing its capital and placing a restriction on the distribution of dividends. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 32 (Accounting)
(1) A financial investment business entity shall comply with the following in accounting: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
1. The fiscal year shall be the term specified by Ordinance of the Prime Minister for each type of financial investment business;
2. The proprietary property of the financial investment business entity, trust property, and other property of investors specified by Ordinance of the Prime Minister shall be clearly separated in accounting;
3. The financial investment business entity shall comply with the accounting standards for financial investment business entities and the accounting standards the Financial Services Commission prescribes and publicly notifies pursuant to Article 13 of the Act on External Audit of Stock Companies by resolution by the Securities and Futures Commission.
(2) Matters not provided for in paragraph (1) in relation to the accounting of the proprietary property of a financial investment business entity, types of account titles and order of arrangement, and other necessary matters, shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 33 (Business Report and Public Disclosure, etc.)
(1) A financial investment business entity shall prepare business reports for three, six, nine, and twelve months respectively from the commencement date of each business year, and shall submit them to the Financial Services Commission within the period prescribed by Presidential Decree, not exceeding 45 days after the lapse of each relevant term as specified above. <Amended by Act No. 8863, Feb. 29, 2008>
(2) A financial investment business entity shall keep a summary of the business reports submitted under paragraph (1) containing the material facts of each business report for public disclosure, in the head office, branch offices, and sales offices for one year from the date the report is submitted to the Financial Services Commission, and shall also disclose it to the public through its website, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(3) In the event that anything that is likely to produce a significant impact on the business management status of a financial investment business entity, such as occurrence of any massive financial scandal or non-performing receivables, as prescribed by Presidential Decree for each type of financial investment business, the financial investment business entity shall report it to the Financial Services Commission, and shall disclose it to the public through its website, etc. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
(4) A financial investment business entity shall submit reports indicating monthly business affairs in addition to business reports under paragraph (1) to the financial Services Commission by the end of the next month. <Newly Inserted by Act No. 9407, Feb. 3, 2009>
(5) Matters concerning the business reports submitted under paragraph (1), the descriptions contained in the document for public disclosure under paragraph (2), and the public notice of the business management status under paragraph (3), the reports submitted under paragraph (4) and other necessary matters shall be prescribed by Presidential Decree. <Amended by Act No. 9407, Feb. 3, 2009>
SECTION 2 Restriction, etc. on Trading with Major Shareholders
 Article 34 (Restriction on Trading, etc. with Major Shareholders)
(1) No financial investment business entity (excluding concurrently-run financial investment entities; hereafter the same shall apply in this Section) shall engage in any of the following activities: Provided, That the same shall not apply where it is necessary to exercise a right, such as a security right, where manipulation for stabilization is conducted under Article 176 (3) 1 or a market is created under Article 176 (3) 2, or in circumstances prescribed by Presidential Decree for conducting financial investment business efficiently, to the extent that it does not undermine the soundness of the financial investment business entity. In such cases, the Financial Services Commission may prescribe and publicly notify the holding period for each of the following subparagraph: <Amended by Act No. 9407, Feb. 3, 2009>
1. Owning securities issued by a major shareholder of the financial investment business entity;
2. Owning stocks, bonds, or promissory notes (limited to those issued by an enterprise to raise funds required for its business) issued by a person specified by Presidential Decree from among the related persons (excluding major shareholders of the financial investment business entity) of the financial investment business entity: Provided, That the same shall not apply where such stocks, bonds, or promissory notes are owned within the ratio prescribed by Presidential Decree;
3. Any activity prescribed by Presidential Decree, which is likely to undermine the sound management of the assets of the financial investment business entity.
(2) No financial investment business entity shall grant credit (referring to lending an asset having economic value, such as money and securities, guaranteeing the performance of an obligation, purchasing securities with a intent to provide financial support, or any trading specified by Presidential Decree, which is direct or indirect trading accompanying credit risk; hereafter the same shall apply in this Section) to any of its major shareholders (including their related persons; hereafter the same shall apply in this Article), and no major shareholder shall receive any credit grant from the financial investment business entity: Provided, That such credit grant may be permitted where credit granting prescribed further by Presidential Decree is unlikely to undermine the soundness of the financial investment business entity.
(3) Where a financial investment business entity intends to engage in any of the acts provided for in the provisos to paragraph (1) 2 or (2) (excluding any act specified by Presidential Decree), it shall refer the case, in advance, to the board of directors for resolution. In such cases, the board of directors shall pass a resolution with the affirmative vote of all incumbent directors.
(4) A financial investment business entity that has engaged in any act prescribed in the proviso to paragraph (1) 2 or paragraph (2) (excluding any act specified by Presidential Decree) shall report it to the Financial Services Commission without delay, and shall disclose it to the public on its website, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(5) Each financial investment business entity shall prepare a comprehensive report for each quarter on the matters specified by Presidential Decree among the matters to be reported under paragraph (4), submit it to the Financial Services Commission, and disclose it to the public on its website, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(6) Where the Financial Services Commission suspects that a financial investment business entity or its major shareholder has violated any provisions of paragraphs (1) through (5), it may order the financial investment business entity or its major shareholders to submit materials as may be necessary. <Amended by Act No. 8863, Feb. 29, 2008>
(7) Where the soundness in business management of a financial investment business entity is likely to be significantly undermined due to its worsened financial structure because the liabilities of a major shareholder (limited to a company) of the financial investment business entity exceed its assets, or owing to any other cause, in any circumstance specified further by Presidential Decree, the Financial Services Commission may impose a restriction on the financial investment business entity in connection with any new acquisition of securities issued by the major shareholder and any credit grant under the proviso to paragraph (2). <Amended by Act No. 8863, Feb. 29, 2008>
 Article 35 (Prohibition on Exercise of Undue Influence by Major Shareholders)
No major shareholder (including his/her related persons; hereafter the same shall apply in this Article and Article 36) of a financial investment business entity shall engage in any of the following acts for the purposes of pursuing his/her own interest in conflict with the interest of the financial investment business entity: <Amended by Act No. 13453, Jul. 31, 2015>
1. Requesting the financial investment business entity to furnish him/her with any non-public data or information for the purposes of exercising undue influence: Provided, That the cases that fall within the exercise of a right under Article 33 (6) of the Act on Corporate Governance of Financial Companies or Article 466 of the Commercial Act shall be excluded herefrom;
2. Exercising undue influence over the personnel affairs or business management of the financial investment business entity in collusion with other shareholders on condition that any benefit, such as an economic benefit, is provided;
3. Any other acts specified by Presidential Decree, similar to those specified in subparagraphs 1 and 2.
 Article 36 (Order of Financial Services Commission to Submit Materials)
The Financial Services Commission may, if it suspects that a major shareholder of any financial investment business entity has violated Article 35, order the financial investment business entity or its major shareholders to submit materials as may be necessary. <Amended by Act No. 8863, Feb. 29, 2008>
CHAPTER IV BUSINESS CONDUCT RULES
SECTION 1 Common Rules of Business Conduct
Subsection 1 Duty of Good Faith, etc.
 Article 37 (Duty of Good Faith, etc.)
(1) A financial investment business entity shall engage in the financial investment business in a fair manner in accordance with the duty of good faith.
(2) No financial investment business entity shall, while performing the financial investment business, pursue its own self-interest, or help a third party pursue his/her self-interest, by undermining the interests of its investors without justifiable reason.
 Article 38 (Trade Names)
(1) No person, other than a financial investment business entity, may use the word "financial investment" or any word in a foreign language with the same meaning, as specified by Presidential Decree, in his/her trade name. <Newly Inserted by Act No. 9407, Feb. 3, 2009>
(2) No person, other than a person who engages in investment trading business or investment brokerage business for securities, may use the word "securities" or any word in a foreign language with the same meaning, as specified further by Presidential Decree, in his/her trade name: Provided, That a collective securities investment scheme under subparagraph 1 of Article 229 may use the word "securities" or any word in a foreign language with the same meaning, as specified further by Presidential Decree, in accordance with Article 183 (1).
(3) No person, other than a person who engages in investment trading business or investment brokerage business for exchange-traded derivatives or over-the-counter derivatives, may use the word "derivative" or "futures" or any word in a foreign language with the same meaning, as specified further by Presidential Decree, in his/her trade name. <Amended by Act No. 9407, Feb. 3, 2009>
(4) No person, other than a collective investment business entity, may use the word "collective investment", "investment trust", or "asset management", or any expression in a foreign language with the same meaning, as specified further by Presidential Decree, in his/her trade name: Provided, That an investment trust that is a collective investment scheme may use the word "investment trust" or any word in a foreign language with the same meaning, as specified further by Presidential Decree.
(5) No person, other than an investment advisory business entity, may use the word "investment advice" or any word in a foreign language with the same meaning, as specified further by Presidential Decree, in his/her trade name: Provided, That a real estate consulting company under the Real Estate Investment Company Act may use the word "investment consulting" or any word in a foreign language with the same meaning, as specified further by Presidential Decree.
(6) No person, other than a discretionary investment business entity, may use the word "discretionary investment" or any word in a foreign language with the same meaning, as specified further by Presidential Decree, in his/her trade name.
(7) No person, other than a trust business entity, may use the word "trust" or any word in a foreign language with the same meaning, as specified further by Presidential Decree, in his/her trade name: Provided, That a collective investment business entity or a person who engages in business under Article 7 (5) may use the word "trust" or any word in a foreign language with the same meaning, as specified further by Presidential Decree, in its or his/her trade name.
 Article 39 (Prohibition on Lending of Names)
No financial investment business entity may allow any other person to run a financial investment business under its name as lent to him/her.
 Article 40 (Financial Investment Business Entity Engaging in Other Financial Business)
A financial investment business entity (excluding concurrently-run financial investment entities and other financial investment business entities specified by Presidential Decree; hereafter the same shall apply in this Article) may engage in any of the following financial business, which is unlikely to undermine the protection of investors or sound trading practices. In such cases, if that financial investment business entity intends to engage in any of the business specified in subparagraphs 2 through 5, it shall file a report with the Financial Services Commission at least seven days prior to the date it intends to commence such business: <Amended by Act No. 8863, Feb. 29, 2008>
1. Insurance agency business or insurance brokerage business provided for in Article 91 of the Insurance Business Act or any other financial business specified by Presidential Decree, which requires permission, authorization, registration, etc. under this Act or any finance-related statute specified by Presidential Decree;
2. Financial business specified by this Act or any finance-related statute specified by Presidential Decree, which is permitted to be engaged in by financial investment business entities pursuant to such finance-related statute;
3. Acting as agency for the business affairs of the State or a public organization;
4. Money transfers conducted for an investor using a deposit of the investor (referring to an investor's deposit as prescribed in Article 74 (1));
5. Any other financial business specified by Presidential Decree, which is unlikely to undermine the protection of investors or sound trading practices.
 Article 41 (Financial Investment Business Entity Engaging in Incidental Business)
(1) Any financial investment business entity that intends to engage in any business incidental to the financial investment business shall report such intention to the Financial Services Commission at least seven days before the day it commences the business. <Amended by Act No. 8863, Feb. 29, 2008>
(2) If details of a report on the incidental business under paragraph (1) fall under any of the following subparagraphs, the Financial Services Commission may place a restriction on performance of the incidental business or issue an order to rectify the item: <Amended by Act No. 8863, Feb. 29, 2008>
1. If it undermines the soundness in business management of the financial investment business entity;
2. If it causes any impediment to the protection of investors in connection with the engagement in an authorized or registered financial investment business;
3. If it undermines the stability of the financial market.
(3) An order of restriction or rectification under paragraph (2) shall be provided in writing with specific descriptions of the details and grounds for such order.
(4) The Financial Services Commission shall provide public notice of the incidental business reported in accordance with paragraph (1) and the order of restriction or rectification given pursuant to paragraph (2) on its website, etc. in accordance with the method and procedure prescribed by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 42 (Entrustment of Affairs by Financial Investment Business Entity)
(1) A financial investment business entity may partially entrust a third party with the affairs that the financial investment business entity performs in relation to the business provided for in each subparagraph of Article 40 and the incidental business provided for in Article 41 (1): Provided, That it shall not entrust any third party with the affairs specified by Presidential Decree, which are likely to undermine the protection of investors or sound trading practices.
(2) A financial investment business entity that entrusts a third party with any of its affairs under the main sentence of paragraph (1) shall enter into an entrustment agreement stipulating the following terms and conditions, and such agreement shall be reported to the Financial Services Commission in accordance with the method and procedure prescribed by Presidential Decree: <Amended by Act No. 8863, Feb. 29, 2008>
1. Scope of the entrusted affairs;
2. Restrictions on the activities that the contract accepter may engage in;
3. Terms and conditions for maintaining records on the performance of entrusted affairs;
4. Other matters specified by Presidential Decree as necessary to protect investors or to maintain sound trading practices.
(3) Where any of the following applies to any terms or conditions of the entrustment agreement reported under paragraph (2), the Financial Services Commission may place a restriction on the entrustment of the pertinent affair or issue a corrective order: <Amended by Act No. 8863, Feb. 29, 2008>
1. Where it undermines soundness in business management of the relevant financial investment business entity;
2. Where it hinders the protection of investors;
3. Where it undermines the stability of the financial market;
4. Where it disturbs sound practices in financial transactions.
(4) Where the affair entrusted under the main sentence of paragraph (1) is one of essential affairs (referring to the affairs specified by Presidential Decree as essential affairs directly related to the business for which the relevant financial investment business entity obtained authorization or completed a registration; hereafter the same shall apply in this paragraph), the person entrusted with such essential affair shall hold authorization or have completed a registration necessary for performing the entrusted affair. In such cases, the person entrusted with such affair shall be deemed to have obtained authorization or completed a registration, if it is a foreign financial investment business entity that satisfies the requirements prescribed by Presidential Decree.
(5) No person entrusted with the affairs under paragraph (1) shall re-entrust the entrusted affairs to any third party: Provided, That such affairs may be re-entrusted to a third party subject to the consent of the entrusting person within the extent that it does not undermine the protection of investors, where it is necessary to conduct financial investment business efficiently in circumstances prescribed by Presidential Decree.
(6) A person who entrusts affairs under paragraph (1) may provide the person entrusted with the affairs with information on the trading of the financial investment instruments of investors and other transactions, and money and other property deposited by investors in trust, within the scope of such entrusted affairs, in compliance with the guidelines prescribed by Presidential Decree.
(7) Each financial investment business entity that intends to entrust its affairs to a third party in accordance with the main sentence of paragraph (1) shall establish guidelines for the management of entrusted affairs in relation to the protection of investors' information and risk management and assessment, etc.
(8) Each financial investment business entity shall state the details of the affairs entrusted in accordance with the main sentence of paragraph (1) in the contract documents under Article 59 (1) and the investment prospectus (including the short-form investment prospectus referred to in Article 124 (2) 3 in the case of collective investment business entities; hereafter the same shall apply in Articles 64, 86 and 93) under Article 123 (1), and shall give notice of any change thereof to investors, whenever there is any affair entrusted or any change made in the contents, after entering into contracts with the investors. <Amended by Act No. 11845, May 28, 2013>
(9) Article 756 of the Civil Act shall apply mutatis mutandis to any damage inflicted on investors by a person entrusted with affairs under paragraph (1) in the course of performing the affair.
(10) Articles 54 and 55 hereof and Article 4 of the Act on Real Name Financial Transactions and Confidentiality shall apply mutatis mutandis to the case where a person entrusted with affairs under paragraph (1) engages in the entrusted affair.
(11) Other matters necessary for the protection of investors or sound trading practices in relation to the guidelines, methods and procedure for entrustment and re-entrustment of affairs shall be prescribed by Presidential Decree.
 Article 43 (Inspection and Taking Action)
(1) A person to whom affairs are entrusted in accordance with Article 42 (1) shall undergo an inspection conducted by the Governor of the Financial Supervisory Service (hereinafter referred to as the "Governor of the Financial Supervisory Service") established under the Act on the Establishment, etc. of Financial Services Commission (hereinafter referred to as the "Financial Supervisory Service") regarding its business and current status of property in connection with the entrusted affairs. Article 419 (5) through (7) and (9) shall apply mutatis mutandis in such cases. <Amended by Act No. 13453, Jul. 31, 2015>
(2) Where any of the following applies to a person to whom affairs are entrusted in accordance with Article 42 (1), the Financial Services Commission may order either party or both parties to the entrustment agreement to cancel or amend the entrustment agreement: <Amended by Act No. 8863, Feb. 29, 2008>
1. Where the person violates any provision of Articles 54 and 55, which shall apply mutatis mutandis pursuant to Article 42 (10), or Article 4 (1) and (3) through (5) of the Act on Real Name Financial Transactions and Confidentiality;
2. Where the person rejects, interferes with, or evades an inspection under the former part of paragraph (1);
3. Where the person fails to comply with a demand to submit a report, etc. under Article 419 (5), which shall apply mutatis mutandis pursuant to the latter part of paragraph (1);
4. Where the person falls under any of the subparagraphs of attached Table 1 (limited to the grounds related to the entrusted affair).
(3) The Financial Services Commission shall record the details of the measure taken pursuant to paragraph (2), and shall keep and maintain such records. <Amended by Act No. 8863, Feb. 29, 2008>
(4) A financial investment business entity or a person to whom affairs are entrusted in accordance with Article 42 (1) (including a person to whom affairs have ever been entrusted) may make an inquiry to the Financial Services Commission concerning whether any measure referred to in paragraph (2) has been taken against him/her and the details of such measure, if any. <Amended by Act No. 8863, Feb. 29, 2008>
(5) Upon receipt of an inquiry made under paragraph (4), the Financial Services Commission shall notify the requesting person of whether any action has been taken and the details of the action, if any, unless good cause exists otherwise. <Amended by Act No. 8863, Feb. 29, 2008>
(6) Article 425 shall apply mutatis mutandis to orders to cancel or amend entrustment agreements issued pursuant to paragraph (2).
 Article 44 (Control of Conflicts of Interest)
(1) A financial investment business entity shall identify and assess the likelihood of conflicts of interest, which may arise between the financial investment business entity and any investor, or between a specific investor and another investor in relation to the financial investment business in which it engages, to prevent such conflicts of interest, and it shall control such conflicts properly in accordance with the method and procedure prescribed by the internal control standards established under Article 24 of the Act on Corporate Governance of Financial Companies (hereinafter referred to as "internal control standards"). <Amended by Act No. 13453, Jul. 31, 2015>
(2) Where conflicts of interest are deemed to likely to occur through an identification and assessment under paragraph (1), a financial investment business entity shall notify the relevant investors thereof in advance, and shall commence trading or any other transactions, after reducing the likelihood of the conflicts of interest in accordance with the method and procedure prescribed by internal control standards to the level that it will not undermine the protection of the investors.
(3) No financial investment business entity shall commence any trading or transactions, if it is deemed impracticable to reduce the likelihood of conflicts of interest under paragraph (2).
 Article 45 (Suspending Exchanges of Information)
(1) No financial investment business entity shall engage in any of the following activities, if conflicts of interest are very likely to occur between the different types of the financial investment business in which it engages (including the management of its proprietary property; hereafter the same shall apply in this Article) in cases prescribed by Presidential Decree:
1. Furnishing information related to the trading of financial investment instruments or other information specified by Presidential Decree;
2. Permitting any of its executive officers (excluding the representative director, an auditor, or a member of the audit committee who is not an outside director) or employees to hold offices concurrently;
3. Using an office space or an electronic computer system jointly in a manner specified by Presidential Decree;
4. Other activities specified by Presidential Decree as likely to cause conflicts of interest.
(2) No financial investment business entity shall engage in any of the following activities, where conflicts of interest are very likely to occur between the financial investment business entity and its affiliated company, or with any other company prescribed by Presidential Decree, in connection with the financial investment business in which it engages, in cases prescribed by Presidential Decree:
1. Furnishing information related to the trading of financial investment instruments or other information specified by Presidential Decree;
2. Permitting any of its executive officers (excluding non-standing auditors) or employees to concurrently hold offices or dispatching any of its executive officers and/or employees to work for the company;
3. Using an office space or an electronic computer system jointly in a manner specified by Presidential Decree;
4. Other activities specified by Presidential Decree as likely to cause conflicts of interest.
Subsection 2 Investment Recommendations, etc.
 Article 46 (Principle of Suitability, etc.)
(1) Each financial investment business entity shall confirm whether an investor is an ordinary investor or a professional investor.
(2) Each financial investment business entity shall obtain information about the investment purpose, status of property, experience in investment, etc. of an ordinary investor through interviews, inquiries, etc. before recommending him/her to make an investment, and shall require the ordinary investor to make a signature (including a digital signature under subparagraph 2 of Article 2 of the Digital Signature Act; hereinafter the same shall apply), print his/her name and affix his/her seal, record conversations, or have a confirmation in any other manner specified by Presidential Decree, and keep and maintain the confirmation safely, and shall furnish the investor with the confirmed information without delay.
(3) No financial investment business entity shall recommend an ordinary investor to make an investment, if the investment is deemed unsuitable for the investor in light of the investment purpose, status of property, experience in investment, etc. of the investor.
 Article 46-2 (Principle of Adequacy, etc.)
(1) Each financial investment business entity shall, whenever it intends to sell derivatives and other financial investment instruments prescribed by Presidential Decree (hereinafter referred to as "derivatives, etc.") without recommending to make an investment to an ordinary investor, obtain information about the investment purpose, status of property, experience in investment, etc. of the ordinary investor through interviews, inquiries, etc.
(2) In cases where a financial investment business entity determines that the relevant derivatives, etc. are not adequate for an ordinary investor taking into consideration the investment purpose, status of property, experience in investment, etc. of the ordinary investor, the financial investment business entity shall notify the ordinary investor of the fact as prescribed by Presidential Decree and shall obtain a confirmation from the ordinary investor by providing his/her signature, printing his/her name and affixing his/her seal, recording conversations, or any other manner prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 47 (Duty to Explain)
(1) A financial investment business entity shall, whenever it makes an investment recommendation to an ordinary investor, explain the details of the financial investment instrument, the risks contingent upon the investment, and other matters specified by Presidential Decree with such sufficiency as to allow the ordinary investor to understand them.
(2) A financial investment business entity shall obtain a confirmation from each ordinary investor, stating that he/she has understood the details as explained pursuant to paragraph (1), in one or more manners, such as providing a signature, printing his/her name and affixing his/her seal, or any other manner prescribed by Presidential Decree.
(3) No financial investment business entity shall, when it provides an explanation under paragraph (1), provide false or distorted information (referring to an act of providing a conclusive judgment on an uncertain matter, or information that is likely to mislead an investor to believe any uncertain matter to be certain) while explaining material facts that may produce a significant impact on the investor's reasonable judgment or the value of the relevant financial investment instrument (hereinafter referred to as "material facts") or omit an explanation of any of the material facts. <Amended by Act No. 9407, Feb. 3, 2009>
 Article 48 (Liability for Damage)
(1) A financial investment business entity shall be liable for any damage that ordinary investors have sustained for its violation of Article 47 (1) or (3).
(2) The amount calculated by subtracting the total amount (including the amount prescribed by Presidential Decree) of money, etc. recovered or recoverable by an ordinary investor through the disposal of a specific financial investment instrument or through any other means, from the total amount (excluding the amount prescribed by Presidential Decree) of money, etc. paid or payable by the ordinary investor for the acquisition of the specific financial investment instrument, shall be presumed as the amount of damage referred to in paragraph (1).
 Article 49 (Prohibition on Undue Recommendation)
No financial investment business entity shall engage in any of the following activities in making an investment recommendation:
1. Providing false information;
2. Providing a decisive judgment on an uncertain matter, or information that is likely to mislead, causing an uncertain matter to be believed to be certain;
3. Using a method of real-time conversation, such as making a personal visit or telephone call, without an investor's request for an investment recommendation: Provided, That activities specified by Presidential Decree as unlikely to undermine the protection of investors and sound trading practices, shall be excluded herefrom;
4. Repeating investment recommendations although an investor to whom an investment was recommended has already manifested his/her intention to reject it: Provided, That activities specified by Presidential Decree as unlikely to undermine the protection of investors and sound trading practices, shall be excluded herefrom;
5. Other activities specified by Presidential Decree as likely to undermine the protection of investors and sound trading practices.
 Article 50 (Working Rules on Investment Recommendations)
(1) A financial investment business entity shall establish specific guidelines and procedures which its executive officers and/or employees shall comply with in making investment recommendations (hereinafter referred to as "working rules on investment recommendations"): Provided, That the financial investment business entity shall establish working rules for investment recommendations differentiated by level of investors, taking into consideration the investment purpose, status of property, experience in investment, etc. <Amended by Act No. 9407, Feb. 3, 2009>
(2) A financial investment business entity shall announce its established working rules on investment recommendations to the public through its website, etc. The same shall also apply to an amendment to the working rules on investment recommendations.
(3) The Association may establish standard working rules on investment recommendations which can be jointly enforced by financial investment business entities.
 Article 51 (Registration of Investment Solicitors, Etc.)
(1) A financial investment business entity may entrust a person (limited to a private individual) who satisfies each of the following requirements with investment recommendations (excluding investment recommendations on derivatives, etc.). Article 42 shall not apply in such cases: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
1. The person shall not have been registered with the Financial Services Commission in accordance with paragraph (3);
2. The person shall have expertise in financial investment instruments and also have the qualifications prescribed by Presidential Decree;
3. Three years shall have passed from the date of revocation if his/her registration was revoked under Article 53 (2).
(2) No person to whom investment recommendations are entrusted in accordance with paragraph (1) shall make any investment recommendation before the persons is registered under paragraph (3) with Financial Services Commission.
(3) A financial investment business entity that entrusts investment recommendations to a person in accordance with paragraph (1) shall register the entrusted person with the Financial Services Commission. In such cases, the Financial Services Commission may entrust the affairs of registration with the Association, as prescribed by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008>
(4) A financial investment business entity that intends to register a person to whom investment recommendations are entrusted in accordance with paragraph (3) shall file an application for registration with the Financial Services Commission (referring to the Association, if the affairs are entrusted with the Association pursuant to the latter part of paragraph (3); hereafter the same shall apply in this Article). <Amended by Act No. 8863, Feb. 29, 2008>
(5) Upon receipt of an application for registration under paragraph (4), the Financial Services Commission shall examine the contents of the application; determine whether to approve the registration within two weeks, and give written notice of its determination and the grounds for such determination to the applicant without delay. In this case, the Financial Services Commission may request that the applicant correct his/her application for registration, if such application is incomplete. <Amended by Act No. 8863, Feb. 29, 2008>
(6) The duration for correcting an incomplete application for registration or other duration specified by Ordinance of the Prime Minister shall be disregarded for the purposes of calculating the period for examination under paragraph (5). <Amended by Act No. 8863, Feb. 29, 2008>
(7) In determining whether to approve an application for registration under paragraph (5), the Financial Services Commission shall not reject the application for registration, unless any of the following grounds exist: <Amended by Act No. 8863, Feb. 29, 2008>
1. If the applicant fails to meet any of the requirements provided for in paragraph (1);
2. If the application for registration filed under paragraph (4) contains false information;
3. If the applicant fails to correct his/her application as requested under the latter part of paragraph (5).
(8) Upon having determined to approve a registration under paragraph (5), the Financial Services Commission shall enter the necessary information in the register of investment solicitors, and shall give public notice of the details of such registration on its website, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(9) A person who is registered pursuant to paragraph (3) (hereinafter referred to as "investment solicitor") shall be in compliance with the requirements provided for in paragraph (1) 2 in the course of conducting its business following registration.
(10) Matters concerning the mandatory descriptions, accompanying documents, etc. of the application for registration under paragraphs (3) through (8), the method and procedure for examination of registration, and other matters pertaining to registration, shall be prescribed by Presidential Decree.
 Article 52 (Prohibited Acts, etc. of Investment Solicitors)
(1) No financial investment business entity shall permit any person, other than investment solicitors, to act as an investment solicitor.
(2) No investment solicitor shall engage in any of the following acts:
1. Making a contract on behalf of the entrusting financial investment business entity;
2. Receiving money, securities, or any other property from an investor;
3. Re-entrusting the agency business of making investment-recommendations entrusted by a financial investment business entity to a third party;
4. Other acts specified by Presidential Decree as likely to undermine the protection of investors or sound trading practices.
(3) An investment solicitor shall pre-inform investors of the following matters; display a sign indicating that he/she is an investment solicitor; or present an identification of his/her status to investors in connection with making investment recommendations on behalf of a financial investment business entity:
1. The name of the financial investment business entity that has entrusted such investment recommendations to him/her;
2. The fact that he/she has no authority to make a contract on behalf of the financial investment business entity that has entrusted investment recommendations to him/her;
3. The fact that an investment solicitor is prohibited from receiving money, securities, or any other property from investors, and that the financial investment business entity collects or receives such directly;
4. Other matters prescribed by Presidential Decree as necessary to protect investors or to maintain sound trading practices.
(4) A financial investment business entity shall supervise investment solicitors in good faith to ensure that they observe statutes and do not undermine sound trading practices in making investment recommendations on its behalf, and shall establish guidelines for making investment recommendation on behalf of financial investment entities.
(5) Article 756 of the Civil Act shall apply mutatis mutandis to any damage inflicted upon investors by investment solicitors in the course of making investment recommendations on behalf of financial investment business entities.
(6) Articles 46 through 49, 54 and 55 hereof and Article 4 of the Act on Real Name Financial Transactions and Confidentiality shall apply mutatis mutandis where investment solicitors make investment recommendations on behalf of financial investment business entities.
 Article 53 (Inspection and Disposition)
(1) An investment solicitor shall receive inspections conducted by the Governor of the Financial Supervisory Service of his/her business and status of property in connection with his/her vicarious investment recommendation. For this purpose, Article 419 (5) through (7) and (9) shall apply mutatis mutandis.
(2) The Financial Services Commission shall, if an investment solicitor falls under any of the following subparagraphs, revoke the registration of the investment solicitor, or suspend the business of the investment solicitor for not more than six months: <Amended by Act No. 8863, Feb. 29, 2008>
1. If he/she breaches the duty to continue to meet the requirements for registration under Article 51 (9);
2. If he/she violates Article 52 (2), (3), or (6) (limited to cases to which Article 46, 47, 49, 54, or 55 hereof or Article 4 (1), or (3) through (5) of the Act on Real Name Financial Transactions and Confidentiality shall apply mutatis mutandis);
3. If he/she rejects, interferes with, or evades an inspection under the former part of paragraph (1);
4. If he/she fails to comply with a demand for reporting, etc. under Article 419 (5), which shall apply mutatis mutandis pursuant to the latter part of paragraph (1).
(3) The Financial Services Commission shall, whenever it revokes the registration of an investment solicitor or suspends the business of the investment solicitor pursuant to paragraph (2), make an entry of the details, and shall keep and maintain relevant records. <Amended by Act No. 8863, Feb. 29, 2008>
(4) The Financial Services Commission shall, whenever it revokes the registration of an investment solicitor or suspends the business of the investment solicitor pursuant to paragraph (2), provide public notice thereof through its website. etc. <Amended by Act No. 8863, Feb. 29, 2008>
(5) A financial investment business entity or investment solicitor (including a person who acted as an investment solicitor in the past) may make inquiry to the Financial Services Commission regarding whether any disposition has been made against him/her pursuant to paragraph (2), including the details of such disposition. <Amended by Act No. 8863, Feb. 29, 2008>
(6) The Financial Services Commission shall, upon receipt of a request for inquiry under paragraph (5), notify the requesting person of whether a disposition has been made, including the details of such disposition, unless there is a justifiable ground otherwise. <Amended by Act No. 8863, Feb. 29, 2008>
(7) Article 423 (excluding subparagraph 2) shall apply mutatis mutandis to the revocation of the registration of an investment solicitor, while Article 425 shall apply mutatis mutandis to the revocation of an investment solicitor and the suspension of the business of an investment solicitor pursuant to paragraph (2).
Subsection 3 Prohibition of Use of Job-Related Information, etc.
 Article 54 (Prohibition on Use of Job-related Information)
No financial investment business entity shall use information known to it in the course of its business and undisclosed to the public, for its own or a third party's interest without a justifiable ground.
 Article 55 (Prohibition on Compensation for Losses, Etc.)
No financial investment business entity shall engage in any of the following acts, except where it compensates for losses or guarantees returns pursuant to Article 103 (3) in connection with the trading of financial investment instruments and other transactions, or where there is no possibility of undermining sound trading practices and good cause exists otherwise. The same shall also apply where any executive officer and/or employee of a financial investment business entity engages in any of the following activities on his/her own account:
1. Promising in advance to fully or partially compensate for losses that an investor may sustain;
2. Fully or partially compensating for losses sustained by an investor after the fact;
3. Promising an investor in advance to guarantee a certain amount of returns;
4. Offering an investor a certain amount of returns after the fact.
 Article 56 (Terms and Conditions)
(1) A financial investment business entity that intends to establish or amend terms and conditions in connection with the operation of the financial investment business shall report it in advance to the Financial Services Commission: Provided, That the financial investment business entity shall report the terms and conditions to the Financial Services Commission and the Association within seven days after the establishment or amendment of the terms and conditions in any of the following cases: <Amended by Act No. 8863, Feb. 29, 2008>
1. Where it amends any term or condition, which is unrelated to investors' rights and obligations;
2. Where it uses the standard terms and conditions established under paragraph (3) without any modification;
3. Where the terms and conditions it intends to establish or amend are identical with those already reported by other financial investment business entities to the Financial Services Commission;
4. Where it establishes or amends the terms and conditions applicable to professional investors only.
(2) Upon establishing or amending the terms and conditions, each financial investment business entity shall disclose them to the public on its website, etc.
(3) The Association may establish terms and conditions, which will serve as standard terms and conditions in connection with the operation of financial investment business (hereafter in this Article referred to as "standard terms and conditions"), to establish sound trading practices and prevent the wide use of unfair terms and conditions.
(4) To establish or amend the standard terms and conditions, the Association shall report such establishment or amendment to the Financial Services Commission in advance: Provided, That the Association shall report to the Financial Services Commission within seven days after the establishment or amendment of the standard terms and conditions applicable only to professional investors. <Amended by Act No. 8863, Feb. 29, 2008>
(5) Upon receipt of a report on the terms and conditions under paragraph (1) or the standard terms and conditions under paragraph (4), the Financial Services Commission shall notify the Fair Trade Commission of the terms and conditions or standard terms and conditions. In such cases, if the Fair Trade Commission deems that any of the terms and conditions or standard terms and conditions notified are in violation of any provision of Articles 6 through 14 of the Act on Regulation of Terms and Conditions, it may notify the Financial Services Commission of the violation and request measures necessary to correct such violation to be taken; and the Financial Services Commission shall comply with such request, except in extenuating circumstances. <Amended by Act No. 8863, Feb. 29, 2008>
(6) Where the Financial Services Commission deems that any terms and conditions, or standard terms and conditions are in violation of this Act or any finance-related statute or are likely to infringe on investors' interests, it may order the financial investment business entity involved or the Association to amend the relevant terms and conditions or standard terms and conditions in writing, stating the relevant details. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 57 (Advertisements Soliciting Investment)
(1) No person, other than a financial investment business entity, shall advertise for any business run by a financial investment business entity or for any financial investment instrument (hereinafter referred to as "advertisement soliciting investment"): Provided, That the Association and any financial holding company under the Financial Holding Companies Act which has a financial investment business entity as its subsidiary or second-tier subsidiary, may advertise for investment, and an issuer or seller of securities may also advertise for investment in the securities.
(2) In advertising for investment (excluding an advertisement soliciting investment in collective investment securities), a financial investment business entity (including any entity referred to in the proviso to paragraph (1); hereafter the same shall apply in this Article) shall include its name, the descriptions of financial investment instruments, the risks contingent upon the investment, and other matters prescribed by Presidential Decree therein.
(3) In advertising for investment in collective investment securities, a financial investment business entity shall include the following statements therein, and shall not contain any statement, other than the name of the collective investment scheme, matters concerning the type of the collective investment scheme, matters concerning the investment purpose and operational strategy of the collective investment scheme, and matters prescribed by Presidential Decree, considering the characteristics, etc. of the collective investment securities, in the advertisement soliciting investment: <Amended by Act No. 11845, May 28, 2013>
1. A statement recommending that the investor read the investment prospectus (referring to the investment prospectus under Article 124 (2) 3) or a short-form investment prospectus under Article 124 (2) 3) before acquiring the collective investment securities;
2. A statement that there is a risk of loss of the principal invested in the collective investment scheme dependent upon the performance of its management and that investors are held accountable for such loss;
3. A statement that the past performance of the collective investment scheme fails to guarantee a return on investment for the future where the advertisement soliciting investment contains the past performance of the collective investment scheme.
(4) In advertising for investment, no financial investment business entity shall include any indication that can be misled as compensation for loss or guarantee for returns, except where any loss is compensated for or returns are guaranteed in accordance with Article 103 (3).
(5) If an advertisement soliciting investment contains any indication or advertisement referred to in Article 4 (1) of the Act on Fair Labeling and Advertising, such indication or advertisement shall be governed by the relevant provisions of the same Act.
(6) Other matters pertaining to the method, procedure, etc. for the advertisement soliciting investment shall be prescribed by Presidential Decree.
 Article 58 (Fees)
(1) A financial investment business entity shall determine the matters concerning the guidelines and procedure for imposition of fees upon investors, and shall announce them through its website, etc.
(2) No financial investment business entity shall discriminate against an investor in determining the guidelines for imposition of fees pursuant to paragraph (1) without a justifiable ground.
(3) A financial investment business entity shall notify the Association of the matters concerning the guidelines and procedure for imposition of fees under paragraph (1).
(4) The Association shall compare the matters notified by each financial investment business entity in accordance with paragraph (3) and disclose its findings to the public.
 Article 59 (Delivery of Contract Documents and Cancellation of Contract)
(1) A financial investment business entity shall, upon executing a contract with an investor, deliver the contract documents without delay: Provided, That the delivery of contract documents may be omitted if there is no possibility of undermining the protection of investors in light of the contents of the contract, etc., as prescribed further by Presidential Decree.
(2) An investor who has entered into a contract (limited to contracts specified by Presidential Decree, considering the nature of the contract and other circumstances) with a financial investment business entity may cancel the contract within seven days from the day on which the contract documents under paragraph (1) are delivered.
(3) The cancellation of a contract under paragraph (2) shall become effective when a written notice manifesting the intent to cancel is dispatched to the financial investment business entity.
(4) When a contract is cancelled in accordance with paragraph (3), the financial investment business entity shall not require an investor to pay damages or penalty, ensuing from the cancellation of the contract in excess of an amount prescribed by Presidential Decree as the fee and remuneration adequate for the period preceding cancellation of the contract and other consideration that the investor is obligated to pay in connection with the contract.
(5) If there is any consideration received in advance from an investor in connection with a contract, the financial investment business entity shall, upon cancellation of a contract under paragraph (3), return such consideration to the investor: Provided, That the financial investment business entity is not obligated to return such consideration, if the consideration fails to exceed the amount prescribed by Presidential Decree.
(6) Special terms and conditions in contravention of the provisions of paragraphs (2) through (5) shall be void and null, if they are unfavorable to investors.
 Article 60 (Keeping and Maintaining Records)
(1) A financial investment business entity shall keep and maintain records of data related to the operation of the financial investment business according to the types of data specified by Presidential Decree for the period prescribed by Presidential Decree.
(2) A financial investment business entity shall establish and implement measures appropriate for preventing the data, the records of which shall be kept and maintained in accordance with paragraph (1), from being destroyed, fabricated, or altered.
 Article 61 (Depositing of Acquired Securities)
(1) Each financial investment business entity (excluding concurrently-run financial investment entities; hereafter the same shall apply in this Article) shall deposit the securities (including those specified by Presidential Decree) acquired in the course of the management of its proprietary property with the Securities Depository without delay: Provided, That it need not deposit the securities in cases prescribed by Presidential Decree, taking into consideration whether the securities can be circulated, whether there is any method of circulation under other statutes, and feasibility of deposit, etc. <Amended by Act No. 11845, May 28, 2013>
(2) In depositing foreign currency securities (referring to the foreign currency securities as defined in Article 3 (1) 8 of the Foreign Exchange Transactions Act) with the Securities Depository under the main sentence of paragraph (1), each financial investment business entity shall comply with the method prescribed by Presidential Decree. <Newly Inserted by Act No. 11845, May 28, 2013>
 Article 62 (Public Announcement of Discontinuance of Financial Investment Business, etc.)
(1) A financial investment business entity that intends to discontinue its financial investment business or the business of a branch office or any other sales office shall announce its intention to the public at least 30 days before the intended discontinuance through two or more daily newspapers circulated nationwide, and shall give an individual notice thereof to each known creditor.
(2) A financial investment business entity that falls under any of the following subparagraphs shall close trading of financial investment instruments and other transactions run by it. In such cases, such a financial investment business entity shall be deemed a financial investment business entity until trading and other transactions are closed:
1. When it obtains approval for discontinuance of the financial investment business in accordance with Article 417 (1) 6;
2. When it obtains approval for discontinuance of the financial investment business in accordance with Article 417 (1) 7;
3. When its authorization or registration for financial investment business is revoked pursuant to Article 420 (1) or 421 (1) (including the case where the said paragraph shall apply mutatis mutandis pursuant to paragraph (4) of the same Article).
 Article 63 (Trading of Financial Investment Instruments by Executive Officers and/or Employees)
(1) An executive officer and/or employee of a financial investment business entity (limited to an executive officer and/or employee who performs the affairs related to the financial investment business, in the case of a financial investment business entity specified by Presidential Decree from among the concurrently-run financial investment entities; hereafter the same shall apply in this Article) shall comply with the following in trading financial investment instruments specified by Presidential Decree on his/her own account:
1. Such trading shall be done in his/her own name;
2. Trading shall be executed through a single account in a single company chosen from among investment brokers (in the case of an executive officer and/or employee of an investment broker, limited to the investment broker for which he/she works, and he/she may use another investment broker, where the investment broker does not deal with the financial investment instruments that he/she intends to trade): Provided, That he/she may use two or more companies or accounts for such trading in circumstances prescribed by Presidential Decree, considering the types of financial investment instruments, the nature of the account, etc.;
3. Details of trading shall be notified on a quarterly basis to the financial investment business entity for which he/she works (and it shall be done on a monthly basis in the case of investment advisors, analysts, fund managers as prescribed in Article 286 (1) 3 (b), and those for investment management; hereafter the same shall apply in this Article);
4. He/she shall comply with other methods and procedures prescribed by Presidential Decree for preventing any unfair practices or conflicts of interest with investors.
(2) A financial investment business entity shall establish proper guidelines and procedures to be complied with its executive officers and/or employees in connection with the trading of financial investment instruments on their own accounts, to prevent any unfair practices or conflicts of interest with investors.
(3) A financial investment business entity shall ascertain the details of trading of financial investment instruments by its executive officers and/or employees on a quarterly basis in accordance with the guidelines and procedures established under paragraph (2).
 Article 63-2 (Obligations to Take Measures to Protect Customer Service Personnel)
(1) To protect personnel who directly deal with customers (hereinafter referred to as "customer service personnel") from verbal abuse, sexual harassment, assault, etc. of customers, every financial investment business entity shall take the following measures:
1. Separating a member of customer service personnel from the relevant customer and replacing the person in charge, if requested by the member of customer service personnel;
2. Providing support for the medical treatment and counseling of customer service personnel;
3. Establishing a permanent grievance-management organ for customer service personnel, or appointing or commissioning a member of a grievance management committee, if it is established under Article 26 of the Act on the Promotion of Workers’ Participation and Cooperation;
4. Other measures prescribed by Presidential Decree, such as legal measures necessary to protect customer service personnel.
(2) A member of customer service personnel may request that the financial investment business entity take measures prescribed in subparagraphs of paragraph (1).
(3) No financial investment business shall give any disadvantage to any member of customer service personnel on the ground that he/she has made a request under paragraph (2).
[This Article Newly Inserted by Act No. 14130, Mar. 29, 2016]
 Article 64 (Liability for Damage)
(1) A financial investment business entity shall be liable for any damage caused by its violation of any statute, terms or conditions, provision of its collective investment agreement or investment prospectus (referring to the investment prospectus under Article 123 (1)) or any damage sustained by its investors due to its negligence in conducting its business: Provided, That where a financial investment business entity liable for such damage violates any provision of Articles 37 (2), 44, 45, 71, or 85 (limited to the violation related to conflicts of interest arising as a consequence of engaging in investment trading business or investment brokerage business and collective investment business concurrently), but if the financial investment business entity proves that it has exercised reasonable care, or that an investor was aware of the facts at the time the investor traded the financial investment instruments or made any other transaction, the financial investment business entity shall be exempt from its liability for such damage.
(2) Where a financial investment business entity is liable for any damage under paragraph (1) and an executive officer involved in the case is found to be culpable for the cause, such executive officer involved shall be liable for the damage jointly with the financial investment business entity.
 Article 65 (Special Cases concerning Foreign Financial Investment Business Entities)
(1) In applying this Act to a branch office or any other sales office (hereafter in this Article referred to as "local branch office, etc.") of a foreign financial investment business entity, the operating fund specified by Presidential Decree shall be construed as the capital, and the aggregate of capital, reserves, and carried-over retained earnings shall be construed as equity capital, while the domestic representative shall be construed as an executive officer of the business entity. <Amended by Act No. 9407, Feb. 3, 2009>
(2) Each local branch office, etc. of any foreign financial investment business entity shall hold its assets, amounting to the aggregate of the operating fund under paragraph (1) and its liabilities within this country in a manner prescribed by Presidential Decree. <Amended by Act No. 9407, Feb. 3, 2009>
(3) In the event that a local branch office, etc. of a foreign financial investment business entity is liquidated or becomes bankrupt, its assets within this country shall be appropriated first for the performance of its obligations owed to the persons who have their domicile or abode in this country. <Amended by Act No. 9407, Feb. 3, 2009>
(4) The Financial Services Commission shall appoint a person who temporarily performs as proxy duties of a representative of a local branch office, etc. that meets each of the following requirements (hereafter in this paragraph, referred to as "acting representative"), and the local branch office, etc. shall register the fact in the area where the local branch office, etc. is located. In such cases, the Financial Services Commission may order the local branch office, etc. to pay adequate remuneration to the acting representative: <Newly Inserted by Act No. 9407, Feb. 3, 2009>
1. In cases where a person having interest in the local branch office, etc. requests the Financial Services Commission to appoint an acting representative when the local branch office, etc. fails to appoint a new representative or an acting representative even though there is no representative in the local branch office, etc. or a representative has no ability to perform his/her duties;
2. In cases where the Financial Services Commission requests that the local branch office, etc. appoint or designate a representative or acting representative within ten days of the request in accordance with the requirement under subparagraph 1;
3. In cases where the local branch office, etc. which receives the request under subparagraph 2 fails to appoint or designate a representative or acting representative within the period prescribed in subparagraph 2.
(5) In addition to the matters under paragraph (1) through (4), matters concerning the operation of a financial investment business by a local branch office, etc., including matters concerning the settlement of accounts, shall be prescribed by Presidential Decree. <Amended by Act No. 9407, Feb. 3, 2009>
SECTION 2 Rules on Business Conduct by Financial Investment Business Entities
Subsection 1 Rules on Business Conduct by Investment Traders and Investment Brokers
 Article 66 (Explicit Indication of Form of Trading)
An investment trader or investment broker shall disclose its identity in advance, whether it is an investment trader or an investment broker, to an investor, whenever it receives an offer or an order for trading a financial investment instrument from the investor. <Amended by Act No. 11845, May 28, 2013>
 Article 67 (Prohibition on Self-Contracting)
Neither investment trader nor investment broker shall simultaneously act on its own behalf and as the investment broker for another party in a single transaction involving a financial investment instrument: Provided, That the same shall not apply in any of the following cases: <Amended by Act No. 11845, May 28, 2013>
1. Where the investment trader or investment broker arranges the trade to be conducted in a securities market or derivatives market;
2. Other cases prescribed by Presidential Decree as unlikely to undermine the protection of investors or sound trading practices.
 Article 68 (Best Execution Obligation)
(1) In order to execute the investors' offers or orders for trading financial investment instruments (excluding the trades prescribed by Presidential Decree: hereafter in this Article the same shall apply), each investment trader or investment broker shall prepare and publicly announce the guidelines for the execution thereof under the best trade terms (hereafter in this Article referred to as "guidelines for best execution"), as prescribed by Presidential Decree.
(2) Each investment trader or investment broker shall execute the offers or orders for trading financial investment instruments in accordance with the guidelines for best execution.
(3) Each investment trader or investment broker shall examine the contents of the guidelines for best execution for each period prescribed by Presidential Decree. In such cases, when the contents of the guidelines for best execution are deemed not suitable for executing offers or orders under paragraph (2), it shall modify them and publicly announce that the modification has been made.
(4) Where an investment trader or investment broker receives an offer or order for trading financial investment instruments, it shall deliver the investor in advance a written explanation wherein the guidelines for best execution are described or indicated in writing, by electronic message or other means prescribed by Presidential Decree: Provided, That the same shall not apply where the relevant written explanation (referring to the written explanation wherein the details of modification are described or indicated, if the guidelines for best execution are modified under paragraph (3)) has been delivered.
(5) Necessary matters concerning the detailed contents of the best trade terms and methods for making a public announcement of the guidelines for best execution under paragraph (1), methods for executing offers and orders under paragraph (2), examination and modification of the guidelines for best execution, method for making a public announcement thereof under paragraph (3), etc. shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 11845, May 28, 2013]
 Article 69 (Exceptional Acquisition of Treasury Stocks)
Where an investment trader receives an offer to sell treasury stocks issued by the investment trader itself in a quantity less than the unit sellable in the securities market (including trades through alternative trading facilities; hereafter the same shall apply in this Article), such investment trader may acquire the treasury stocks outside the securities market. In such cases, it shall dispose of the treasury stocks so acquired, within a period prescribed by Presidential Decree. <Amended by Act No. 11845, May 28, 2013>
 Article 70 (Prohibition on Discretionary Trading)
No investment trader or investment broker shall trade financial investment instruments with property deposited by an investor in the absence of an offer or order for trading such financial investment instruments from the investor or his/her agent. <Amended by Act No. 11845, May 28, 2013>
 Article 71 (Prohibition on Unsound Business Activities)
Neither investment trader nor investment broker shall engage in any of the following activities: Provided, That it may engage in such activities in cases prescribed by Presidential Decree as unlikely to undermine the protection of investors or sound trading practices: <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. Buying or selling a financial investment instrument on its own account, or recommending a third party to buy or sell the financial investment instrument, before closing a trade for an order from an investor for buying or selling that financial investment instrument that could substantially affect the price of such financial investment instrument, where it has received or is very likely to receive an offer or order for buying or selling such instrument;
2. Trading a financial investment instrument included in certain research and analysis data which contains an assertion or a forecast of the value of the financial investment instrument (hereinafter referred to as "research and analysis data") on its own account during the time period, starting from the time the contents of such research and analysis data are fixed and ending with the lapse of 24 hours after the research and analysis data is disclosed to the public, where such research and analysis data is disclosed to the public;
3. Paying any contingent remuneration to a person in charge of the preparation of research and analysis data in connection with the corporate finance affairs specified by Presidential Decree;
4. Disclosing to the public, or providing to a specific person, certain research and analysis data on any of the following securities during the time period from the time a contract is executed in connection with a public offering or sale of the securities to the time specified by Presidential Decree after the securities are listed for the first time in the securities market:
(a) Stock certificates;
(b) Stock-related corporate bonds specified by Presidential Decree;
(c) Depositary receipts related to item (a) or (b);
5. Engaging any person other than an investment solicitor or investment advisor to make investment recommendations;
6. Acquiring, disposing of, or managing financial investment instruments separately for each investor with a discretionary power authorized by investors, wholly or partially, for making judgments on whether to invest in the financial investment instruments: Provided, That it may be allowed if it is performed as discretionary investment business and it falls under Article 7 (4);
7. Other activities specified by Presidential Decree, as likely to undermine the protection of investors or sound trading practices.
 Article 72 (Credit Granting)
(1) An investment trader or investment broker may grant credit to investors by means of lending money or securities: Provided, That no investment trader shall lend money or grant credit to an investor with intent to solicit the investor to buy any securities within three months after it underwrites the securities.
(2) Matters pertaining to the guidelines and methods for credit granted under paragraph (1) shall be prescribed by Presidential Decree.
 Article 73 (Notification of Details of Trading)
An investment trader or investment broker shall, upon closing a trade of financial investment instruments, notify the investor of the details in accordance with the method prescribed by Presidential Decree.
 Article 74 (Separate Depositing of Investor's Deposit)
(1) An investment trader or investment broker shall separate an investor's deposit (referring to money deposited by investors in connection with the trading of financial investment instruments and other transactions; hereinafter the same shall apply) from its proprietary property and shall place it in a deposit or trust account with a securities finance company.
(2) Notwithstanding paragraph (1), any investment trader or investment broker specified by Presidential Decree, from among the concurrently-run financial investment entities, may place the investor's deposit in a trust with a trust business entity (excluding securities finance companies; hereafter in this Article the same shall apply) instead of placing it in a deposit or trust account under paragraph (1). In such cases, if the investment trader or investment broker runs a trust business, it may execute a self-contract, notwithstanding Article 3 (1) of the Trust Business Act. <Amended by Act No. 10924, Jul. 25 2011>
(3) In placing an investor's deposit in a deposit or trust account with a securities finance company or a trust business entity (hereafter in this Article referred to as "depository institution") in accordance with paragraph (1) or (2), every investment trader or investment broker shall indicate that the investor's deposit is the investor's property.
(4) No one shall offset or seize (including provisional seizure) an investor's deposit placed in any deposit or trust account with a depository institution in accordance with paragraph (1) or (2), and neither the investment trader nor the investment broker who has placed the investor's deposit in a deposit or trust account (hereafter in this Article referred to as "depositing financial investment business entity") shall transfer or provide as collateral any investor's deposit placed in a deposit or trust account with a depository institution, except in circumstances prescribed by Presidential Decree.
(5) In any of the following events, a depositing financial investment business entity shall withdraw the investor's deposit placed in a deposit or trust account with a depository institution and preferentially pay the deposit to its investor. In such cases, the depositing financial investment business entity shall give public notice of the relevant event, and the matters concerning the time and place for the payment of the investor's deposit, and other matters related to the payment of the investor's deposit on at least two daily newspapers, and also disclose such matters to the public on its website, etc.:
1. Where authorization for its business is revoked;
2. Where a resolution for dissolution is passed;
3. Where it is declared bankrupt;
4. Where the complete transfer of the financial investment business referred to in Article 6 (1) 1 and 2 is approved;
5. Where the complete discontinuance of the financial investment business referred to in Article 6 (1) 1 and 2 is approved;
6. Where it is ordered to completely suspend the financial investment business referred to in Article 6 (1) 1 or 2;
7. Where any cause or event similar to those specified in subparagraphs 1 through 6 occurs.
(6) Where any of the causes or events provided for in subparagraphs of paragraph (5) occurs in relation to a depository institution, the depository institution shall return the investor's deposit placed in a deposit or trust account by a depositing financial investment business entity, preferentially to the depositing financial investment business entity.
(7) A depository institution shall manage the investor's deposit in any of the following manners:
1. Purchasing state bonds or local government bonds;
2. Purchasing debt securities with a guarantee of payment by the State, a local government, or any financial institution specified by Presidential Decree;
3. A method prescribed by Presidential Decree as unlikely to undermine the stable management of the investor's deposit.
(8) The scope of the investor's deposit which an investment trader or investment broker shall place in a deposit or trust account with a depository institution in accordance with paragraph (1) or (2), the ratio of the deposit or trust, the withdrawal of the investor's deposit placed in a deposit or trust account, the management of the investor's deposit by a depository institution, and other matters pertaining to placing the investors' deposit in a deposit or trust, shall be prescribed by Presidential Decree. In such cases, the ratio of the deposit or trust applicable to each authorized investment trader or investment broker may differ depending upon the financial status of each investment trader or investment broker.
 Article 75 (Depositing of Securities Deposited by Investors)
(1) An investment trader or investment broker shall, upon receipt of securities (including those prescribed by Presidential Decree) owned and deposited by investors in connection with trading of financial investment instruments and other transactions, deposit them in the Securities Depository without delay: Provided, That it may not deposit them in the Securities Depository, in the cases prescribed by Presidential Decree taking into consideration whether securities has any feasibility of circulation, method of circulation under other statutes, and feasibility of deposit, etc. <Amended by Act No. 11845, May 28, 2013>
(2) In depositing foreign currency securities with the Securities Depository under the main sentence of paragraph (1), each investment trader or investment broker shall comply with the method prescribed by Presidential Decree. <Newly Inserted by Act No. 11845, May 28, 2013>
 Article 76 (Special Cases concerning Sale, etc. of Collective Investment Securities)
(1) When selling collective investment securities to an investor, an investment trader or investment broker shall sell them at the first base price (referring to the base price computed under Article 238 (6); hereinafter the same shall apply) calculated after the investor pays money, etc. for acquiring the collective investment securities: Provided, That the investment trader or investment broker may sell the collective investment securities at the base price prescribed by Presidential Decree, in circumstances prescribed by Presidential Decree where it is unlikely to undermine investors' interests.
(2) Neither investment trader nor investment broker shall sell collective investment securities at issue upon receipt of notice given under Article 92 (1) (including the case to which such provision shall apply mutatis mutandis under Article 186 (2)): Provided, That the investment trader or investment broker may resume sale of such collective investment securities upon receipt of notice under Article 92 (2) (including the case to such provision shall apply mutatis mutandis under Article 186 (2)).
(3) Neither investment trader nor investment broker shall sell any collective investment securities or advertise for the sale of such collective investment securities before the collective investment scheme is registered in accordance with Article 182: Provided, That advertising for sale may be commenced in circumstances prescribed by Presidential Decree where it is unlikely to undermine investors' interests.
(4) Neither investment trader nor investment broker shall receive a sales commission (referring to money received directly from investors as consideration for the conduct of selling collective investment securities; hereinafter the same shall apply) or sales remuneration (referring to money received from a collective investment scheme as consideration for services provided continuously to investors by an investment trader or investment broker who has sold collective investment securities; hereinafter the same shall apply) contingent upon the performance of management of the collective investment scheme. <Amended by Act No. 9407, Feb. 3, 2009>
(5) Neither the sales commission nor the sales remuneration referred to in paragraph (4) shall exceed the following applicable ceiling: <Amended by Act No. 10063, Mar. 12, 2010; Act No. 13448, Jul. 24, 2015>
1. Sales commission: Ceiling prescribed by Presidential Decree, which is not more than 3/100 of the amount of payment or amount of redemption;
2. Sales remuneration: Ceiling prescribed by Presidential Decree, which is not more than 15/1,000 of the annual average value of the collective investment property.
(6) The detailed method of setting a ceiling on sales commission and sales remuneration under paragraph (5), method of collection, and other necessary matters concerning sales commission and sales remuneration shall be prescribed by Presidential Decree. <Newly Inserted by Act No. 10063, Mar. 12, 2010>
 Article 77 (Special Cases concerning Deposits and Insurance with Investment Risk)
(1) A bank shall be deemed to have obtained authorization for a financial investment business under Article 12 in regard to an investment trading business, when it signs a contract for a deposit in the nature of an investment or a contract corresponding thereto prescribed by Presidential Decree. In this regard, Articles 15, 39 through 45, subparagraph 3 of Article 49, Articles 56, 58, 61 through 65, Part II, Chapters II and III, and Chapter IV, Section 2, Sub-Section 1 shall not apply, while Part III, Chapter I shall not apply in cases where a bank signs a contract for a foreign currency deposit in the nature of an investment. <Amended by Act No. 11845, May 28, 2013>
(2) An insurance company (including an entity under Article 2 (8) through (10) of the Insurance Business Act) shall be deemed to have obtained authorization for a financial investment business under Article 12 in regard to an investment trading business or an investment brokerage investment, when it signs an insurance contract with investment risk or acts as a broker or an agent for such contract. In such cases, Articles 15, 39 through 45, subparagraph 3 of Article 49, Articles 51 through 53, 56, 58, 61 through 65, and Part II, Chapters II and III, Chapter IV, Section 2, Sub-Section 1, and Part III, Chapter I shall not apply.
 Article 77-2 (Designation, etc. of Comprehensive Financial Investment Business Entities)
(1) The Financial Services Commission may designate an investment trader or investment broker who meets all the following requirements as a comprehensive financial investment business entity:
1. It shall be a stock company under the Commercial Act;
2. It shall engage in business of underwriting securities;
3. Its equity capital shall reach or exceed the amount prescribed by Presidential Decree, which shall be at least three trillion won;
4. Other criteria prescribed by Presidential Decree taking into consideration the risk management ability, etc. of the relevant investment trader or investment broker in carrying out the credit offering service.
(2) Any investment trader or investment broker that intends to be designated as a comprehensive financial investment business entity shall file an application with the Financial Services Commission.
(3) The Financial Services Commission may request to submit data, where necessary for the designation of a comprehensive financial investment business entity under paragraph (1).
(4) Where a comprehensive financial investment business entity falls under any of the following cases, the Financial Services Commission may revoke the designation made under paragraph (1):
1. Where the designation is made by fraud or other wrongful means;
2. Where it fails to meet the criteria prescribed in subparagraphs of paragraph (1).
(5) Detailed matters concerning the procedures, etc. for designation and revocation of designation under paragraphs (1) and (4) shall be prescribed by Presidential Decree.
(6) Detailed criteria for equity capital under paragraph (1) 3 shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 77-3 (Special Cases concerning Comprehensive Financial Investment Business Entities)
(1) No entity, other than a comprehensive financial investment business entity, shall engage in prime brokerage business.
(2) To provide prime brokerage business service to an entity prescribed by Presidential Decree among the hedge fund, etc., taking into account the objects of investment, existence of any loan, etc., a comprehensive financial investment business entity shall first conclude a contract with that hedge fund, etc. or the entity prescribed by Presidential Decree, which includes the following: <Amended by Act No. 13448, Jul. 24, 2015>
1. Matters concerning the roles and responsibilities of the comprehensive financial investment business entity and the hedge fund, etc. in relation to prime brokerage business;
2. Where the comprehensive financial investment business entity uses assets of the hedge fund, etc. to provide it as collateral for, or lend it to a third party or by other means prescribed by Presidential Decree, matters concerning the use thereof;
3. Procedures and methods for providing information on the status, etc. of assets held in the hedge fund, etc. that are used by the comprehensive financial investment business entity under subparagraph 2 to the hedge fund, etc.;
4. Other matters prescribed by Presidential Decree.
(3) A comprehensive financial investment business entity may engage in the business of providing following services, notwithstanding this Act or other finance-related statutes:
1. Credit offering for enterprises;
2. Other services prescribed by Presidential Decree as appropriate to be permitted only for comprehensive financial investment business entities taking into account the soundness of the relevant comprehensive financial investment business entity, potential for contributing to the efficient provision of the relevant services, etc.
(4) Where a comprehensive financial investment business entity offers credit under paragraph (3) 1 or the main sentence of Article 72 (1), the total amount of credit offered shall not exceed 100 percent of its equity capital: Provided, That the same shall not apply in cases prescribed by Presidential Decree taking into account the characteristics of the services of the comprehensive financial investment business entity, influence of such credit offering on the soundness of the comprehensive financial investment business entity, etc.
(5) In offering credit under paragraph (3) 1, no comprehensive financial investment business entity shall offer the credit to the same corporation or to any entity that shares credit risk prescribed by Presidential Decree with such corporation in excess of the amount equivalent to the percent prescribed by Presidential Decree within 25 percent of its equity capital.
(6) Where the amount of credit offered by a comprehensive financial investment business entity exceeds the limit prescribed in paragraphs (4) or (5) due to a change in its equity capital, a change in the composition of the same credit recipient, etc., although it has not offered any additional credit, the amount of credit so offered shall be corrected to be under the limit within one year from the date such limit starts to exceed.
(7) No comprehensive financial investment business entity shall offer credit under paragraph (3) 1 to any corporation (including an overseas corporation prescribed by Presidential Decree; hereafter the same shall apply in this paragraph) affiliated with it or provide prime brokerage services for the hedge fund, etc. managed by such corporation. <Amended by Act No. 13448, Jul. 24, 2015>
(8) Neither the Bank of Korea Act nor the Banking Act shall apply to any comprehensive financial investment business entity.
(9) Matters necessary concerning the specific scope, etc. of credit offering under paragraph (3) 1 shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 78 (Special Cases concerning Alternative Trading Systems)
(1) An alternative trading system shall comply with business guidelines prescribed by Presidential Decree concerning the following matters in providing alternative trading services:
1. Matters concerning the persons who participate in the trade of instruments for trade contracts or trade in an alternative trading system (hereafter referred to as "participants in trading" in this Article, and Articles 402 and 404);
2. Matters concerning the suspension of trade of instruments for trade contract and the cancellation thereof;
3. Matters concerning the conclusion of trade contracts, including transaction confirmation, and matters concerning liquidation and payments, including acquisition and reduction of debts, payment methods, and responsibility for settlement;
4. Matters concerning the trust of trade by participants in trading, including guarantee deposits;
5. Matters concerning reporting and public disclosure by the issuers of instruments for trade contracts;
6. Matters concerning publication of, and reporting on, the result of a trade;
7. Matters concerning opening, closing, suspension and interruption of alternative trading services;
8. Other necessary matters concerning the provision of alternative trading services.
(2) Articles 40, 72, 73 and 419 (2) through (4) shall not apply to any alternative trading system.
(3) An exchange designated by the Financial Services Commission (hereafter referred to as "designated exchange" in this Article, and Articles 402 and 404) may monitor the following matters for the protection of investors and sound trading practices in trading at an alternative trading system:
1. Status of trade offers or orders for instruments for trade contracts or the status of the prices offered by participants in trading at the alternative trading system;
2. Rumors, information or new reports on instruments for trade contracts;
3. Reporting on or public disclosure concerning issuers, etc. of instruments for trade contracts;
4. Other conditions or factors prescribed by Presidential Decree that affect the price formation or trading volume of instruments for trade contracts.
(4) In any of the following cases, the designated exchange may request participants in trading to submit relevant data in writing, specifying the grounds therefor, or may inspect the business, status of property, account books, documents, and other related articles. In such cases, Article 404 (2) and (3) shall apply mutatis mutandis:
1. Where necessary to ascertain the trading status of the items of instruments for trade contracts or trading items deemed suspected of abnormal trading prescribed in Article 377 (1) 8;
2. Where necessary to ascertain whether participants in trading observe the business guidelines referred to in paragraph (1).
(5) Except in any of the following cases, no person shall hold stocks issued by an alternative trading system in excess of 15/100 of outstanding voting stocks of that alternative trading system. Articles 406 (2) through (4) and 407 shall apply mutatis mutandis to such cases:
1. Where such stocks are held by a collective investment scheme (excluding where such stocks held by a privately placed fund);
2. Where such stocks are held by the Government;
3. Where such stocks are otherwise held with approval from the Financial Services Commission, as prescribed by Presidential Decree.
(6) Articles 383 (1) and (2), 408 and 413 shall apply mutatis mutandis to alternative trading systems.
(7) Where the trading volume of an instrument for trade contract exceeds the criteria prescribed by Presidential Decree, an alternative trading system (excluding any alternative trading system that determines trade prices by the method prescribed in Article 8-2 (5) 1) shall take measures prescribed by Presidential Decree for protecting investors, securing the stability of trade contracts, etc.
(8) Methods and procedures for conducting the business of alternative trading systems and detailed methods necessary to form fair trade prices and to secure stability, efficiency, etc. of trade contracts shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 11845, May 28, 2013]
Subsection 2 Rules on Business Conduct by Collective Investment Business Entities
 Article 79 (Fiduciary Duty of Due Care and Duty of Good Faith)
(1) A collective investment business entity owes investors the fiduciary duty of due care in managing collective investment property.
(2) A collective investment business entity shall carry out the business in good faith for the purpose of protecting investors' interests.
 Article 80 (Instructions on, and Execution of, Asset Management)
(1) In managing the assets of an investment trust, a collective investment business entity of the investment trust shall give the trust business entity that keeps in custody and manages such assets of the investment trust instructions in relation to the acquisition, disposal, etc. of investable assets separately for each item of assets of the investment trust in accordance with the method prescribed by Presidential Decree, and the trust business entity shall acquire, dispose of, etc. the investable assets in accordance with the instructions given by the collective investment business entity: Provided, That the collective investment business entity may acquire, dispose of, etc. any investable assets directly in its name in cases prescribed by Presidential Decree where it is essential for managing the assets of the investment trust efficiently.
(2) Where a collective investment business entity of an investment trust (including a trust business entity that keeps in custody and manages the assets of the investment trust; hereafter the same shall apply in this paragraph) acquires, disposes of, etc. an investable asset in accordance with paragraph (1), it shall be liable for the performance within the extent of the assets of the investment trust: Provided, That the same shall not apply where the collective investment business entity is liable for any damage pursuant to Article 64 (1).
(3) Where a collective investment business entity perform such business as the acquisition, disposal, etc. of investable assets in accordance with the proviso to paragraph (1), it shall distribute the outcome of the acquisition, disposal, etc. in accordance with the asset distribution schedule predetermined for each asset of the investment trust. In such cases, the collective investment business entity shall prepare, maintain, and control the asset distribution schedule and account books and documents for the outcome of acquisition, disposal, etc. and the results of distribution, etc. in accordance with the method prescribed by Ordinance of the Prime Minister. <Amended by Act No. 8863, Feb. 29, 2008>
(4) Matters pertaining to the asset distribution schedule, etc. referred to in paragraph (3) shall be prescribed by Ordinance of the Prime Minister. <Amended by Act No. 8863, Feb. 29, 2008>
(5) In managing the collective investment property, a collective investment business entity of any collective investment scheme, other than an investment trust, shall acquire, dispose of, etc. of the investable assets by each collective investment property (excluding assets of an investment trust) in accordance with the method prescribed by Presidential Decree in the name of the collective investment scheme (referring to the name of the collective investment business entity in the case of an undisclosed investment association), give the trust business entity of the collective investment scheme instructions necessary for keeping in custody and managing the asset acquired, disposed of, etc., and the trust business entity shall comply with the instructions given by the collective investment business entity. In such cases, the collective investment business entity shall indicate that it represents the collective investment scheme whenever it acquires, disposes of, etc. the investable assets. <Amended by Act No. 9407, Feb. 3, 2009>
 Article 81 (Restrictions on Asset Management)
(1) No collective investment business entity shall engage in any of the following activities in the course of managing the collective trust property: Provided, That collective investment business entities may engage in such activities in circumstances prescribed by Presidential Decree where it is unlikely to undermine the protection of investors and the stable management of the collective investment property: <Amended by Act No. 13448, Jul. 24, 2015>
1. Any of the following activities in the course of investing the collective investment property in securities (excluding collective investment securities and other securities specified by Presidential Decree, but including the investable assets specified by Presidential Decree; hereafter the same shall apply in this subparagraph) or derivatives:
(a) Investing the assets of each collective investment scheme managed by each collective investment business entity in an identical item of securities in excess of the ratio prescribed by Presidential Decree within 10 percent of the total assets of each collective investment scheme. In such cases, equity securities (including depositary receipts related to equity securities issued by a corporation, etc.; hereafter the same shall apply in this Sub-Section) and securities, other than the equity securities issued by an identical corporation, etc., shall be deemed identical securities, respectively;
(b) Investing the total assets of all collective investment schemes managed by each collective investment business entity in equity securities issued by an identical corporation, etc. in excess of 20 percent of the total number of equity securities;
(c) Investing the total assets of each collective investment scheme in equity securities issued by an identical corporation, etc. in excess of 10 percent of the total number of equity securities;
(d) Trading over-the-counter derivatives with a person who fails to meet the qualification requirements prescribed by Presidential Decree;
(e) Investing assets in such a manner that the assessed risks contingent to trading derivatives exceed the ratio prescribed by Presidential Decree;
(f) In relation to the trading of derivatives, investing the assets of each collective investment scheme in such a manner that the assessed risks ensuing from price fluctuations in the securities issued by an identical corporation, etc. (including depositary receipts related to the securities issued by the corporation, etc.) among the underlying assets exceed 10 percent of the total assets of each collective investment scheme;
(g) Investing assets in such a manner that the assessed risks of the trading counterparty ensuing from the trading of over-the-counter derivatives with the same trading counterparty exceed 10 percent of the total assets of each collective investment scheme;
2. Any of the following activities in the course of investing the collective investment property in real property:
(a) Disposing of real estate within the period prescribed by Presidential Decree not exceeding five years from the acquisition of the real estate: Provided, That where a parcel of land, buildings, etc. developed or constructed by a real estate development project (referring to a project for developing a parcel of land into sites for houses, factories, etc. or constructing or reconstructing a building or any other structure on the parcel of land; hereinafter the same shall apply) are sold in lots or in units or in cases prescribed by Presidential Decree as necessary for protecting investors, such disposal shall be excluded herefrom;
(b) Disposing of a parcel of land without any building or other structure thereon before executing a real estate development project for such a parcel of land: Provided, That where the collective investment scheme is merged, terminated, or dissolved or in cases prescribed by Presidential Decree as necessary for protecting investors, such disposal shall be excluded herefrom;
3. Any of the following acts in the course of investing the collective investment property in collective investment securities (including foreign collective investment securities provided for in Article 279 (1); hereafter the same shall apply in this subparagraph):
(a) Investing the assets of each collective investment scheme in the collective investment securities of a collective investment scheme (including foreign collective investment schemes provided for in Article 279 (1)) managed by the same collective investment business entity (including foreign collective investment business entities under Article 279 (1)), in excess of 50 percent of the total assets of the collective investment scheme;
(b) Investing the assets of each collective investment scheme in the collective investment securities of the same collective investment scheme (including foreign collective investment schemes provided for in Article 279 (1)), in excess of 20 percent of the total assets of the collective investment scheme;
(c) Investing assets in the collective investment securities of a collective investment scheme (including foreign collective investment schemes provided for in Article 279 (1)), which is allowed to invest in collective investment securities in excess of 40 percent of the total assets;
(d) Investing assets in the collective investment securities of a privately placed fund (including foreign privately placed funds equivalent to privately placed funds) in excess of the ratio prescribed by Presidential Decree not exceeding five percent of the total amount of assets of each collective investment scheme;
(e) Investing the collective investment property of each collective investment scheme in the collective investment securities of the same collective investment scheme (including foreign collective investment schemes provided for in Article 279 (1)), in excess of 20 percent of the total number of the collective investment securities. In such cases, the ratio shall be calculated based on the date of such investment;
(f) Investing assets in collective investment securities to the extent that the aggregate of sales commissions or sales remuneration paid to the investment trader or investment broker, who sells the collective investment securities of a collective investment scheme, and sales commission or sales remuneration paid to the investment trader (including foreign investment traders (referring to persons who engage in any business equivalent to the investment trading business in a foreign country in accordance with the statutes of the foreign country), who sells the collective investment securities of other collective investment schemes (including foreign collective investment schemes provided for in Article 279 (1)) in which the aforesaid collective investment scheme invests in, or the investment broker (including foreign investment brokers (referring to persons who engage in any business equivalent to the investment brokerage business in a foreign country in accordance with the statutes of the foreign country)), exceeds the limits prescribed by Presidential Decree;
4. Any other act specified by Presidential Decree as likely to undermine the protection of investors, the stable management of collective investment property, etc.
(2) Matters pertaining to the methods, etc. of determining the assessed risks under paragraph (1) 1 (e), the assessed risks under paragraph (1) 1 (f), and the assessed risks of the other trading party under paragraph (1) 1 (g) shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(3) Where an investment has exceeded the investment limit provided for in paragraph (1) due to an unavoidable cause or event specified by Presidential Decree, such as price fluctuation of any investable asset belonging to the collective investment property, the investment shall be deemed to be made in accordance with the investment limit during the period prescribed by Presidential Decree, beginning from the date on which the investment has exceeded the prescribed limit.
(4) Investment ratios provided for in paragraph (1) 1 (a), (e) through (g), 3 (a), 3 (b) and each subparagraph of Article 229 shall not apply to the period specified by Presidential Decree, not exceeding six months (one year, in the cases of a real estate fund referred to in subparagraph 2 of Article 229) from the date of initial creation or establishment of a collective investment scheme. <Amended by Act No. 9407, Feb. 3, 2009; Act No. 14130, Mar. 29, 2016>
 Article 82 (Restriction on Acquisition of One's Own Collective Investment Securities)
No collective investment business entity of an investment trust or an undisclosed investment association shall acquire the collective investment securities of the collective investment scheme, or receive such securities as the subject matter of a pledge right on the collective investment scheme's account: Provided, That the entity may acquire the collective investment securities of the collective investment scheme on the collective investment scheme's account in any of the following cases:
1. Where it is necessary for exercising a security right or any other right. In such cases, the collective investment securities so acquired shall be disposed of in accordance with the method prescribed by Presidential Decree;
2. Where beneficiary certificates are purchased in accordance with Article 191.
 Article 83 (Restrictions on Borrowing Money or Similar)
(1) No collective investment business entity shall borrow money on the collective investment scheme’s account in the course of managing the collective investment property: Provided, That it may borrow money on the collective investment scheme’s account in any of the following cases:
1. Where it is difficult to pay a redemption price temporarily because of a large number of claims for redemption of collective investment securities made under Article 235;
2. Where it is difficult to pay a repurchase price temporarily because of a large number of claims for repurchase made under Articles 191 and 201 (4).
(2) Where money is borrowed on a collective investment scheme’s account in accordance with paragraph (1), the total amount of the borrowed money shall not exceed 10 percent of the amount calculated by deducting the total amount of liabilities from the total amount of assets as at the time of borrowing. <Amended by Act No. 13448, Jul. 24, 2015>
(3) Matters pertaining to the method of borrowing money under paragraph (1), restrictions on acquisition of the investable assets before repayment of loans, etc. shall be prescribed by Presidential Decree.
(4) In the course of managing the collective investment property, no collective investment business entity shall lend money out of the collective investment property (excluding short-term loans to any financial institution specified by Presidential Decree for a period not exceeding 30 days).
(5) In the course of managing the collective investment property, no collective investment business entity shall guarantee any debt or offer any security for any person other than the pertinent collective investment scheme with the collective investment property.
 Article 84 (Restrictions, etc. on Transactions with Interested Parties)
(1) In managing the collective investment property, no collective investment business entity shall conduct any transactional activity with an interested party prescribed by Presidential Decree (hereafter in this Section referred to as "interested party"): Provided, That the entity is allowed to make any of the following transactions, if there is no possibility of a conflict of interest with the collective investment scheme:
1. A transaction under a contract entered into with a person at least six months before the person becomes an interested party;
2. A transaction through an open market in which a multiple number of unspecified people participate, such as the securities exchange;
3. A transaction favorable to the collective investment scheme in comparison to the standard terms and conditions of such a transaction;
4. Other transactions specified by Presidential Decree.
(2) A collective investment business entity shall, when a transaction with an interested party is allowed pursuant to the proviso to paragraph (1) or when there is a change of interested parties, promptly notify the details of such event to the trust business entity who keeps in custody and manages the relevant collective investment property.
(3) In managing the collective investment property, no collective investment business entity shall acquire securities (excluding beneficiary certificates prescribed in Article 189) issued by the collective investment business entity itself on its account of collective investment scheme.
(4) In managing the collective investment property, no collective investment business entity shall acquire securities (excluding beneficiary certificates prescribed in Article 189 and other securities specified by Presidential Decree, but including securities depositary receipts related to equity securities issued by its affiliated company and investable assets specified by Presidential Decree; hereafter the same shall apply in this Article) issued by an affiliated company of the collective investment business entity in excess of the limit prescribed by Presidential Decree.
(5) Necessary matters concerning the restriction on acquisition of securities issued by an affiliated company under paragraph (4) shall be prescribed by Presidential Decree.
 Article 85 (Prohibition on Unsound Business Activities)
No collective investment business entity shall engage in any of the following activities: Provided, That collective investment business entities may engage in such activities in cases prescribed by Presidential Decree where it is unlikely to undermine the protection of investors or sound trading practices:
1. Deciding on a purchase or sale which may significantly affect the price of the financial investment instruments or other investable assets in the course of managing the collective investment property, and, before implementing such decision, buying or selling financial investment instruments or any other investable asset on its own account, or soliciting a third party to buy or sell such instruments or asset;
2. Buying securities underwritten by itself or a related underwriter specified by Presidential Decree (hereafter in this Section referred to as "related underwriter") with the collective investment property;
3. Buying specific securities, etc. (referring to specific securities, etc. as defined in Article 172 (1); hereafter in this subparagraph the same shall apply) with the collective investment property to create an artificial market price (referring to the market price as defined in Article 176 (2) 1) for the specific securities, etc. of a corporation for which the corporation itself or its related underwriter was in charge of underwriting affairs prescribed by Presidential Decree;
4. Undermining the interest of a specific collective investment scheme to pursue its own or a third party's interest;
5. Trading a specific collective investment property for the collective investment business entity's proprietary property or other collective investment property, discretionary investment property (referring to the property managed pursuant to the discretionary power authorized by investors for making judgments on investments; hereinafter the same shall apply), or trust property managed by the collective investment business entity;
6. Investing the collective investment property with another interactively in a specific asset by agreement or in collusion, etc. with a third party;
7. Engaging any persons other than fund managers to manage the collective investment property;
8. Other activities specified by Presidential Decree as likely to undermine the protection of investors or sound trading practices.
 Article 86 (Restriction on Contingent Remuneration)
(1) No collective investment business entity shall receive remuneration that is contingent upon the performance of its collective investment scheme (hereinafter referred to as "contingent remuneration") in accordance with a predetermined calculation formula: Provided, That such contingent remuneration may be allowed in any of the following cases:
1. If the collective investment scheme is a privately placed fund;
2. If there is no possibility of undermining the protection of investors or sound trading practices in circumstances prescribed by Presidential Decree, considering the calculation method used for remuneration of management for any collective investment scheme other than privately placed funds, the composition of investors, etc.
(2) A collective investment business entity that intends to receive contingent remuneration in accordance with the proviso to paragraph (1) shall state the calculation method of the contingent remuneration and other matters prescribed by Presidential Decree in the relevant investment prospectus (referring to the investment prospectus under Article 123 (1)) and the collective investment agreement.
 Article 87 (Voting Rights, etc.)
(1) To protect the interests of investors, each collective investment business entity (limited to collective investment business entities of an investment trust or an undisclosed investment association; hereafter in this Article the same shall apply) shall faithfully exercise its voting right of the stocks that belong to the collective investment property: <Amended by Act No. 11845, May 28, 2013>
1. through 3. Deleted. <by Act No. 11845, May 28, 2013>
(2) Notwithstanding paragraph (1), a collective investment business entity shall exercise its voting rights so as not to affect a resolution passed by the number of stocks, as calculated by subtracting the number of the stocks that belong to the collective investment property from the number of stocks held by shareholders present at the general meeting of shareholders of the corporation that has issued the stocks that belong to the collective investment property, in any of the following cases: <Amended by Act No. 11845, May 28, 2013>
1. Where any of the following entities intends to incorporate the corporation that has issued the stocks, which belong to the collective investment property, into a group of its affiliates:
(a) The collective investment business entity or any person who has an interest therein as prescribed by Presidential Decree;
(b) A person prescribed by Presidential Decree, who has de facto control over the collective investment business entity;
2. Where the corporation that has issued the stocks that belong to the collective investment property has any of the following relationships with the collective investment business entity:
(a) Where it is an affiliate of the collective investment business entity;
(b) Where it is in a relationship prescribed by Presidential Decree, under which it exercises de facto control over the collective investment business;
3. Other cases prescribed by Presidential Decree as likely to undermine the protection of investors or the proper management of the collective investment property.
(3) Notwithstanding paragraph (2), a collective investment business entity may exercise its voting rights as provided for in paragraph (1), where it is obviously foreseeable that exercising its voting rights as provided for in paragraph (2) for the merge of a corporation, transfer or acquisition of business, appointment or dismissal of an executive officer, amendment of articles of incorporation, or any equivalent matters, which evidently affect the investors' interests (hereafter in this Article referred to as "major matters for decision"), will cause any loss to the collective investment property: Provided, That a collective investment business entity that belongs to a conglomerate subject to limitations on cross-holdings referred to in Article 9 (1) of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as "conglomerate subject to limitations on cross-holdings") may exercise its voting rights only by the method satisfying each of the following requirements, if it holds stocks as part of its collective investment property that are issued by a stock-listed corporation which is one of its affiliates: <Amended by Act No. 11845, May 28, 2013>
1. It shall exercise its voting rights to the extent not exceeding 15 percent of the total number of outstanding stocks of the stock-listed corporation by aggregating the number of stocks through which all related persons (referring to the related persons as defined in Article 7 (1) 5 (a) of the Monopoly Regulation and Fair Trade Act) of such corporation may exercise voting rights;
2. In regard to the stocks acquired by a collective investment business entity in excess of the investment limit provided for in Article 81 (1) 1 (a) in accordance with the proviso to Article 81 (1), it shall exercise its voting rights so as not to affect the resolution passed by the number of stocks, as calculated by subtracting the number of stocks held as part of the collective investment property from the number of stocks held by the shareholders present at the general meeting of shareholders of the corporation that has issued the stocks.
(4) No collective investment business entity may exercise any voting rights in relation to the stocks acquired in excess of the investment limit provided for in Articles 81 (1) and 84 (4).
(5) No collective investment business entity shall engage in any conduct to circumvent any provision of paragraphs (2) through (4), such as cross-exercising voting rights by a contract, etc. with a third party. <Amended by Act No. 11845, May 28, 2013>
(6) Where a collective investment business entity exercises its voting rights in relation to the stocks that belong to the collective investment property, in violation of any of paragraphs (2) through (5), the Financial Services Commission may issue an order to the collective investment business entity to dispose of such stocks within a prescribed period, not exceeding six months. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
(7) Each collective investment business entity shall keep and maintain records as to whether it has exercised the voting rights over the corporation that has issued the stocks held in excess of the ratio or amount prescribed by Presidential Decree (hereafter in Article referred to as "corporation required to disclose its voting rights to the public") as part of the collective investment property, including the details of such exercise (or the grounds for failure to exercise its voting rights, if applicable) in the manner prescribed by Presidential Decree.
(8) Each collective investment business entity shall disclose to the public the details of the voting rights exercised in relation to the stocks prescribed by Presidential Decree (in cases of stock-listed corporations as defined in Article 9 (15) 3 (b), including depositary receipts related to the stocks), from among stocks that belong to the collective investment property, etc., as classified below. In such cases, the method of public disclosure and other necessary matters shall be prescribed by Presidential Decree: <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. Where it has exercised its voting rights in relation to the major matters for decision in accordance with paragraphs (2) and (3): Specific details of how it has exercised voting rights and the grounds therefor;
2. Where it has exercised its voting rights in relation to a corporation required to disclose its voting rights to the public: Specific details of how it has exercises its voting rights in accordance with paragraph (7);
3. Where it has exercised voting rights in relation to a corporation required to disclose its voting rights to the public: Specific grounds for the failure to exercise its voting rights in accordance with paragraph (7).
(9) In disclosing to the public the matters concerning the exercise of voting rights in accordance with paragraph (8), each collective investment business entity shall also disclose the data specified by Presidential Decree as necessary for investors to ascertain whether the exercise of, or failure to exercise, voting rights was proper, etc.
 Article 88 (Delivery of Asset Management Reports)
(1) Each collective investment business entity shall prepare an asset management report at least once every three months and shall deliver the asset management report to each investor of the relevant collective investment scheme subject to verification from the trust business entity that keeps in custody and manages the relevant collective investment property: Provided, That it need not deliver such asset management report to each investor in cases prescribed by Presidential Decree as unlikely to undermine investors' interests, including frequent changes of investors. <Amended by Act No. 9407, Feb. 3, 2009>
(2) Each collective investment business entity shall state the following matters in the asset management report prepared under paragraph (1):
1. Assets and liabilities of the collective investment scheme and the base prices of the collective investment securities as at any of the following date (hereafter in this Article referred to as "base date"):
(a) The date three months elapse from the commencement date of each accounting period;
(b) The last day of each accounting period;
(c) The last day of the contract term or the expiry date of the existence term;
(d) The date of termination or dissolution;
2. A summary of management progress during the period from the immediately preceding base date (referring to the initial date of creation or formation of the relevant collective investment scheme, if no immediately preceding base date is available) to the pertinent base date (hereafter in this Article referred to as "pertinent management period") and the matters concerning profit and loss during the pertinent management period;
3. The assessed value of each type of asset that belong to the collective investment property and the ratio of such assessed value to the total value of the collective investment property as at the base date;
4. The total number of stocks traded, total trading amount, and turnover rate prescribed by Presidential Decree during the pertinent management period;
5. Other matters prescribed by Presidential Decree.
(3) The timing and method for delivering the asset management report under paragraph (1), cost bearing, and other relevant matters shall be prescribed by Presidential Decree. <Amended by Act No. 9407, Feb. 3, 2009>
 Article 89 (Ad Hoc Public Disclosure)
(1) A collective investment business entity of an investment trust or an undisclosed investment association shall, when any of the following events or causes occurs, disclose such event or cause to the public without delay, as prescribed by Presidential Decree: <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11040, Aug. 4, 2011>
1. Where any fund manager is replaced: Such fact and fund management career (referring to the name of the collective investment scheme managed, and the scale of and rate of return from the collective investment property) of the replaced fund manager;
2. Decisions on deferment or resumption of redemption and the reason therefor;
3. Details of non-performing assets, if any, specified by Presidential Decree, and the depreciation rate thereof;
4. Details of resolutions of the general meeting of collective investors;
5. Other matters prescribed by Presidential Decree as those necessary for the protection of investors.
(2) Ad hoc public disclosure shall be made in any manner described below: <Newly Inserted by Act No. 9407, Feb. 3, 2009>
1. Disclosing to the public through the website of a collective investment business entity, an investment trader or broker that sold the relevant collective investment securities, and the Association;
2. Informing investors through electronic mail by a investment trader or investment broker that sold the relevant collective investment securities;
3. Posting a public notice at the head office, branch offices, and other sales offices of a collective investment business entity, an investment trader or investment broker that sold the relevant collective investment securities.
 Article 90 (Reporting on Collective Investment Property, etc.)
(1) A collective investment business entity (limited to the collective investment business entities of an investment trust or an undisclosed investment association; hereafter the same shall apply in this Article) shall prepare a business report for each quarter concerning the collective investment property in accordance with the manner prescribed by Presidential Decree, and shall submit it to the Financial Services Commission and the Association no later than two months after the end of each quarter. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
(2) A collective investment business entity shall, when any of the following causes or events occur, submit documents of settlement of accounts under Article 239 to the Financial Services Commission and the Association within two months from the day on which such cause or event occurs: <Amended by Act No. 8863, Feb. 29, 2008>
1. The end of the fiscal term of a collective investment scheme;
2. The end of the contract term or existence term of a collective investment scheme;
3. Termination or dissolution of a collective investment scheme.
(3) The Financial Services Commission and the Association shall disclose the documents submitted in accordance with paragraphs (1) and (2) to the public through its website, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(4) The Association shall compare management performance of each collective investment property including the details of change in net asset value of each collective investment property in accordance with the manner prescribed by Presidential Decree, and shall disclose the result thereof to the public through its website, etc.
 Article 91 (Inspection, Public Disclosure, etc. of Account Books and Documents)
(1) An investor may request a collective investment business entity (limited to the collective investment business entities of an investment trust or an undisclosed investment association, but including the investment trader and the investment broker who sold the relevant collective investment securities; hereafter the same shall apply in this Article), in writing stating the reasons, to allow him/her to inspect account books and documents related to the collective investment property in which he/she has an interest during business hours, or to issue a certified copy or abstract of such account books and documents. In such cases, the collective investment business entity shall not reject such request, unless there is a justifiable ground as prescribed by Presidential Decree.
(2) Matters pertaining to the range of the account books and documents subject to the request for inspection or issuance of a certified copy or extract thereof under paragraph (1) shall be prescribed by Presidential Decree.
(3) An investment business entity shall publicly disclose its collective investment agreement through its website, etc.
 Article 92 (Notice of Deferment of Redemption, etc.)
(1) A collective investment business entity (limited to collective investment business entities of an investment trust or an undisclosed investment association; hereafter the same shall apply in this Article) shall, when any of the following events occur, notify the investment trader or the investment broker who sold the relevant collective investment securities thereof without delay:
1. When the redemption of the collective investment securities is deferred in accordance with Article 237 (1);
2. When the accounting auditor's audit opinion on the collective investment scheme under Article 240 (3) is not an unqualified one.
(2) A collective investment business entity shall, when the event under paragraph (1) terminates, notify the investment trader or the investment broker who sold the relevant collective investment securities thereof without delay.
 Article 93 (Special Cases concerning Management of Derivatives)
(1) When the collective investment property of a collective investment scheme, which is allowed to invest its property in derivatives to the extent that the assessed risks contingent to the trading of derivatives (referring to the assessed risks under Article 81 (1) 1 (e); hereafter the same shall apply in this Article) exceed the guidelines prescribed by Presidential Decree, is invested in derivatives, the collective investment business entity shall publicly disclose the contract amount and other indexes related to risks, as prescribed by Presidential Decree, through its website, etc. In such cases, the investment prospectus (referring to the investment prospectus under Article 123 (1)) of the collective investment scheme shall contain a statement that the summary of indexes related to contingent risks and the indexes related to such risks shall be publicly disclosed.
(2) When the collective investment property of a collective investment scheme, which is allowed to invest its property in over-the-counter derivatives to the extent that the assessed risks contingent to the trading of over-the-counter derivatives exceed the guidelines prescribed by Presidential Decree, is invested in such over-the-counter derivatives, the collective investment business entity shall prepare a risk management scheme for management of over-the-counter derivatives, and shall report it the Financial Services Commission subject to a prior confirmation of the trust business entity that keeps in custody and manages the collective investment property. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 94 (Special Cases concerning Management of Real Property)
(1) Where a collective investment business entity acquires real estate with the collective investment property (including the management of real estate in the case of a real estate fund referred to in subparagraph 2 of Article 229), it may borrow money on the collective investment scheme's account in the manner prescribed by Presidential Decree, notwithstanding the main sentence of Article 83 (1). <Amended by Act No. 14130, Mar. 29, 2016>
(2) A collective investment business entity may lend money to a corporation that engages in the business of developing real estate (including real estate trust business entities and other persons specified further by Presidential Decree) out of the collective investment property in the manner prescribed by Presidential Decree, notwithstanding Article 83 (4).
(3) Whenever a collective investment business entity acquires or disposes of real estate with the collective investment property, it shall prepare and keep a due-diligence report, which shall contain the current status of the real estate, its trading price, and other matters prescribed by Presidential Decree.
(4) Whenever a collective investment business entity intends to invest the collective investment property in a real estate development project, it shall prepare a business plan, which shall contain the timetable and method for promotion, and other matters prescribed by Presidential Decree, subject to confirmation from an appraiser under the Act on Appraisal and Certified Appraisers on whether the business plan is feasible, and shall publicly disclose the business plan on its website, etc. <Amended by Act No. 13782, Jan. 19, 2016>
(5) Where a collective investment business entity acquires real estate with the investment trust property, it need not enter the description of beneficiaries in the statement of trust for the purposes of Article 81 of the Registration of Real Estate Act. <Amended by Act No. 10580, Apr. 12, 2011>
(6) Matters pertaining to the limits on borrowing and lending money under paragraphs (1) and (2), restrictions on the management of borrowed money shall be prescribed by Presidential Decree.
 Article 95 (Liquidation)
(1) The Financial Services Commission shall supervise the affairs related to liquidation of a financial investment business entity that has engaged in a collective investment business. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission may inspect the status of liquidation affairs and property or issue an order to deposit the property in securities depository or any other order as may be necessary for the supervision of liquidation. <Amended by Act No. 8863, Feb. 29, 2008>
(3) The Financial Services Commission shall, when a financial investment business entity that has engaged in a collective investment business is dissolved due to the revocation of its authorization for its financial investment business, appoint a liquidator ex officio. <Amended by Act No. 8863, Feb. 29, 2008>
(4) The Financial Services Commission shall, if a financial investment business entity that has engaged in a collective investment business is dissolved by an order or a judgment of a court or if there is no liquidator, appoint a liquidator ex officio or upon request of an interested party. <Amended by Act No. 8863, Feb. 29, 2008>
(5) The Financial Services Commission may, when it appoints a liquidator, require a financial investment business entity that has engaged in a collective investment business to pay remuneration to the liquidator. In such cases, the Financial Services Commission shall determine the amount of remuneration and provide public notice of such. <Amended by Act No. 8863, Feb. 29, 2008>
(6) If a liquidator is significantly unfit for executing such affairs or commits a serious violation of any statute, the Financial Services Commission may remove the liquidator ex officio or upon request of an interested party. <Amended by Act No. 8863, Feb. 29, 2008>
Subsection 3 Rules on Business Conduct by Investment Advisory Business Entities and Discretionary Investment Business Entities
 Article 96 (Fiduciary Duty of Due Care and Duty of Good Faith)
(1) An investment advisory business entity owes the fiduciary duty of due care to investors in providing advice for investment, and a discretionary investment business entity owes the fiduciary duty of due care to investors in managing the discretionary investment property.
(2) An investment advisory business entity and discretionary investment business entity shall execute its business affairs in good faith to protect investors' interests.
 Article 97 (Execution of Contract)
(1) When an investment advisory business entity or discretionary investment business entity intends to enter into an investment advisory contract or a discretional investment contract with an ordinary investor, it shall deliver written materials containing the following matters in advance to the ordinary investor: <Amended by Act No. 11845, May 28, 2013>
1. The scope of advising for investment, the method of providing such service, the scope of discretionary investment, and the financial investment instruments, etc. advisable for investment;
2. General guidelines and procedure established by the investment advisory business entity or discretionary investment business entity, in connection with the execution of the investment advisory business or discretionary investment business;
3. Names and major professional experience of executive officers and/or employees who actually run the investment advisory business or discretionary investment business;
4. Guidelines and procedure established by the investment advisory business entity or discretionary investment business entity in order to prevent conflict of interests with investors;
5. The fact that the results of investment shall be imputed to each investor in relation to the investment advisory contract or discretionary investment contract and matters concerning the liability of each investor;
6. Matters concerning fees;
7. The method of notifying investors of the evaluation of performance of investments and the outcomes of investments (limited to a discretionary investment contract);
7. 2. The fact that the investor may change the method of management of discretionary investment property or request to terminate the contract;
8. Other matters prescribed by Presidential Decree as those that serve as important guidelines for investors' judgment when they determine whether to sign a contract.
(2) An investment advisory business entity or discretionary investment business entity shall, whenever it executes an investment advisory contract or a discretionary investment contract with an ordinary investor, state the following matters in the contract documents delivered to the ordinary investor in accordance with Article 59 (1). In such cases, the descriptions therein shall not differ from those contained in the written materials delivered in accordance with paragraph (1):
1. Matters under the subparagraphs of paragraph (1);
2. Matters concerning contractual parties;
3. Contract term and contract date;
4. Matters concerning amendment to and termination of the contract;
5. The investment trader or investment broker in which the discretionary investment property is deposited, and names of other financial institutions and their sales offices.
 Article 98 (Prohibition on Unsound Business Activities)
(1) Neither investment advisory business entity nor discretionary investment business entity shall engage in any of the following activities: Provided, That the investment advisory business entity or discretionary investment business entity may engage in such activities in circumstances prescribed by Presidential Decree where it is unlikely to undermine the protection of investors and sound trading practices: <Amended by Act No. 11845, May 28, 2013>
1. Receiving money, securities, or any other property from an investor for keeping in custody or deposit;
2. Lending money, securities, or any other property to an investor, or acting as a broker, an intermediary or agent of a third party for lending the third party's money, securities, or any other property to an investor;
3. Engaging any person other than an investment advisor or a fund manager to run the investment advisory business or discretionary investment business;
4. Receiving any consideration in addition to the fees stipulated in the agreement;
5. Buying or selling on its own account, or soliciting a third party to buy or sell, a financial investment instrument, etc., after determining to give advices on the judgment of investment or to make a purchase or sale, which may produce a significant impact on the price of the financial investment instrument, etc., while providing advices as requested or managing the discretionary investment property, but before putting such determination into action.
(2) In the course of managing the discretionary investment property, no discretionary investment business entity shall engage in any of the following activities: Provided, That the discretionary investment business entity may engage in such activities in circumstances prescribed by Presidential Decree where it is unlikely to undermine the protection of investors and sound trading practices: <Amended by Act No. 11845, May 28, 2013>
1. Failing to comply with an investor's request to change the method of management or to terminate the contract, without any justifiable grounds;
2. Buying securities underwritten by itself or a related underwriter for the discretionary investment property;
3. Buying specific securities, etc. (referring to specific securities, etc. under Article 172 (1); hereafter the same shall apply in this subparagraph), using the discretionary investment property with intent to create an artificial market value (referring to the market value under Article 176 (2) 1) for the specific securities, etc. of a corporation for which the corporation itself or its related underwriter was in charge of the underwriting affairs as prescribed by Presidential Decree;
4. Undermining a specific investor's interest to pursue its own or a third party's interest;
5. Trading the discretionary investment property for another discretionary investment property, collective investment property, or trust property managed by itself;
6. Trading the discretionary investment property for the proprietary property of the discretionary investment business entity or its interested party;
7. Investing the discretionary investment property in securities issued by the discretionary investment business entity or its interested party without the investor's consent;
8. Managing several investors' assets collectively instead of managing the discretionary investment property separately for each investor;
9. Obtaining authorization for any of the following activities from an investor:
(a) Designating or changing the investment trader, investment broker, or any other financial institution for depositing the discretionary investment property;
(b) Depositing or withdrawing the discretionary investment property;
(c) Exercising voting rights or any other rights in securities that belong to the discretionary investment property;
10. Other activities specified by Presidential Decree as likely to undermine the protection of investors or sound trading practices.
 Article 98-2 (Restriction on Contingent Remuneration)
(1) Neither investment consulting business entity nor discretionary investment business entity shall receive remuneration that is contingent upon the investment outcome related to investment advice or management performance of discretionary investment property: Provided, That it may receive contingent remuneration where it is unlikely to undermine the protection of investors or sound trading practices in circumstances prescribed by Presidential Decree.
(2) Where an investment consulting business entity or discretionary investment business entity intends to receive contingent remuneration under the proviso to paragraph (1), it shall state the method to calculate the contingent remuneration and other matters prescribed by Presidential Decree in the contract for investment advice services or discretionary investment services.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 99 (Delivery of Discretionary Investment Report)
(1) A discretionary investment business entity shall prepare a report on the following matters (hereafter referred to as "discretionary investment report" in this Article) at least once every three months, and shall deliver it to each ordinary investor who signed the discretionary investment contract: <Amended by Act No. 9407, Feb. 3, 2009>
1. Current status of management of the discretionary investment property;
2. Time and outcome of trading in a specific asset among the discretionary investment property with the proprietary property of the discretionary investment business entity and the balance thereof, if there was such transaction.
(2) Matters concerning the mandatory descriptions of the discretionary investment report, the delivery method thereof, etc. shall be prescribed by Presidential Decree.
 Article 100 (Special Cases concerning Offshore Investment Advisory Business Entity, etc.)
(1) Articles 28-2, 30 through 36, 38, 40, 41, 44, 45, 50 through 52, 56, and 61 through 63 shall not apply to any foreign investment advisory business entity (hereinafter referred to as "offshore investment advisory business entity") or foreign discretionary investment business entity (hereinafter referred to as "offshore discretionary investment business entity") that engage in investment advisory business or discretionary investment business under the proviso to Article 18 (2) 1. <Amended by Act No. 13453, Jul. 31, 2015>
(2) An offshore investment advisory business entity or offshore discretionary investment business entity shall place a person in charge of liaison, who meets the requirements prescribed by Ordinance of the Prime Minister, within the Republic of Korea for the protection of investors. <Amended by Act No. 8863, Feb. 29, 2008>
(3) Each offshore investment advisory business entity or offshore discretionary investment business entity shall include in each investment advisory contract or a discretionary investment contract concluded with a domestic resident, provisions stipulating that the contract is governed by the laws of the Republic of Korea and the courts of the Republic of Korea have jurisdiction over lawsuits arising from the contract.
(4) Each offshore investment advisory business entity or offshore discretionary investment business entity shall prepare the proper guidelines and procedures with which its executive officers and/or employees shall comply in performing their duties to monitor whether the matters provided for in Article 98 are complied with, and shall monitor the actual status of its operation on a regular basis.
(5) Each offshore investment advisory business entity or offshore discretionary investment business entity shall prepare a business report in the manner prescribed by Presidential Decree, and shall submit the business report to the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(6) No offshore discretionary investment business entity shall engage in the discretionary investment business with the aim to solicit for investment any person other than those specified by Presidential Decree from among professional investors.
(7) Each offshore discretionary investment business entity shall keep foreign currency securities acquired with the discretionary investment property in the custody of a foreign depository institution specified by Presidential Decree.
(8) Other matters pertaining to the business method, procedure, etc. for offshore investment advisory business entities or offshore discretionary investment business entities shall be prescribed by Presidential Decree.
 Article 101 (Reporting on Quasi-Investment Advisory Business)
(1) A person who intends to engage in the business providing advice concerning judgments on investment in financial investment instruments or the values of financial investment instruments, as prescribed by Presidential Decree, using a periodical published for unspecified people, electronic mail, etc. (hereafter in this Article referred to as "quasi-investment advisory business") shall file a report with the Financial Services Commission in the form prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(2) Where any of the following events occur, an entity who engages in quasi-investment advisory business shall report such event to the Financial Services Commission within two weeks: <Amended by Act No. 8863, Feb. 29, 2008>
1. Where the entity closes the quasi-investment advisory business;
2. Where its name or domicile is changed;
3. Where its representative is changed.
(3) The Financial Services Commission may request that an entity engaging in quasi-investment advisory business submit materials concerning the details of its business, the business method, etc., if deemed necessary to maintain the sound practices in the quasi-investment advisory business and to protect customers, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(4) Article 98 (1) (excluding subparagraph 3) shall apply mutatis mutandis to any person who is required to file a report in accordance with paragraph (1).
Subsection 4 Rules on Business Conduct by Trust Business Entities
 Article 102 (Fiduciary Duty of Due Care and Duty of Good Faith)
(1) A trust business entity owes the fiduciary duty of due care to beneficiaries in managing the trust property.
(2) A trust business entity shall execute its business affairs in good faith to protect beneficiaries' interests.
 Article 103 (Restrictions on Trust Property, etc.)
(1) No trust business entity shall accept any property, other than the following, in its trust: <Amended by Act No. 10629, May 19, 2011>
1. Money;
2. Securities;
3. Monetary claims;
4. Movable property;
5. Real property;
6. Superficies, rights to lease on a deposit basis, leasehold interests in real property, claims for transfer registration of ownership of real property, and other rights related to real property;
7. Intangible property rights (including intellectual property rights).
(2) Any trust business entity may comprehensively accept in a trust two or more assets among the assets referred to in the subparagraphs of paragraph (1) from a trustor under a single trust contract.
(3) Matters pertaining to the acceptance in trusts of assets referred to in the subparagraphs of paragraph (1), the kind of trusts in connection with acceptance of a comprehensive property trust under paragraph (2), compensation for losses, guarantee for returns, and other terms and conditions of trust transactions shall be prescribed by Presidential Decree.
(4) Where a trust business entity executes a trust contract for real estate development projects, it may accept in a trust the asset referred to in paragraph (1) 1 for each real estate development project under the trust contract within 15 percent of the project cost prescribed by Presidential Decree.
 Article 104 (Segregation of Trust Property from Proprietary Property)
(1) The proviso to Article 34 (2) shall not apply to any trust business entity. <Amended by Act No. 10924, Jul. 25, 2011>
(2) Each trust business entity may acquire a trust asset with its proprietary property, in accordance with the terms and conditions of a trust contract in any of the following cases: <Amended by Act No. 11845, May 28, 2013>
1. Where it is necessary for performing the obligation that it owes to a beneficiaries as a consequence of its trust activities (limited to where the asset acquired in the course of managing a monetary trust asset has a market value (referring to the market value under Article 176 (2) 1) in an exchange market (including the trades conducted at an alternative trading system) or an overseas market similar to any of the aforesaid markets));
2. In circumstances prescribed by Presidential Decree where it is inevitable to protect beneficiaries, due to termination of the trust contract or on other grounds (limited to a trust contract under which losses shall be compensated or returns shall be guaranteed, in accordance with Article 103 (3)).
 Article 105 (Restrictions on Management of Trust Property, etc.)
(1) A trust business entity shall manage the money within the trust property in accordance with the following methods:
1. Purchasing securities (limited to the securities specified by Presidential Decree);
2. Purchasing exchange-traded or over-the-counter derivatives;
3. Depositing the money in a financial institution, as specified by Presidential Decree;
4. Purchasing monetary claims;
5. Making loans;
6. Purchasing bills;
7. Purchasing commodities;
8. Purchasing intangible property rights;
9. Purchasing or developing real estate;
10. The methods specified by Presidential Decree, considering the safety, profitability, etc. of the trust property.
(2) No trust business entity shall borrow money for the proprietary property of the trust business entity on the trust's account, except where it is entrusted with only the assets under Article 103 (1) 5 and 6 or where there exists any ground prescribed otherwise by Presidential Decree.
(3) Matters pertaining to the specific extent, conditions, limitations of management of trust property under paragraphs (1) and (2), and other methods of, and restrictions on, management of trust property shall be prescribed by Presidential Decree.
 Article 106 (Management of Surplus Fund)
A trust business entity shall, when it is entrusted with only the assets under Article 103 (1) 5 and 6, manage the surplus fund raised in the course of management of such trust property in accordance with the following methods:
1. Depositing the money in a financial institution specified by Presidential Decree;
2. Purchasing national bonds, local government bonds, or special bonds;
3. Purchasing securities for which the payment is guaranteed by the government or a financial institution specified by Presidential Decree;
4. Other methods specified by Presidential Decree as those that will not undermine the safety, profitability, etc. of trust property under Article 103 (1) 5 and 6.
 Article 107 Deleted. <by Act No. 9407, Feb. 3, 2009>
 Article 108 (Prohibition on Unsound Business Activities)
No trust business entity shall engage in any of the following activities: Provided, That trust business entities may engage in such activities in cases prescribed Presidential Decree as unlikely to undermine the protection of beneficiaries or sound trading practices:
1. Buying or selling financial investment instruments or any other investable asset on its own account or soliciting a third party to buy or sell such instruments or assets after deciding on a purchase or sale, which may significantly affect the price of the financial investment instruments or other investable assets, but before putting the decision into action, while managing the trust property;
2. Buying securities underwritten by itself or a related underwriter with the trust property;
3. Buying specific securities, etc. (referring to specific securities, etc. as defined in Article 172 (1); hereafter the same shall apply in this subparagraph) with the trust property to create an artificial market price (referring to the market price as defined in Article 176 (2) 1) for the specific securities, etc. of a corporation for which the corporation itself or its related underwriter was in charge of the underwriting affairs prescribed by Presidential Decree;
4. Undermining a specific trust property's interest to pursue its own or a third party's interest;
5. Trading the trust property for any other trust property, collective investment property, or discretionary investment property managed by the trust business entity;
6. Trading the trust property for the proprietary property of the trust business entity or its interested party;
7. Investing the trust property in securities issued by the trust business entity or its interested party without consent of beneficiaries;
8. Engaging any person other than fund managers to manage the trust property;
9. Other activities specified by Presidential Decree as likely to undermine the protection of beneficiaries or sound trading practices.
 Article 109 (Trust Contract)
A trust business entity shall, whenever it executes a trust contract with a trustor, state the following matters in the contract documents delivered to the trustor in accordance with Article 59 (1):
1. Name or designation of the trustor, the beneficiaries, and the trust business entity;
2. Matters concerning designation and change of beneficiaries;
3. Kinds, quantity and value of the trust property;
4. Purpose of trust;
5. Contract term;
6. Details of specific assets, if there are assets specified for acquisition in the course of management of the trust property;
7. Matters concerning the rate of compensation or guarantee, if losses shall be compensated for or returns shall be guaranteed;
8. Matters concerning remuneration to which the trust business entity shall be entitled;
9. Matters concerning termination of the trust contract;
10. Other matters prescribed by Presidential Decree as necessary for the protection of beneficiaries or sound trade practice.
 Article 110 (Beneficiary Certificate)
(1) A trust business entity may issue beneficiary certificates that represent the beneficial interest under a monetary trust contract.
(2) A trust business entity shall, whenever it intends to issue beneficiary certificates under paragraph (1), file a report with the Financial Services Commission along with the accompanying documents specified by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008>
(3) Beneficiary certificates shall be in bearer form: Provided, That they may be issued in registered form if there is such request from beneficiaries.
(4) Registered beneficiary certificates may be changed to bearer certificates upon such request of beneficiaries.
(5) Each beneficiary certificate shall contain the following descriptions and shall bear the printed name, and an affixed seal, or it shall be signed by the representative of the trust business entity:
1. Trade name of the trust business entity;
2. Name or designation of beneficiary if it is in registered form;
3. Par value;
4. Details of the management method agreed upon, if any;
5. Details of compensation or guarantee, if there is a condition to compensate for losses or guarantee of returns in accordance with Article 103 (3) in the contract;
6. Trust contract term;
7. Time period and place for repayment of principal of the trust and distribution of earnings;
8. Calculation method of remuneration for trust;
9. Other matters prescribed by Presidential Decree.
(6) In cases where beneficiary certificates have been issued, the beneficial interest under the relevant trust contract shall be transferred or exercised along with the beneficiary certificates: Provided, That the beneficial interest may be transferred or exercised without the beneficiary certificates if they are registered beneficiary certificates.
 Article 111 (Repurchasing Beneficiary Certificates)
A trust business entity may repurchase beneficiary certificates as its proprietary property in accordance with the manner prescribed by Presidential Decree. In such cases, Article 36 of the Trust Business Act shall not apply. <Amended by Act No. 10924, Jul. 25, 2011>
 Article 112 (Voting Rights, etc.)
(1) The rights for stocks acquired with the trust property shall be exercised by the trust business entity. In such cases, the trust business entity shall faithfully exercise the voting rights in relation to the stocks that consist of the trust property to protect the beneficiary's interests. <Amended by Act No. 11845, May 28, 2013>
(2) In exercising voting rights in relation to stocks that consist of the trust property, a trust business entity shall exercise the voting rights so as not to affect a resolution passed by the number of stocks, as calculated by subtracting the number of the stocks that consist of the trust property from the stocks held by shareholders present at the general meeting of shareholders of the corporation that issued the stocks that consist of the trust property, notwithstanding paragraph (1), in any of the following cases: Provided, That the same shall not apply in cases where the corporation that issued the stocks that consist of the trust property is merged, its business is transferred, it acquires any business transferred, an executive officer is appointed or dismissed, or there is any other cause or event similar to the aforesaid, and if it is obviously foreseeable that such event or cause will result in any loss to the trust property:
1. Where any of the following entities intends to incorporate the corporation that issued the stocks consisting of the trust property, into a group of its affiliates:
(a) The trust business entity or an entity in a special relationship specified by Presidential Decree with the business entity;
(b) An entity specified by Presidential Decree that has de facto control over the trust business entity;
2. Where the corporation that issued the stocks that consist of the trust property has any of the following relationships with the trust business entity:
(a) Where it is an affiliate;
(b) Where it has a relationship prescribed by Presidential Decree under which it exercises de facto control over the trust business entity;
3. Where there is a possibility of undermining the protection of beneficiaries or the appropriate management of the trust property in circumstances prescribed by Presidential Decree.
(3) No trust business entity may exercise the voting rights in relation to the stocks that consist of the trust property, if any of the following applies to such stocks:
1. Excess stocks, where such stocks have been acquired in excess of 15 percent of the total number of the stocks issued by an identical corporation;
2. Stocks of a corporation that issued stocks consisting of the trust property, if the corporation engages the trust property entity to acquire them under a trust contract with intent to secure treasury stocks.
(4) No trust business entity shall engage in any conduct to circumvent any provision of paragraphs (2) and (3) by cross-exercising the voting rights under an agreement with a third party.
(5) The proviso to paragraph (2) shall not apply to any trust business entity that belongs to a conglomerate subject to limitations on cross-holdings.
(6) Where a trust business entity exercises the voting rights in relation to stocks that consist of the trust property, in violation of paragraphs (2) through (5), the Financial Services Commission may order the trust business entity to dispose of such stocks within a prescribed period not exceeding six months. <Amended by Act No. 8863, Feb. 29, 2008>
(7) When a trust business entity exercises voting rights in accordance with paragraph (2) in relation to a matter concerning a change in the management of business, such as a merger, transfer or acquisition of business, or appointment of an executive officer, the trust business entity shall disclose to the public the details of the exercised voting rights on its website, etc. in the manner prescribed by Presidential Decree.
 Article 113 (Inspection, Public Disclosure, etc. of Account Books and Documents)
(1) A beneficiary may request a trust business entity, in writing with the reasons contained therein, to allow him/her to inspect account books and documents related to the trust property, in which he/she has an interest, during business hours, or to issue a certified copy or abstract of such account books and documents. In such cases, the trust business entity shall not reject such request, unless a justifiable ground exists as prescribed by Presidential Decree.
(2) Matters pertaining to the extent of the account books and documents subject to the request for inspection or issuance of a certified copy or abstract thereof under paragraph (1) shall be prescribed by Presidential Decree.
 Article 114 (Accounting of Trust Property, etc.)
(1) In accounting the trust property, a trust business entity shall comply with the accounting standards prescribed and publicly notified by the Financial Services Commission, following deliberation by the Securities and Futures Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission may entrust the establishment or amendment of the accounting standards referred to in paragraph (1) to an entity prescribed by Presidential Decree from among non-governmental corporations or organizations with expertise. In such cases, upon establishing or amending the accounting standards, such non-governmental corporation or organization shall report the established or amended accounting standards to the Financial Services Commission without delay. <Amended by Act No. 8863, Feb. 29, 2008>
(3) A trust business entity shall undergo an audit conducted by an auditor under Article 3 (1) of the Act on External Audit of Stock Companies (hereinafter referred to as "auditor") for its trust property within two months after the end of each fiscal year of the trust business entity: Provided, That it need not undergo such audit where there is no possibility of undermining beneficiaries' interests in circumstances prescribed by Presidential Decree.
(4) Upon the appointment or replacement of an auditor for the trust property, each trust business entity shall report such fact to the Financial Services Commission within one week after such appointment or replacement. <Amended by Act No. 8863, Feb. 29, 2008>
(5) The auditor shall audit whether a trust business entity has complied with related statutes when the trust business entity calculates the base prices of beneficiary certificates and accounting of the trust property, and shall notify the internal auditor of the trust business entity (referring to an audit committee, if such audit committee is established therein) of the findings thereof.
(6) Each auditor shall conduct an audit in compliance with the audit standards referred to in paragraph (9) and the audit standards prescribed under Article 5 of the Act on External Audit of Stock Companies. <Amended by Act No. 9407, Feb. 3, 2009>
(7) Each auditor may request a trust business entity to allow him/her to inspect and copy relevant materials, including account books of the trust property, or request it to submit materials necessary for the audit. In such cases, the trust business entity shall comply with a request without delay.
(8) Article 9 of the Act on External Audit of Stock Companies shall apply mutatis mutandis to the audit of trust property under paragraph (3).
(9) Matters pertaining to the guidelines for appointment of auditors, the audit standards, the authority of auditors, and the submission, public disclosure, etc. of the audit report shall be prescribed by Presidential Decree. <Amended by Act No. 9407, Feb. 3, 2009>
 Article 115 (Auditor's Liability for Damage)
(1) An auditor shall be liable for any damage sustained by a beneficiary, if the auditor has caused such damage to the beneficiary who has relied on any false statement or representation concerning a material fact or an omission to state or represent a material fact in the audit report prepared after conducting an audit under Article 114 (3). In such cases, where the auditor was in the form of an audit team referred to in Article 3 (1) 3 of the Act on External Audit of Stock Companies, the persons who have participated in the audit of the trust property shall be jointly liable for such damage.
(2) Where an auditor is liable for any damage sustained by a beneficiary and a director or an auditor of the trust business entity (referring to a member of an audit committee, if such audit committee is established therein; hereafter the same shall apply in this paragraph) is culpable for such damage, the auditor and the director or auditor of the trust business entity shall be jointly liable for such damage: Provided, That where a person liable for damage has no intention, the person who shall be liable for damage according to the rate of liability determined by the court dependent upon the causes attributable. <Amended by Act No. 12383, Jan. 28, 2014>
(3) Notwithstanding the proviso to paragraph (2), where the amount of income recognized (referring to the amount of income recognized as defined in subparagraph 8 of Article 2 of the National Basic Living Security Act) does not exceed the amount prescribed by Presidential Decree, an auditor shall be jointly liable for damage with a director and an auditor of the trust business entity. <Newly Inserted by Act No. 12383, Jan. 28, 2014>
(4) Article 17 (6) through (9) of the Act on External Audit of Stock Companies shall apply mutatis mutandis in cases falling under paragraphs (1) and (2). <Amended by Act No. 12383, Jan. 28, 2014>
 Article 116 (Merger, etc.)
(1) In cases where trust business entities are merged, the trust business entity surviving the merger or thereby newly established shall succeed to the rights and obligations related to the trust of ceased trust business entity.
(2) In cases where any beneficiary raises an objection to a merger of trust business entities, Articles 11 and 17 (1) and (3) of the Trust Act shall apply to the termination of the mission of the trust business entity, the appointment of a new trust business entity, etc. <Amended by Act No. 10924, Jul. 25, 2011>
(3) In cases where a trust business entity continues its business after changing its purpose of business to engage in another business, the Financial Services Commission may order the entity to place its property in deposit until its obligations related to the trust are fully performed, or issue any other order as may be necessary. The same shall apply in cases where any company other than a trust business entity carries out business affairs necessary for termination of the mission of a trust business entity in the course of its merger. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 117 (Liquidation)
Article 95 shall apply mutatis mutandis to the liquidation of a financial investment business entity that engages in trust business.
 Article 117-2 (Special Cases concerning Managerial Trust)
(1) Where a trust business entity entrusted with only one type of property referred to in Article 103 (1) 4 through 6 concludes a managerial trust contract, it may be entrusted with any monetary claims accompanied by such trust property.
(2) Necessary matters concerning the method of management of trust property and restriction thereon under paragraph (1) shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
CHAPTER V SPECIAL CASES CONCERNING CROWDFUNDING BROKERS, ETC.
 Article 117-3 (Prohibition on Business Activities without Registration)
No one shall engage in the brokerage of crowdfunding unless he/she has been registered as a crowdfunding broker under this Act.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-4 (Registration)
(1) An entity who intends to be a crowdfunding broker shall be deemed to have obtained authorization under Article 12, if the person has been registered with the Financial Services Commission.
(2) An entity who intends to be registered as a crowdfunding broker under paragraph (1) shall satisfy each of the following requirements: <Amended by Act No. 13453, Jul. 31, 2015>
1. The entity shall be either of the following:
(a) A stock company incorporated under the Commercial Act;
(b) A foreign crowdfunding broker (referring to an entity engages in any business equivalent to crowdfunding brokerage in a foreign country under the statutes of the foreign country; hereafter the same shall apply) that has established a branch or other places of business necessary for the crowdfunding brokerage;
2. Its equity capital shall not be less than the amount prescribed by Presidential Decree, which shall be at least 500 million won;
3. Its business plan shall be feasible and sound;
4. It shall have human resources, electronic computer systems and other physical facilities sufficient to protect investors and conduct the business in which it intends to engage;
5. None of its executive officers shall be those provided for in Article 5 of the Act on Corporate Governance of Financial Companies;
6. Its major shareholders (referring to the major shareholders as defined in Article 12 (2) 6 (a)) or the foreign crowdfunding broker shall have sufficient investment capabilities, good financial standing and social credibility;
7. It shall have good financial standing prescribed by Presidential Decree, such as the fulfillment of guidelines for management soundness, and good social credibility prescribed by Presidential Decree, such as having no record of violations of statutes;
8. It shall have a system for preventing conflicts of interest between the crowdfunding broker and investors, as well as between a specific investor and other investors, which shall satisfy the requirements prescribed by Presidential Decree.
(3) A person who intends to be registered under paragraph (1) shall file an application for registration with the Financial Services Commission.
(4) Upon receipt of an application for registration filed under paragraph (3), the Financial Services Commission shall examine the contents of the application; determine whether to approve the registration within two months, and give written notice of its determination and the grounds for such determination to the applicant without delay. In this case, the Financial Services Commission may request that the applicant correct his/her application, if such application is incomplete.
(5) The duration for correcting an incomplete application for registration or other durations specified by Ordinance of the Prime Minister shall be disregarded for the purposes of calculating the period for examination under paragraph (4).
(6) In determining whether to approve an application for registration under paragraph (4), the Financial Services Commission shall not reject the application for registration, unless any of the following grounds exists:
1. Where the applicant fails to satisfy any of the requirements for registration provided for in paragraph (2);
2. Where the application for registration filed under paragraph (3) contains false information;
3. Where the applicant fails to correct his/her application as requested under the latter part of paragraph (4).
(7) Upon having determined to approve a registration pursuant to paragraph (4), the Financial Services Commission shall enter the necessary matters in the register of crowdfunding brokers, and shall give public notice of the details of such registration on the Official Gazette, its website, etc.
(8) A crowdfunding broker shall be comply with the requirements for registration provided for in the subparagraphs of paragraph (2) (excluding subparagraph 7 of the same paragraph; and referring to the relaxed requirements prescribed by Presidential Decree in the case of subparagraph 2 and 6 the same paragraph) in the course of conducting its business following registration.
(9) Matters concerning filing applications for registration, including the mandatory descriptions and accompanying documents of the applications for registration under paragraphs (1) through (8), and other necessary matters, including the methods and procedures for examination of registration, shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-5 (Prohibition, etc. on Use of Similar Name)
(1) A crowdfunding broker that does not engage in any other types of financial investment business (including investment brokerage business that does not fall within the category of crowdfunding brokerage) shall use "financial investment" or the foreign words prescribed by Presidential Decree, which have a similar meaning, in his/her trade name.
(2) No entity, other not a crowdfunding broker, shall use the expression "crowdfunding brokerage" or a similar in its title.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-6 (Corporate Governance, etc.)
(1) Where the major shareholder (referring to the major shareholder referred to in Article 23 (1)) of a crowdfunding broker is changed, the crowdfunding broker shall report such change to the Financial Services Commission within two weeks.
(2) A crowdfunding broker shall establish internal control standards that shall be complied with by its executive officers and/or employees as appropriate guidelines and procedures when they perform their duties, which include matters prescribed by Presidential Decree.
(3) Articles 28, 28-2, 29, 30 and 31 shall not apply to any crowdfunding broker.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-7 (Regulations, etc. on Business Activities)
(1) Articles 40, 46, 46-2, 47 through 53, 59, 61, 66 through 70, 72 through 77, 77-2, 77-3 and 78 shall not apply to any crowdfunding broker.
(2) No crowdfunding broker shall acquire on his/her own account any securities for which he/she performs crowdfunding brokerage, or act as an intermediary or agent for the issuance of or subscription for such securities.
(3) No crowdfunding broker shall provide any advice that may affect an investor's judgment on the credit of a person who issues securities through crowdfunding brokerage (hereafter in Chapter referred to as "issuer of online small-value securities") or on making any investment, or any advice on the management of an issuer of online small-value securities.
(4) No crowdfunding broker shall accept an investor's declaration of intent to subscribe for securities before it ascertains, by any method prescribed by Presidential Decree, such as the investor's signature that the investor has thoroughly examined the contents of documents stating the details of the subscription, risks contingent on investment, restrictions on the sale of securities, conditions for issuing securities, and the financial standing of the issuer of online small-value securities, and the business plan.
(5) A crowdfunding broker may impose restrictions on the qualifications, etc. of investors according to the reasonable and clear criteria, if requested by an issuer of online small-value securities.
(6) No crowdfunding broker shall subscribe for any security with an investor's property unless the investor has indicated his/her intent to subscribe.
(7) No crowdfunding broker shall unfairly give preferential treatment to, or discriminate any particular issuer of online small-value securities or any investor in the course of performing such affairs as providing information on the issuer of online small-value securities, and processing the orders for subscription: Provided, That the same shall not apply where good cause prescribed by Presidential Decree exists, such as where an investor indicates his/her intent to subscribe in advance.
(8) Upon expiration of the subscription period of securities, a crowdfunding broker shall give notice to each investor of the details of the subscription and issuance of the securities without delay by the method prescribed and publicly notified by the Financial Services Commission.
(9) A crowdfunding broker take necessary measures to ensure that the limit of issuance of securities and the limit of investment by an investor prescribed in Article 117-10 (1) and (6) are complied with.
(10) No crowdfunding broker shall engage in any activities soliciting subscriptions for securities, except for the following activities:
1. Posting advertisements soliciting investment referred to in Article 117-9 (1) on his/her website;
2. Posting the details posted by an issuer of online small-value securities under Article 117-10 (2) on his/her website;
3. Managing his/her website to allow investors to exchange opinions on the securities the brokerage of which is conducted by himself/herself or on the issuer of online small-value securities: Provided, That no crowdfunding broker shall delete or modify any investor’s opinions posted on his/her website at his/her own discretion;
4. Transmitting the details posted by an issuer of online small-value securities under Article 117-10 (2) to a specific investor, where the subscription of securities is solicited through private placement.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-8 (Management of Subscription Deposits)
(1) No crowdfunding broker shall take the custody and deposit of any money, securities or other property from investors.
(2) A crowdfunding broker shall place investors' subscription deposits in deposit or trust account with a bank prescribed by Presidential Decree (hereafter in Article referred to as "bank") or securities finance company.
(3) A crowdfunding broker shall expressly state that the investors' subscription deposits placed in a deposit or trust account with a bank or securities finance company under paragraph (2) is the investors' property.
(4) No one shall offset or seize (including provisional seizure) any investor's subscription deposit placed in a deposit or trust account with a bank or securities finance companies under paragraph (2); and no crowdfunding broker shall transfer or provide as collateral any investor's subscription deposit placed in a deposit or trust account with a bank or securities finance company, except in circumstances prescribed by Presidential Decree.
(5) Upon the occurrence of any event prescribed by Presidential Decree, such as cancellation of registration, resolution of dissolution, etc., a crowdfunding broker shall take measures so as to pay the investors' subscription deposits placed in a deposit or trust account with a bank or securities finance company preferentially to its investors.
(6) Necessary matters concerning placing subscription deposits in a deposit or trust account under paragraphs (1) through (5) shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-9 (Special Cases concerning Advertisements Soliciting Investment)
(1) Neither crowdfunding broker nor issuer of online small-value securities shall advertise for investment through any means other than the website opened by the crowdfunding broker: Provided, That a crowdfunding broker or issuer of online small-value securities may give information on the address of the website on which the advertisement soliciting investment is posted, or may provide means to access the website using other media.
(2) No one, other than a crowdfunding broker or an issuer of online small-value securities, shall advertise for investment concerning crowdfunding brokerage.
(3) Except as provided for in this Article, Article 57 shall apply mutatis mutandis where a crowdfunding broker or an issuer of online small-value securities runs any advertisement soliciting investment.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-10 (Special Cases concerning Public Offering of Securities)
(1) Articles 119 and 130 shall not apply to any public offering of securities exceeding the amount prescribed by Presidential Decree through crowdfunding brokerage.
(2) To protect investors, an issuer of online small-value securities shall post the terms and conditions for issuing securities, its financial standing and business plan, and other matters prescribed by Presidential Decree on the website opened by a crowdfunding broker and take other measures prescribed by Presidential Decree.
(3) Where any online small-value securities are placed for public offering through crowdfunding brokerage, if the amount of subscription falls short of the amount calculated by multiplying the amount scheduled for public offering by the ratio prescribed by Presidential Decree, the issuer of the online small-value securities shall cancel the issuance thereof.
(4) An issuer of online small-value securities may provide information that can help investors make their judgment on investment on the website managed by a crowdfunding broker under Article 117-7 (10) 3 until seven days prior to the end of the subscription period of securities: Provided, That where the information containing a material fact that may affect investors in making their judgment on investment, as prescribed by Presidential Decree, is different from the details posted under paragraph (2), the issuer of online small-value securities shall immediately correct the relevant details posted under paragraph (2) and post the correction on the website managed by the crowdfunding broker (where the date of posting the correction falls within seven days from the last day of the subscription period, the last day of the subscription period shall be deemed to be changed to the date which falls seven days after the date of posting).
(5) Neither issuer of online small-value securities nor its major shareholder (referring to the major shareholder prescribed in Article 23 (1) as at the time immediately before funds are raised through crowdfunding brokerage) shall sell any share he/she holds to a third person during the period prescribed by Presidential Decree, which shall be at least one year from the time the issuer of online small-value securities issues the securities through crowdfunding brokerage.
(6) The amount of investment to be made by an investor (excluding persons prescribed by Presidential Decree, such as professional investors) through crowdfunding brokerage shall not exceed the following limits:
1. A person who meets the requirements prescribed by Presidential Decree, such as income:
(a) Cumulative amount of investment in the same issuer of online small-value securities for the most recent one year: An amount prescribed by Presidential Decree not exceeding 10 million won;
(b) Cumulative amount of investment for the most recent one year: An amount prescribed by Presidential Decree not exceeding 20 million won;
2. A person who fails to meet the requirements referred to in subparagraph 1:
(a) Cumulative amount of investment in the same issuer of online small-value securities for the most recent one year: An amount prescribed by Presidential Decree not exceeding 2 million won;
(b) Cumulative amount of investment for the most recent one year: An amount prescribed by Presidential Decree not exceeding 5 million won.
(7) An investor shall deposit or safeguard his/her securities issued through crowdfunding brokerage without delay in the Securities Depository by the method prescribed in Article 309 (5), and shall not sell such securities (including securities acquired by exercising the rights vested in the securities) or otherwise transfer to any third person for one year from the date of the deposit or safeguard: Provided, That the investor may sell or transfer his/her securities in any of the following cases:
1. Sale to a professional investor;
2. Sale to a person prescribed Presidential Decree who is aware of the possibility of investment loss, low possibility of circulation, etc. of the relevant securities.
(8) An investor may withdraw his/her intention for subscription, as prescribed by Presidential Decree, by not later than the end of the subscription period of the securities issued through crowdfunding brokerage. In such cases, the crowdfunding broker shall return the subscription deposit to the investor without delay.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-11 (Ascertaining Facts of Posted Matters)
(1) A crowdfunding broker shall ascertain the following matters concerning an issuer of online small-value securities before conducting crowdfunding brokerage:
1. Financial standing of the issuer of online small-value securities;
2. Whether the business plan of the issuer of online small-value securities contains items prescribed by Presidential Decree for the protection of investors;
3. Careers of the representative and management personnel of the issuer of online small-value securities;
4. Whether the plan to use raised fund contains items prescribed by Presidential Decree for the protection of investors;
5. Other matters prescribed by Presidential Decree, based on which the creditability of the issuer of online small-value securities can be ascertained.
(2) The methods and procedures for ascertaining the facts of the matters prescribed in subparagraphs of paragraph (1) shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-12 (Liability for Damage, etc.)
(1) Each of the following persons shall be liable for any damage sustained by a person who has acquired a security through crowdfunding brokerage due to a false statement or representation of a material fact in a document stating the conditions for the issuance of securities, financial standing, etc. posted under Article 117-10 (2) or a business plan (including any correction thereof posted under Article 117-10 (4)), or due to an omission to state or represent a material fact therein: Provided, That where a person who shall be otherwise liable for such damage proves that he/she was unable to know such fact although he/she exercised reasonable care, or the purchaser of a security was aware of such fact as at the time of subscription for the acquisition of the security, each of the following persons shall be exempt from his/her liable for such damage:
1. The issuer of online small-value securities;
2. The representative or a director (referring to any equivalent person if no director exists; and referring to a promoter where the document stating the conditions for the issuance of securities, financial standing, etc. or the business plan was prepared before the incorporation of a corporation) as at the time such document or business plan was prepared;
3. A person referred to in any subparagraph of Article 401-2 (1) of the Commercial Act, who instructed or executed the preparation of the document stating the conditions for the issuance of securities, financial standing, etc. or the business plan;
4. A person prescribed by Presidential Decree, such as a certified public accountant, a certified appraiser or a credit rating specialist, (including the organization with which he/she is affiliated), who certified that the document stating the conditions for the issuance of securities, financial standing, etc. or the business plan was true and accurate by affixing his/her signature thereto;
5. A person who consented to include his/her statement of appraisal, analysis or verification in the document stating the conditions for the issuance of securities, financial standing, etc. or the business plan and confirmed the contents as described therein.
(2) Article 126 shall apply mutatis mutandis to the calculation of the amount of damages under paragraph (1).
(3) The liability for damage provided for in paragraph (1) ceases, if a claimant fails to exercise the right to make a claim within the one-year period beginning on the date he/she becomes of the relevant facts, or within the three-year period beginning on seven days prior to the end of the subscription period of the relevant securities.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-13 (Central Record Keeping Agency)
(1) Upon receipt of a request for the brokerage of public offering or private placement of securities from an issuer of online small-value securities or upon receipt of an order for subscription from an investor, a crowdfunding broker shall provide data prescribed by Presidential Decree, such as the details of the request or order, information on the issuer of online small-value securities and the investor, without delay to the Central Recording Keeping Agency (referring to the agency that manages information on the issuers of online small-value securities and investors, etc. provided by crowdfunding brokers, as prescribed by Presidential Decree; hereinafter the same shall apply).
(2) A crowdfunding broker shall entrust the Central Recording Keeping Agency with the matters necessary to take the measures referred to in Article 117-7 (9).
(3) The Central Recording Keeping Agency shall keep in custody and manage the data received under paragraph (1) by the method prescribed by Presidential Decree.
(4) The Central Recording Keeping Agency shall not provide the data received under paragraph (1) to any third person: Provided, That the Central Recording Keeping Agency may provide the data for the crowdfunding brokers or issuers of online small-value securities, or in other cases prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-14 (Management of Register of Investors)
(1) An issuer of online small-value securities shall entrust the affairs related to the management of a register of investors (referring to a register containing the details of owners of securities, such as a list of shareholders, for management) to the Securities Depository.
(2) Upon acceptance of the entrustment under paragraph (1), the Securities Depository shall prepare and keep a register of investors containing the following matters:
1. Address and name of each investor;
2. Quantity of securities owned by each investor;
3. Where real securities are issued, the numbers thereof.
(3) The Securities Depository shall not provide information prescribed in the subparagraphs of paragraph (2) to any third person: Provided, That the Securities Depository may provide such information for crowdfunding brokers or issuers of online small-value securities, or in other cases prescribed by Presidential Decree.
(4) Article 358-2 (1) and (2) of the Commercial Act shall apply mutatis mutandis to the securities issued through crowdfunding brokerage.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-15 (Responsibilities of Providers of Electronic Message Board Services)
(1) A provider of information and communications services as defined in Article 2 (1) 3 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, Etc. who operates an electronic message board as defined in subparagraph 9 of the same paragraph (hereinafter referred to as "electronic message board service provider") shall comply with the following matters to prevent any damage to investors, if the provider gives information on the address of the website of a crowdfunding broker, or provides any means to access that website under Article 117-9 on the message board he/she operates:
1. Where an issuer of online small-value securities or a crowdfunding broker gives information on the address of the website through which crowdfunding brokerage is conducted, or provides any means to access that website, using the message board, the electronic message board service provider shall give guidance and recommendations to comply with the obligations prescribed in Article 117-9;
2. Where an issuer of online small-value securities or a crowdfunding broker that gives information on the address of his/her website, or provides any means to access that website, using the message board violates this Act, the electronic message board service provider shall take the following measures:
(a) Measures to prevent damage to investors, such as restricting access by the violator, and deleting information posted in violation of the Act;
(b) Reporting to the Financial Services Commission on the fact that the violator has violated the Act;
3. Other matters prescribed by Presidential Decree.
(2) Where an electronic message board service provider fails to comply with any of the matters prescribed in paragraph (1), the Financial Services Commission may request that the Korea Communications Commission issue a corrective order or impose an administrative fine.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
 Article 117-16 (Inspections and Measures)
Article 419 (2) through (4) and (8) shall not apply to a crowdfunding broker.
[This Article Newly Inserted by Act No. 13448, Jul. 24, 2015]
PART III ISSUANCE AND CIRCULATION OF SECURITIES
CHAPTER I REGISTRATION STATEMENT
 Article 118 (Scope of Application)
No provision of this Chapter shall apply to national bonds, local government bonds, bonds issued by a corporation established directly pursuant to an Act specified by Presidential Decree, or other securities deemed to be those in which investors are properly protected through sufficient public disclosure pursuant to other Acts or in any other way, as specified by Presidential Decree.
 Article 119 (Registration of Public Offering or Sale)
(1) No securities shall be publicly offered or sold, unless and until the registration statement filed by the issuer in connection with the public offering or sale of the securities with the Financial Services Commission is accepted by the Commission (limited to where the total amount of securities publicly offered or sold, as calculated by the formula prescribed by Presidential Decree, is not less than the amount prescribed by Presidential Decree). <Amended by Act No. 8863, Feb. 29, 2008>
(2) Where a registration statement for a total amount of securities to be publicly offered en bloc over a certain period (hereinafter referred to as "universal shelf registration statement") in accordance with the guidelines and methods prescribed by Presidential Decree, considering the type of securities, scheduled issue period, frequency of issuance, requirements for the issuer, etc., is filed with and accepted accordingly by the Financial Services Commission, such securities may be publicly offered or sold without submitting a registration statement each time such securities are publicly offered or sold during the period stated therein, notwithstanding paragraph (1). In such cases, the documents related to the universal shelf registration statement (hereinafter referred to as "supplements to the universal shelf registration statement"), as prescribed by Presidential Decree, shall be submitted each time such securities (excluding collective investment securities and derivatives-linked securities, prescribed by Presidential Decree) are publicly offered or sold. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
(3) An issuer may make a statement or representation of the following matters (hereinafter referred to as "forward-looking statement") concerning predictions or projections for the financial status of the issuer (referring to an investment trust or undisclosed investment association, where the beneficiary certificates of an investment trust or the equity securities of an undisclosed investment association are involved; hereafter the same shall apply in this paragraph), its future business performance, etc. in the registration statement filed under paragraph (1) and the universal shelf registration statement filed under paragraph (2) (hereinafter referred to as "registration statement"). In such cases, the forward-looking statement shall be made as provided for in Article 125 (2) 1, 2, and 4:
1. Matters concerning predictions and projections for the issuer's sales performance, including sales volume, size of income, and other business performance;
2. Matters concerning predictions and projections for the issuer's financial status, including size of capital and cash flow;
3. Matters concerning the issuer's business performance in connection with the occurrence of a specific event or the establishment of a specific plan, or the targeted level at a certain point in time;
4. Other matters prescribed by Presidential Decree as those concerning future predictions and projections for the issuer.
(4) If any part of the descriptions required in a registration statement or in any accompany document is the same as the part in the one prior-submitted, when filing a registration statement, a written statement that indicates and makes reference to the part may be filed in lieu of the registration statement.
(5) In filing a registration statement, the representative director (referring to the representative executive officer in the case of a company with executive officer system; hereafter the same shall apply in this Article) of the issuer and the director responsible for filing the registration statement (or a person in an equivalent position, if there is no representative director or director responsible for filing the registration statement) shall review and confirm the matters prescribed by Presidential Decree, such as the fact that there is no false statement or representation of a material fact, nor omission of a material fact in the descriptions of the registration statement, and each of them shall affix his/her signature to the registration statement. <Amended by Act No. 11845, May 28, 2013>
(6) Notwithstanding paragraphs (1) through (5), no registration statement need be submitted if the conditions prescribed by Presidential Decree are met, such as where enough disclosures are being made on the issuer and securities of the same type. <Newly Inserted by Act No. 11845, May 28, 2013>
(7) Necessary matters concerning the mandatory descriptions of a registration statement and its accompanying documents under paragraphs (1) through (4) shall be prescribed by Presidential Decree.
 Article 119-2 (Right to Request Data, etc.)
(1) A corporation obligated to submit a registration statement among corporations having any subsidiary companies (where an issuer which is a dominant corporation is in a dominant-subordinate relationship with a specific company as prescribed in the Presidential Decree pursuant to subparagraph 2 of Article 1-2 of the Act on External Audit of Stock Companies, referring to such specific company that is subordinate to the corporation; and in cases of foreign corporations, etc. having any subordinate companies obligated to prepare consolidated financial statements under the accounting standards applied by the issuer, such as international accounting standards, referring to such subsidiary company as prescribed in the relevant international accounting standards; hereinafter the same shall apply) (hereinafter referred to as "corporation subject to preparation of consolidated financial statements") may request its subsidiary companies to submit relevant data to the extent necessary for preparation of the registration statement.
(2) A corporation obligated to submit a registration statement among corporations subject to preparation of consolidated financial statements may examine the business affairs and financial standing of its subsidiary companies, when it is unable to acquire the data necessary for the preparation of the registration statement or when it needs to verify the contents of the data submitted by the subsidiary companies.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 120 (Effective Date of Registration Statement, etc.)
(1) The registration of securities under Article 119 (1) and (2) (hereinafter referred to as "securities registration") shall be effective on the day after the expiration of the time period prescribed by Ordinance of the Prime Minister, considering the type of securities or the characteristics of the transaction, etc., which shall begin on the day on which the registration statement is submitted and accepted by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission shall not refuse to approve a registration statement, unless it is not prepared in conformity with the prescribed form of the registration statement, there is any false description or representation in the registration statement concerning a material fact, or any description or representation of a material fact is omitted. <Amended by Act No. 8863, Feb. 29, 2008>
(3) The effectiveness under paragraph (1) shall not include any effect of acknowledging that the descriptions of the relevant registration statement are true or correct, or the Government's assurance or approval of the value of the securities.
(4) An issuer of securities shall, when it intends to withdraw its securities registration, file a withdrawal statement with the Financial Services Commission no later than the day before the date set for offering to acquire or purchase the securities stated in the relevant registration statement. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 121 (Restrictions on Trading)
(1) If there is an offer to acquire or purchase securities before the registration under Article 120 becomes effective, the issuer, seller, or its agent of the securities shall not accept such offer.
(2) If it is required to submit supplements to a universal shelf registration statement in accordance with Article 119 (2), the issuer, seller, or its agent shall not accept an offer to acquire or purchase the securities, unless and until such supplements to the universal shelf registration statement are submitted.
 Article 122 (Corrective Registration Statement)
(1) If a registration statement submitted has not been prepared in conformity with the prescribed form for the statement, there is any false description or representation of a material fact in the registration statement or any omission of a material fact, or there is any uncertain description or representation of a material fact in the registration statement which may undermine investors’ reasonable judgment on investment or significantly mislead investors, the Financial Services Commission may demand that the person present the grounds therefor and submit a registration statement (hereafter in Chapter referred to as "corrective registration statement") with correct contents of the registration statement by no later than the date prior to the date set for offering to acquire or purchase the securities stated in the registration statement. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
(2) Upon a demand under paragraph (1), the relevant registration statement shall be deemed not accepted from the date such demand is made.
(3) A person who has filed a registration statement (including supplements to a universal shelf registration statement referred to in Article 119 (2); hereafter in this paragraph the same shall apply) intends to correct any description of the registration statement, the person may file a corrective registration statement by no later than the date prior to the date set for offering to acquire or purchase the securities stated in the registration statement. In such cases, if the person intends to correct any material fact prescribed by Presidential Decree, or if it is necessary to correct any description of the registration statement for protecting investors in circumstances prescribed by Presidential Decree, the person must file a corrective registration statement. <Amended by Act No. 11845, May 28, 2013>
(4) Notwithstanding paragraph (3), a person who has filed a universal shelf registration statement may file a corrective registration statement before the expiration of the scheduled issue period. In such cases, the predetermined issue amount and the scheduled issue period of securities, other than those prescribed by Presidential Decree from among collective investment securities, shall not be corrected: Provided, That the predetermined issue amount that is reduced below the limit prescribed by Presidential Decree, may be corrected by up to 20 percent of the predetermined issue amount. <Amended by Act No. 9407, Feb. 3, 2009>
(5) Where a corrective registration statement has been filed in accordance with paragraph (1), (3), or (4), the relevant registration statement shall be deemed to have been accepted on the date of acceptance of the corrective registration statement.
(6) Where an issuer fails to submit a corrective registration statement within the period prescribed by Presidential Decree after receiving a demand made under paragraph (1), the relevant registration statement shall be deemed to have been withdrawn. <Newly Inserted by Act No. 11845, May 28, 2013>
 Article 123 (Preparation and Public Notice of Investment Prospectus)
(1) When an issuer publicly offers or sells securities in accordance with Article 119, the issuer shall file an investment prospectus (hereinafter referred to as "investment prospectus") and a short-form investment prospectus referred to in Article 124 (2) 3 (limited to the cases where the securities for public offer or sales are collective investment securities; hereafter the same shall apply in this Article), prepared in accordance with the manner prescribed by Presidential Decree, with the Financial Services Commission on the day on which the relevant registration statement becomes effective (or the day on which the supplements to a universal shelf registration statement are filed, in cases where the supplements to the universal shelf registration statement shall be filed in accordance with Article 119 (2)) and keep it at a place specified by Ordinance of the Prime Minister to make it available to the public for inspection. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
(2) No investment prospectus shall contain any description different from the one described in the relevant registration statement (including any supplements to a universal shelf registration statement under Article 119 (2); hereafter the same shall apply in this Chapter) or omit any description stated therein: Provided, That a description may be omitted, if it is necessary to omit the description in consideration of the balance between confidentiality in corporate management, etc. and protection of investors, etc., as prescribed further by Presidential Decree.
(3) An issuer of the collective investment securities or derivatives-combined securities prescribed by Presidential Decree shall file an additional investment prospectus and a short-form investment prospectus separately from the ones under paragraph (1) in accordance with the following subparagraphs, with the Financial Services Commission, and shall keep it at a place specified by Ordinance of the Prime Minister to make it available to the public for inspection: Provided, That such filing, keeping, and disclosure may be omitted, if offering or selling such collective investment securities or derivatives-combined securities is discontinued: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
1. A revised investment prospectus and a short-form investment prospectus shall be filed at least once after the investment prospectus and a short-form investment prospectus under paragraph (1) are filed within an interval prescribed by Ordinance of the Prime Minister;
2. In cases where an amendment to registration is filed in accordance with Article 182 (8), an investment prospectus and a short-form investment prospectus in which such amendment is reflected shall be filed within five days after a notice of amended registration is delivered.
 Article 124 (Fair Use of Investment Prospectus)
(1) No one shall allow any other person to acquire securities or sell securities to any other person, unless an investment prospectus (referring to a short-form investment prospectus under paragraph (2) 3, if any investor in collective investment securities fails to separately request the delivery of an investment prospectus under Article 123; hereafter the same shall apply in this paragraph and Article 132) prepared in conformity with Article 123 is delivered to the person (excluding professional investors and those specified by Presidential Decree) who intends to acquire the securities after the relevant registration statement becomes effective. In such cases, it shall be deemed that the investment prospectus is delivered at the time the following requirements are fully satisfied, if the investment prospectus is delivered by means of an electronic document under Article 436: <Amended by Act No. 11845, May 28, 2013>
1. The person to whom the electronic document is addressed (hereinafter referred to as "addressee of the electronic document") shall consent to the delivery of the investment prospectus by means of an electronic document;
2. The addressee of the electronic document shall designate the kind of an electronic transmission medium and place for receiving the electronic document;
3. The addressee of the electronic document shall confirm his/her receipt of the electronic document;
4. The contents of the electronic document shall be identical with those of the investment prospectus in writing.
(2) A person who intends to solicit, etc. an offer for public offering or sale of securities subject to securities registration or any other transaction thereof shall do so in any of the following manners:
1. Using the investment prospectus after the registration statement becomes effective in accordance with Article 120 (1);
2. Using the preliminary investment prospectus (referring to an investment prospectus with an additional statement that the relevant registration statement has not become effective yet; hereinafter the same shall apply) prepared by the issuer in a manner prescribed by Presidential Decree, after the registration statement was accepted pursuant to Article 120 (1), but before the registration statement has not become effective yet;
3. Using a short-form investment prospectus (referring to a document, an electronic document, or any other similar description or representation, by omitting a part of the mandatory descriptions of the investment prospectus or making an abstract of important descriptions thereof; hereinafter the same shall apply) prepared by the issuer in a manner prescribed by Presidential Decree, through an advertisement, a notice, or a leaflet via newspapers, broadcasting, magazines, or an electronic transmission medium, after the relevant registration statement is accepted pursuant to Article 120 (1).
(3) In cases of collective investment securities, a short-form investment prospectus may be used, notwithstanding paragraph (2): Provided, That the same shall not apply where any investor separately requests to use an investment prospectus prescribed in Article 123. <Newly Inserted by Act No. 11845, May 28, 2013>
(4) Where a short-form investment prospectus of collective investment securities is delivered or used under paragraph (1) or (3), investors shall be informed that they may separately request an investment prospectus prescribed in Article 123. <Newly Inserted by Act No. 11845, May 28, 2013>
 Article 125 (Liabilities for Damage Caused by False Descriptions, etc.)
(1) Each of the following persons shall be liable for damage sustained by any purchaser of securities due to a false description or representation of any material fact in a registration statement (including a corrective registration statement and accompanying documents; hereafter the same shall apply in this Article) and an investment prospectus (including a preliminary investment prospectus and a short-form investment prospectus; hereafter the same shall apply in this Article) or an omission of a material fact therefrom: Provided, That such person shall not be liable if he/she proves that he/she was unable to discover such false description or representation or omission although he/she exercised due care or that the purchaser of the securities was aware of the fact as at the time he/she made an offer to purchase them: <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. The registrant of that registration statement and a director of the issuer as at the time of filing the registration (referring to a person in a similar position if no director exists, or a promoter if the registration statement was filed prior to the incorporation of the corporation);
2. A person referred to in any subparagraphs of Article 401-2 (1) of the Commercial Act, who instructed or executed the preparation of that registration statement;
3. A person specified by Presidential Decree, including a certified public accountant, a certified appraiser or a credit rating specialist (including an organization with which each of them is affiliated), who certified that the descriptions of that registration statement or the accompanying documents were true and accurate by affixing his/her signature thereto;
4. A person who consented to include his/her statement of appraisal, analysis, or verification in the descriptions of the registration statement or the accompanying documents and confirmed the contents as described therein;
5. An underwriter or intermediary of the securities (referring to a person specified by Presidential Decree, if two or more underwriters or intermediaries exist);
6. A person who prepared or delivered the investment prospectus;
7. The seller as at the time the registration statement for sale was filed, if the case involved a sale of securities.
(2) If a forward-looking statement is made as provided for in the following, none of the persons referred to in the subparagraphs of paragraph (1) shall be liable for any damage incurred therefrom: Provided, That such persons shall be liable for damage, if the purchaser of the relevant securities proves that he/she was not aware that there was a false statement or representation of a material fact in the forward-looking statement or an omission of a statement or representation of a material fact therein as at the time he/she made an offer to purchase such securities and that there was an intentional or grossly negligent act on the part of the persons referred to in the subparagraphs of paragraph (1) in connection with such statement or representation:
1. It was clearly stated that the statement or representation at issue was a forward-looking statement;
2. The grounds for assumption or judgment related to the predictions or projections were clearly stated;
3. The statement or representation at issue was made in good faith based on the reasonable ground or assumption;
4. It shall be accompanied by cautionary statements that actual results may differ from the estimates in relation to the statement or representation.
(3) Paragraph (2) shall not apply where a registration statement is filed in order for an unlisted corporation to make an initial public offering or sale of stocks.
 Article 126 (Amount of Damages)
(1) The amount of damages for which a person shall be held liable in accordance with Article 125 shall be the amount estimated by subtracting any of the following amounts from the amount actually paid by the claimant for acquiring the securities at issue:
1. The market price of the securities at the time of closing the proceedings of the lawsuit filed for the claim of damages in accordance with Article 125 (referring to an estimate disposal price if there is no market price available);
2. The disposal price if the securities are disposed of before the closing of the proceedings under subparagraph 1.
(2) Notwithstanding paragraph (1), a person who shall be otherwise liable in accordance with Article 125 shall not be held liable for partial damages, if he/she proves that all or part of the damages sustained by the claimant were not caused by a false description or representation of any material fact, or by an omission of a description or representation of such material fact.
 Article 127 (Cease of Claims for Damage)
The liability for damage provided for in Article 125 ceases, if a claimant fails to exercise the right to make a claim within one year from the date on which he/she becomes aware of the relevant facts, or within the three-year period beginning on the date a registration statement related to the relevant securities takes effect.
 Article 128 (Post-Issuance Report)
An issuer of securities issued under an effective registration statement shall file a report on the results of issuance of such securities (hereinafter referred to as "post-issuance report") with the Financial Services Commission in the manner prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 129 (Public Notice of Registration Statement and Post-issuance Report)
The Financial Services Commission shall make the following documents available to the public for inspection at a certain place for three years, and shall disclose them to the public through its website, etc. In such cases, the descriptions specified by Presidential Decree may be excluded from such availableness and public disclosure in consideration of the balance between confidentiality in corporate management, etc. and protection of investors, etc.: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
1. The registration statement and the corrective registration statement;
2. The investment prospectus (including the short-form investment prospectus referred to in Article 124 (2) 3, in cases of collective investment securities);
3. The post-issuance report.
 Article 130 (Public Offering or Sale without Filing Registration Statement)
An issuer who makes a public offering or sale of securities without filing a registration statement in accordance with Article 119 (1) shall disclose the matters concerning its financial status and take measures prescribed by Presidential Decree for protecting investors: Provided, That the same shall not apply to cases not falling under any ground prescribed in Article 119 (6). <Amended by Act No. 11845, May 28, 2013>
 Article 131 (Reporting and Inspection)
(1) The Financial Services Commission may, if necessary for protection of investors, order the registrant of a registration statement, an issuer, a seller, an underwriter, or any other related person of securities to submit a report or materials for reference, or may engage the Governor of the Financial Supervisory Service to inspect its account books, documents, and other materials. <Amended by Act No. 8863, Feb. 29, 2008>
(2) A person who conducts an inspection pursuant to paragraph (1) shall carry with him/her an identification showing his/her authority and shall present it to any relevant person.
 Article 132 (Measures by Financial Services Commission)
The Financial Services Commission may, in any of the following cases, order the registrant of a registration statement, an issuer, seller, underwriter, or intermediary of securities, to disclose to the public relevant facts, along with the grounds therefor and make a correction therefor, or suspend or prohibit the issuance, public offering or sale, or any other transaction of such securities, or take any of measures prescribed by Presidential Decree, if necessary. In such cases, the procedures and guidelines necessary for taking such measures shall be prescribed by Ordinance of the Prime Minister: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. When the registration statement, the corrective registration statement, or the post-issuance report has not been filed;
2. When there exists a false description or representation of a material fact or an omission of a description or representation of a material fact in the registration statement, the corrective registration statement, or the post-issuance report;
3. When the acceptance of an offer to acquire or purchase securities violates Article 121;
4. When there is a violation of Article 123 or 124 in relation to the investment prospectus;
5. When there is a violation of Article 124 (2) in connection with the public offering or sale or any other transaction of securities under a preliminary investment prospectus or a short-form investment prospectus;
6. When the measures under Article 130 have not been taken.
CHAPTER II SYSTEMS RELATED TO CORPORATE ACQUISITIONS AND MERGERS
SECTION 1 Public Tender Offer
 Article 133 (Subject Matters of Tender Offer)
(1) The term "tender offer" in this Section means to make an offer to unspecified people to purchase (including an exchange with other securities; hereafter in this Section the same shall apply) voting stocks or any other securities specified by Presidential Decree (hereinafter referred to as "stocks, etc.") or to invite them to sell (including an exchange with other securities; hereafter in this Section the same shall apply) such stocks, etc. and purchase them outside the securities market and alternative trading system (including a similar market in a foreign country; hereafter in this Section the same shall apply). <Amended by Act No. 11845, May 28, 2013>
(2) The term "tender offer agent" means a person who performs the affairs related to taking custody of stocks, etc. subject to purchase, exchange, bidding, or otherwise acquisition for value (hereafter in this Section referred to as "purchase, etc."), payment or delivery of the fund necessary for tender offer or the securities for exchange, and other affairs related to tender offer on behalf of the person who intends to make a tender offer.
(3) A person who intends to make a purchase, etc. of stocks, etc. from not less than the number of persons prescribed by Presidential Decree, outside the securities market, shall make a tender offer, if the aggregate of the number of stocks, etc. to be held by the person and his/her related persons (referring to those in a special relationship determined by Presidential Decree; hereinafter the same shall apply) after the purchase, etc. (including ownership or other equivalent cases prescribed by Presidential Decree; hereafter the same shall apply in this Section and Section 2), is not less than five percent of the total number of the stocks, etc. (including where a person who holds not less than five percent of the total number of the stocks, etc. along with those held by his/her related persons, makes a tender offer for purchase, etc. of such stocks, etc.): Provided, That stocks, etc. may be purchased by any means other than tender offer, in cases of purchase, etc. prescribed by Presidential Decree, considering the purpose and type of purchase, etc., and the possibility of causing a detriment to other shareholder's interests.
(4) For the purposes of paragraph (3), stock purchase, etc., by any means other than competitive trading in the securities market, as prescribed by Presidential Decree, shall be deemed to have been conducted outside the securities market.
(5) The number and total number of stocks, etc. referred to in paragraph (3) shall be the numbers calculated by a formula prescribed by Ordinance of the Prime Minister. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 134 (Public Notice of Tender Offer and Submission of Tender Offer Statement)
(1) A person who intends to make a tender offer shall give public notice of the following matters (hereinafter referred to as "public notice of tender offer") in a manner prescribed by Presidential Decree:
1. The person who intends to make a tender offer;
2. The issuer of the stocks, etc. subject to the tender offer (referring to the person specified by Presidential Decree, in the case of depositary receipts related to such stocks, etc. or any other stocks, etc. specified by Presidential Decree);
3. The purpose of the tender offer;
4. The class and number of stocks, etc. subject to the tender offer;
5. The terms and conditions of the tender offer, including the period, price, and payment date of the tender offer;
6. The details of the purchasing fund and other matters prescribed by Presidential Decree as necessary for the protection of investors.
(2) A person who has given public notice of a tender offer (hereinafter referred to as "tender offeror") shall file a statement with descriptions of the following matters (hereinafter referred to as "tender offer statement") with the Financial Services Commission and an exchange on the date of the public notice of the tender offer (hereinafter referred to as "public notice date of tender offer") in a manner prescribed by Presidential Decree: Provided, That if the public notice date of the tender offer falls on a holiday (including the Workers' Day designated under the Designation of Workers' Day Act and Saturdays) or any other day prescribed and publicly notified by the Financial Services Commission, it may be filed on the day immediately following such holiday: <Amended by Act No. 8863, Feb. 29, 2008>
1. Matters concerning the tender offeror and his/her related persons;
2. The issuer of the stocks, etc. subject to the tender offer;
3. The purpose of the tender offer;
4. The class and number of the stocks, etc. subject to the tender offer;
5. The terms and conditions of the tender offer, including the period, price, and payment date of the tender offer;
6. The provisions of a contract for purchase, etc. of stocks, etc. without tender offer after the public notice date of tender offer, if such contract exists;
7. The details of the purchasing fund and other matters prescribed by Presidential Decree as necessary for the protection of investors.
(3) The tender offer period under paragraphs (1) and (2) shall not exceed the period set by Presidential Decree.
(4) A tender offeror may make the issuer's forward-looking statement about the stocks, etc. involved in the tender offer statement. In this regard, such forward-looking statement shall be made as provided for in Article 125 (2) 1, 2, and 4.
(5) Accompanying documents of the tender offer statement and other matters pertaining to the tender offer statement shall be prescribed by Presidential Decree.
 Article 135 (Submission of Copied Tender Offer Statement)
A tender offeror shall, upon filing a tender offer statement, send a copy thereof to each of the issuers of stocks, etc. subject to the tender offer without delay.
 Article 136 (Corrective Statement, Public Notice thereof, etc.)
(1) The Financial Services Commission may demand the filing of a corrective statement with the grounds therefor and the corrected contents of the relevant tender offer statement therein (hereafter in this Section referred to as "corrective statement") by no later than the end of the tender offer period, if the tender offer statement filed has not been prepared in conformity with the prescribed form, or if there is any false description or representation of a material fact or any omitted description or representation of a material fact in the tender offer statement. <Amended by Act No. 8863, Feb. 29, 2008>
(2) Upon a demand under paragraph (1), the relevant tender offer statement shall be deemed not submitted from the date such demand is made.
(3) A tender offeror shall file a corrective statement with the Financial Services Commission and an exchange by no later than the expiry of the tender offer period, if he/she intends to correct terms and conditions of the tender offer or any other description of the tender offer statement, or if it is necessary to correct the contents of the tender offer statement for the purpose of protecting investors, as prescribed by Ordinance of the Prime Minister: Provided, That no changes shall be made in relation to the decrease in purchase price, reduction of the proposed number of stocks, etc. for the tender offer, extension of the payment term of the purchasing price (excluding cases falling under paragraph (4) 1), and other terms and conditions specified by Presidential Decree may not be modified. <Amended by Act No. 8863, Feb. 29, 2008>
(4) Where a tender offeror files a corrective statement in relation to a tender offer statement in accordance with paragraph (1) or (3), the tender offer period shall expire on the following dates:
1. The date ten days has elapsed since such corrective statement is filed, where the day on which the corrective statement was filed falls within ten days prior to the expiration of the tender offer period provided by public notice in accordance with Article 134 (1) 5;
2. The date the tender offer period expires, where the day on which the corrective statement was filed fails to fall within ten days prior to the expiration of the tender offer period provided by public notice in accordance with Article 134 (1) 5.
(5) Upon filing a corrective statement in accordance with paragraph (1) or (3), a tender offeror shall promptly disclose such fact and the corrected contents (limited to the contents included in the relevant public notice of tender offer). In such cases, the public notice shall be made in a manner set forth in Article 134 (1).
(6) Upon filing a corrective statement concerning a tender offer statement, a tender offeror shall promptly forward a copy thereof to the issuer of the stocks, etc. subject to the tender offer.
 Article 137 (Preparation and Public Notice of Prospectus for Tender Offer)
(1) A tender offeror (including a tender offer agent; hereafter the same shall apply in this Article) shall, when he/she intends to purchase securities through tender offer, prepare a prospectus for such tender offer (hereinafter referred to as "prospectus for tender offer") in a manner prescribed by Presidential Decree, submit it to the Financial Services Commission and an exchange on the public notice date of tender offer, and keep it at a place designated by Ordinance of the Prime Minister in order to make it available to the public for inspection. In this regard, the proviso to Article 134 (2) shall apply mutatis mutandis. <Amended by Act No. 8863, Feb. 29, 2008>
(2) No prospectus for tender offer shall contain a description different from the one stated in the relevant tender offer statement or omit any description therein.
(3) No tender offeror shall purchase stocks, etc., before and unless he/she delivers a prospectus for tender offer in conformity with paragraph (1) to a person who intends to sell such stocks, etc. subject to tender offer. In this regard, the prospectus for tender offer shall be deemed delivered when it satisfies all the following requirements, if it is to be delivered by means of electronic document under Article 436:
1. The addressee of the electronic document shall consent to receive the prospectus for tender offer by means of electronic document;
2. The addressee of the electronic document shall designate the kind of electronic transmission medium and the place for receiving the electronic document;
3. The addressee of the electronic document shall confirm his/her receipt of the electronic document;
4. The contents of the electronic document shall be identical with those of the relevant prospectus for tender offer.
 Article 138 (Manifestation of Opinion on Tender Offer)
(1) An issuer of stocks, etc. for which a tender offer statement has been filed may manifest its opinion on the tender offer in a manner prescribed by Presidential Decree.
(2) An issuer shall, upon manifesting its opinion in accordance with paragraph (1), submit a document with the opinion contained therein to the Financial Services Commission and an exchange without delay. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 139 (Revocation, etc. of Tender Offer)
(1) No tender offeror may revoke his/her tender offer after the public notice date of the tender offer: Provided, That it may be revoked by the last day of the tender offer period, if there is a counter tender offer (referring to another tender offer made against the tender offer during the tender offer period), if the tender offeror is dead, dissolved, or bankrupt, or if there is no possibility of undermining the protection of investors in circumstances prescribed by Presidential Decree.
(2) To revoke a tender offer in accordance with paragraph (1), a tender offeror shall file a revocation statement with the Financial Services Commission and an exchange, and shall give public notice thereof. In this regard, such public notice shall be given as prescribed in Article 134 (1). <Amended by Act No. 8863, Feb. 29, 2008>
(3) Upon filing a revocation statement concerning a tender offer, a tender offeror shall forward a copy thereof without delay to the issuer of the stocks, etc. for which the tender offer is to be revoked.
(4) A person who accepted an offer to purchase or made an offer to sell (hereinafter referred to as "tender") the stocks, etc. subject to a tender offer (hereinafter referred to as "tendering shareholder") may revoke his/her tender at any time during the tender offer period. In this regard, no tender offeror is entitled to claim against the tendering shareholder for compensation for damage incurred by the revocation of the tender or to pay a penalty.
 Article 140 (Prohibition on Purchase, etc. Other than through Tender Offer)
No tender offeror (including his/her related persons and tender offer agent) shall purchase the relevant stocks, etc. other than through the tender offer from the public notice date of the tender offer until the end of the tender offer period: Provided, That such purchase, etc. may be allowed, if there is no possibility of undermining other shareholder's interests, in circumstances prescribed by Presidential Decree, even if the relevant stocks, etc. are purchased other than through the tender offer.
 Article 141 (Terms, Conditions and Manner of Tender Offer)
(1) A tender offeror shall purchase without delay all the stocks, etc. tendered according to the purchasing terms, conditions and manners stated in the tender offer statement on and after the day following the expiry date of the tender offer period: Provided, That if any of the following conditions included in the public notice of tender offer and the tender offer registration exist, he/she may decline to purchase all or part of the stocks, etc. tendered in accordance with the said conditions:
1. A condition that he/she will not purchase all tendered stocks, etc., if the total number of tendered stocks, etc. fails to reach the contemplated purchasing number of stocks, etc.;
2. A condition that if the total number of tendered stocks, etc. exceeds the proposed number of stocks, etc. for the tender offer, he/she will buy the stocks pro rata within the limit of the proposed number of stocks, etc. for tender offer and will not purchase all or part of the excess stocks, etc.
(2) The purchasing prices at the time when a tender offeror purchases stocks, etc. under a tender offer in accordance with paragraph (1) shall be uniform.
 Article 142 (Liability for Damage of Tender Offeror, etc.)
(1) Each of the following persons shall be liable for damage sustained by tendering shareholders due to the inclusion of a false description or representation of a material fact in a tender offer statement (including accompanying documents; hereafter the same shall apply in this Article) and the public notice thereof, a corrective statement (including accompanying documents; hereafter the same shall apply in this Article) and the public notice thereof, or a prospectus for tender offer, or an omission of a description or representation of a material fact: Provided, That a person who shall be otherwise held liable for damage is exempt from his/her liability if the person proves that he/she was unable to know the relevant fact although he/she exercised reasonable care, or that the tendering shareholder knew the fact as at the time he/she made the tender:
1. The registrant of the tender offer statement and its corrective statement (including the registrant's related persons, and directors if the registrant is a corporation) and his/her agent;
2. The person who prepared the prospectus for tender offer and his/her agent.
(2) If a forward-looking statement is made in accordance with the following, none of the persons referred to in the subparagraphs of paragraph (1) shall be liable for damage caused by the forward-looking statement, notwithstanding paragraph (1): Provided, That each of the persons referred to in the subparagraphs of paragraph (1) shall be liable for such damage, if a tendering shareholder did not know that there was a false statement or representation of a material fact in the forward-looking statement, or an omission of a description or representation of a material fact as at the time the tendering shareholder tendered his/her stocks, etc., and if he/she proves that there was an intentional or grossly negligent act on the part of each of the persons referred to in the subparagraphs of paragraph (1) in connection with the statement or representation:
1. It was clearly stated that the statement or representation at issue was a forward-looking statement;
2. The grounds for assumption or judgment related to the predictions or projections were clearly stated;
3. The statement or representation at issue was made in good faith based on the reasonable ground or assumption;
4. It shall be accompanied by cautionary statements that actual results may differ from the estimates in relation to the statement or representation.
(3) The amount of damages for which a person shall be held liable in accordance with paragraphs (1) and (2) shall be the amount estimated by subtracting an amount actually received as the price for the tender from the market price (referring to an estimated disposal price if there is no market price available) of the stocks, etc. at the time of closing the proceedings of the lawsuit filed for the claim of such damages.
(4) Notwithstanding paragraph (3), a person who shall be liable in accordance with Article paragraphs (1) and (2) shall not be held liable for partial damages, if he/she proves that all or part of the damages sustained by the tendering shareholders were not caused by a false description or representation of any material fact, or by an omission of a description or representation of such material fact.
(5) The liability for damage under paragraphs (1) and (2) ceases, if a tendering shareholder fails to exercise his/her right to claim within one year from the date on which he/she becomes aware of the fact, or within three years from the public notice date of the relevant tender offer.
 Article 143 (Post Tender Offer Report)
A tender offeror shall file a report on the results of the tender offer (hereinafter referred to as "post tender offer report") with the Financial Services Commission and an exchange in a manner prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 144 (Public Notice of Statements, etc.)
The Financial Services Commission and an exchange shall make the following documents available to the public for inspection for three years from the date of receipt thereof, and shall also disclose them to the public through its website, etc.: <Amended by Act No. 8863, Feb. 29, 2008>
1. The tender offer statement and the corrective statement thereof;
2. The prospectus for tender offer;
3. Documents under Article 138;
4. The revocation statement under Article 139 (2);
5. The post tender offer report.
 Article 145 (Limitations on Voting Rights, etc.)
A person who violates Article 133 (3) or 134 (1) or (2) in purchasing stocks, etc., may not exercise voting rights for the stocks (including the stocks acquired by exercising any right related to the stocks, etc.) from the day of such violation, and the Financial Services Commission may issue an order to dispose of such stocks, etc. (including the stocks, etc. acquired by exercising any right related to the stocks, etc.) within a given period, not exceeding six months. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 146 (Inspections and Measures)
(1) If necessary for protecting investors, the Financial Services Commission may order a tender offeror, his/her related persons or tender offer agent, and other persons involved, to submit a report or materials for reference, or may authorize the Governor of the Financial Supervisory Service to inspect their account books, documents, and other materials. In this regard, Article 131 (2) shall apply mutatis mutandis. <Amended by Act No. 8863, Feb. 29, 2008>
(2) In any of the following cases, the Financial Services Commission may order a tender offeror, his/her related person or tender offer agent to give public notice of the relevant facts, specifying the grounds therefor or to make a correction therefor, and may suspend or prohibit a tender offer or take any of the measures prescribed by Presidential Decree, if necessary. In such cases, the procedures and guidelines necessary for taking such measures shall be prescribed by Ordinance of the Prime Minister: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
1. Where the public notice of a tender offer or the public notice under Article 136 (5) has not been provided;
2. Where the tender offer statement, corrective statement, or post tender offer report has not been filed;
3. Where there exists a false description or representation of a material fact, or an omission of a description or representation of a material fact in the public notice of a tender offer, the tender offer statement, the corrective statement, the public notice under Article 136 (5), or the post tender offer report;
4. Where a copy of the tender offer statement, the corrective statement, or the revocation statement has not been forwarded to the issuer in violation of Article 135, 136 (6) or 139 (3);
5. Where the contents differ from the contents of a statement or an omission of contents in the copy of the statement forwarded in accordance with Article 135, 136 (6) or 139 (3);
6. Where there is a violation of Article 137 in connection with the prospectus for tender offer;
7. Where the tender offer has been revoked in violation of Article 139 (1) or (2);
8. Where purchasing, etc. has been done other than through the tender offer in violation of Article 140;
9. Where a tender offer has been made in violation of Article 141;
10. Where Article 145 has been violated in exercising voting rights or an order for disposal issued under the same Act has been disobeyed.
SECTION 2 Report on Stocks, etc. Held in Bulk
 Article 147 (Report on Stocks, etc. Held in Bulk)
(1) A person who holds stocks, etc. (excluding stocks of an investment company which is an exchange trade fund referred to in Article 234 (1) shall be excluded herefrom; hereafter the same shall apply in this Section) of a stock-listed corporation in bulk (referring to where the aggregate of the number of the stocks, etc. held by the person and his/her related persons is not less than five percent of the total number of the stocks, etc.) shall report the status of the stocks he/she holds, the purpose of holding (referring to whether he/she has any intention to exercise influence on the issuer's business administration), essential terms and conditions of the contract related to the stocks, etc. he/she holds, and other matters prescribed by Presidential Decree, to the Financial Services Commission and an exchange in a manner prescribed by Presidential Decree within five days from the date the person becomes a holder of the stocks in such a quantity (excluding the days specified by Presidential Decree; hereafter the same shall apply in this Section), and shall also report the details of a change, where the change occurs in relation to the aggregate of the number of stocks, etc. he/she holds by not less than one percent of the total number of stocks, etc. (excluding where there no change occurs in relation to the number of stocks, etc. he/she holds or other case prescribed by Presidential Decree), to the Financial Services Commission and an exchange within five days from the date such change occurs in a manner prescribed by Presidential Decree. In this regard, the details, timing, etc. of reporting may be otherwise prescribed by Presidential Decree, where the purpose of holding the stocks is not to exercise influence over the issuer's business administration (referring to matters prescribed further by Presidential Decree, such as appointment and dismissal of an executive officer, or suspension of duties, amendment of the articles of incorporation in connection with the organs of the company, including the board of directors) and where a professional investor specified by Presidential Decree is involved. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 14130, Mar. 29, 2016>
(2) The number of stocks, etc. and the total number of stocks, etc. referred to in paragraph (1) shall be calculated by the formula prescribed by Ordinance of the Prime Minister. <Amended by Act No. 8863, Feb. 29, 2008>
(3) Where an event occurs before the date the status of stocks, etc. held in bulk, the purpose of such holding, or the details of a change shall be reported in accordance with paragraph (1) to trigger a duty to report a new change, the details of such a new change shall be reported together at the time the original status of stocks, etc. held in bulk, the purpose of such holding, or the details of a change is reported.
(4) A person who has filed a report in accordance with paragraph (1) shall, whenever there is a change in relation to a material fact specified by Presidential Decree, such as a change in the purpose of holding or an essential term and condition of the contract related to the stocks, etc. held, report it to the Financial Services Commission and an exchange. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 148 (Dispatching of Report on Stocks Held in Bulk, etc. to Issuer)
A person who has filed a report in accordance with Article 147 (1) or (4) shall dispatch a copy of the report to the issuer (referring to a person specified by Presidential Decree, in the case of stocks, etc. specified by Presidential Decree) of the relevant stocks, etc. without delay.
 Article 149 (Public Notice of Reports, etc.)
The Financial Services Commission and an exchange shall keep the reports filed in accordance with 147 (1) and (4) for three years, and shall also disclose them through their websites, etc. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 150 (Restrictions, etc. on Exercise of Voting Rights in Relation to Stocks, etc. Held in Violation)
(1) A person who fails to file a report (including a correction report) in accordance with Article 147 (1), (3), or (4); a person who files a false report of a material fact specified by Presidential Decree; or a person who omits to state a material fact specified by Presidential Decree shall not exercise voting rights in relation to the stocks held in violation among the stocks held in excess of five percent of the total number of outstanding voting stocks during the time period prescribed by Presidential Decree, and the Financial Services Commission may order the portion held in violation to be disposed of within a prescribed period, not exceeding six months. <Amended by Act No. 8863, Feb. 29, 2008>
(2) A person who has filed a report in accordance with Article 147 (1), (3), or (4), stating that his/her purpose of holding stocks, etc. is to exercise influence on the issuer's business administration, shall not acquire the issuer's stocks, etc. additionally nor exercise his/her voting rights in relation to the stocks, etc. held, for the period from the date there occurred an event that triggered the duty to file such report to five days after the date such report was filed.
(3) A person who acquires stocks, etc. additionally in violation of paragraph (2) shall not exercise his/her voting rights in relation to the stocks, etc. additionally acquired, and the Financial Services Commission may order the portion acquired additionally to be disposed of with a prescribed period, not exceeding six months. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 151 (Inspection, Demand for Correction, etc.)
(1) The Financial Services Commission may, if necessary for the protection of investors, order a person who has filed a report in accordance with Article 147 (1) or (4), or any other related person, to submit a report or materials for reference, or get the Governor of the Financial Supervisory Service to inspect account books, documents and other materials. In this regard, Article 131 (2) shall apply mutatis mutandis. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission may, if a report filed in accordance with Article 147 (1) or (4) has not been prepared in conformity with the prescribed report form, or if there is a false description or representation of a material fact or an ommission of a description or representation of a material fact in the report, order a correction of the report showing the grounds therefor, and suspend or prohibit transactions or take any of the measures prescribed by Presidential Decree, if necessary. <Amended by Act No. 8863, Feb. 29, 2008>
SECTION 3 Restriction on Solicitation to Exercise Voting Right by Proxy
 Article 152 (Solicitation to Exercise Voting Rights by Proxy)
(1) A person who intends to solicit a person to exercise voting rights by proxy (hereinafter referred to as "proxy solicitor") for listed stocks (including securities depositary receipts related to the listed stocks; hereafter the same shall apply in this Section) shall deliver the proxy form and reference documents to the other person (hereinafter referred to as "solicited voting right holder") for such solicitation in accordance with the manner prescribed by Presidential Decree.
(2) The term "solicitation to exercise voting rights by proxy" in paragraph (1) means any of the following acts performed by the proxy solicitor: Provided, That such acts shall not be deemed an act of solicitation to exercise voting rights by proxy in any case prescribed by Presidential Decree, considering the number of solicited voting right holders, etc.:
1. Soliciting for the permission of himself/herself or a third party to exercise voting right by proxy;
2. Demanding the exercise or non-exercise of voting rights, or demanding the revocation of delegation of voting rights;
3. Sending a proxy form to a shareholder for the purpose of securing a voting right, persuading to revoke delegation of a voting right, etc. or presenting an opinion in any other way.
(3) In cases where a listed corporation specified by Presidential Decree among corporations that engage in an industry essential to the national economy, such as a national key industry (hereinafter referred to as "public purpose corporation"), is involved, only the public purpose corporation may solicit for the exercise of voting rights by proxy of its stocks.
(4) The proxy form under paragraph (1) shall be prepared in such a manner as to allow each solicited voting right holder to express whether he/she approves or disapproves each item on the agenda to be raised at the general meeting of shareholders.
(5) No proxy solicitor may exercise a voting right in contravention of the solicited voting right holder's intention expressed on the proxy form.
(6) Matters pertaining to the descriptions included in the proxy form, reference documents, etc. shall be prescribed by Presidential Decree.
 Article 152-2 (Relationship between Issuer and Proxy Solicitor)
(1) Where a proxy solicitor who is not an issuer is requested by an issuer to solicit a person to exercise voting rights by proxy, he/she may request the issuer to do any of the following acts:
1. To allow the proxy solicitor who is not an issuer to inspect or print the register of shareholders (including the roster of beneficial shareholders under Article 316);
2. To forward the proxy form and reference documents to a shareholder for the proxy solicitor who is not an issuer at the proxy solicitor's expense.
(2) Upon receipt of a request pursuant to paragraph (1), an issuer shall comply therewith within two days (excluding the dates prescribed by Presidential Decree) from the date of receiving such request.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 153 (Keeping and Inspection on Proxy Form and Reference Documents)
A proxy solicitor shall file a proxy form and reference documents with the Financial Services Commission and an exchange at least two days (excluding any days specified by Presidential Decree) before the day on which such form and documents are provided to solicited voting right holders under Article 152, and shall keep them at a place designated by Ordinance of the Prime Minister to make them available to the general public for inspection. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
 Article 154 (Fair Use of Proxy Form, etc.)
No proxy solicitor shall include a false description or representation in relation to a matter that may produce a significant impact on solicited voting right holders' judgment regarding delegation of voting rights (hereafter in this Section referred to as "material fact related to the delegation of voting rights") in the proxy form and reference documents or omit a description or indication of a material fact related to the delegation of voting rights therein.
 Article 155 (Manifestation of Opinion)
An issuer of listed stocks subject to a solicitation to exercise voting rights by proxy shall, when it manifests its opinion concerning the solicitation to exercise voting rights by proxy, submit without delay a written statement with such contents therein to the Financial Services Commission and an exchange. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 156 (Demand for Correction, etc.)
(1) If the proxy form or its reference documents have not been prepared in conformity with the prescribed form, or if there is any false description or representation concerning a material fact related to the delegation of voting rights in the proxy form or its reference documents, or any omission of a description or indication of a material fact related to the delegation of voting rights therein, the Financial Services Commission may demand a correction of the proxy form and its reference documents, showing the grounds therefor. <Amended by Act No. 8863, Feb. 29, 2008>
(2) If there is a demand under paragraph (1), it shall be deemed that the proxy form and its reference documents originally submitted have not been submitted.
(3) A proxy solicitor may, if he/she intends to correct any description in the proxy form or reference documents, correct and submit it no later than seven days (excluding any days specified by Presidential Decree) before the opening date of the general meeting of shareholders to be held in relation to the solicitation. In this regard, if he/she intends to correct a material fact specified by Presidential Decree, or if it is necessary to correct any description on the proxy form or reference documents, as prescribed further by Presidential Decree, he/she is obligated to make such corrections before submission.
 Article 157 (Public Notice of Proxy Forms, etc.)
The Financial Services Commission and an exchange shall keep the proxy forms and reference documents referred to in Article 152, the written statement under Article 155, and the corrected contents under Article 156 for three years from the filing date, and shall disclose them to the general public through their websites, etc. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 158 (Inspection and Disposition)
(1) If necessary for the protection of investors, the Financial Services Commission may order a proxy solicitor or his/her related person to submit a report or materials for reference, or may get the Governor of the Financial Supervisory Service to inspect account books, documents, and other materials. In this regard, Article 131 (2) shall apply mutatis mutandis. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission may, in any of the following cases, provide public notice of the relevant facts and order a proxy solicitor to take corrective measures, after showing the grounds therefor, and may also suspend or prohibit solicitation to exercise voting rights by proxy or take measures prescribed by Presidential Decree, if necessary. In such cases, the procedures and guidelines necessary for taking such measures shall be prescribed by Ordinance of the Prime Minister: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
1. When the proxy form and reference documents have not been delivered to the solicited voting right holder in violation of Article 152 (1);
2. When any person other than a public purpose corporation solicits to exercise voting rights by proxy in violation of Article 152 (3);
3. When there is a violation of Article 153 or 154 in relation to the proxy form or reference documents;
4. When there exists a false description or representation of a material fact related to the delegation of voting rights in the proxy form or reference documents submitted in accordance with Article 153 or 156 (1) or (3), or there has been an omission of a description or representation of a material fact related to the delegation of voting rights therein;
5. When a corrected document has not been submitted in violation of the latter part of Article 156 (3).
CHAPTER III LISTED CORPORATION'S BUSINESS REPORT, ETC.
 Article 159 (Submission of Business Report, etc.)
(1) A stock-listed corporation or a corporation specified by Presidential Decree (hereinafter referred to as "corporation subject to business reporting") shall submit its business report to the Financial Services Commission and an exchange within 90 days of the closing of each business year: Provided, That the obligation to submit a business report may be excused if it is virtually impossible or impractical to submit the report, due to bankruptcy or any other reason prescribed by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008>
(2) A corporation subject to business reporting shall state the following matters in its business report referred to in paragraph (1), which shall be accompanied by the documents prescribed by Presidential Decree: <Amended by Act No. 11845, May 28, 2013; Act No. 14130, Mar. 29, 2016>
1. Purpose, trade name, and details of business of the corporation;
2. Remuneration of executive officers (including stock options granted under the Commercial Act and other Acts, but limited to those prescribed by Presidential Decree; hereafter the same shall apply in this paragraph);
3. Remuneration of each executive officer and detailed standards for and methods of calculation thereof (limited to where the remuneration of an executive officer is not less than the amount prescribed by Presidential Decree, which shall not exceed 500 million won);
4. Matters concerning finance;
5. Other matters prescribed by Presidential Decree.
(3) A corporation subject to the first-time business reporting in accordance with paragraph (1) shall submit its business report for the immediately preceding business year to the Financial Services Commission and an exchange within five days from the date the corporation becomes subject to business reporting (or within the time period for submission of the business report under paragraph (1), if the corporation becomes subject to business reporting during that time period): Provided, That the corporation need not submit a business report for the immediately preceding business year, if it has already disclosed the matters equivalent to a business report for the immediately preceding year through its registration statement, etc. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
(4) In preparing the business report under paragraph (1), a corporation subject to business reporting shall follow the method of description and use the form prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
(5) Deleted. <Deleted by Act No. 9408, Feb. 3, 2009>
(6) A corporation subject to business reporting may make a forward-looking statement in the business report. In this regard, such forward-looking statement shall be made in the manners set forth in Article 125 (2) 1, 2, and 4.
(7) To submit a business report, the representative director (referring to the representative executive officer in the case of a company with executive officer system) of a corporation and the director responsible for the submission of the business report as at the time of submission shall review and confirm the matters prescribed by Presidential Decree, such as the facts that there is no false statement or representation of a material fact in the business report nor omission of a statement or representation of a material fact therein, and each of them shall affix his/her signature thereto, respectively. <Amended by Act No. 11845, May 28, 2013>
 Article 159 (Submission of Business Report, etc.)
(1) A stock-listed corporation or a corporation specified by Presidential Decree (hereinafter referred to as "corporation subject to business reporting") shall submit its business report to the Financial Services Commission and an exchange within 90 days of the closing of each business year: Provided, That the obligation to submit a business report may be excused if it is virtually impossible or impractical to submit the report, due to bankruptcy or any other reason prescribed by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008>
(2) A corporation subject to business reporting shall state the following matters in its business report referred to in paragraph (1), which shall be accompanied by the documents prescribed by Presidential Decree: <Amended by Act No. 11845, May 28, 2013; Act No. 14130, Mar. 29, 2016>
1. Purpose, trade name, and details of business of the corporation;
2. Remuneration of executive officers (including stock options granted under the Commercial Act and other Acts, but limited to those prescribed by Presidential Decree; hereafter in this paragraph the same shall apply);
3. Remuneration of each executive officer and detailed standards for and methods of calculation thereof (limited to where the remuneration of an executive officer is not less than the amount prescribed by Presidential Decree, which shall not exceed 500 million won);
3-2. Remuneration, etc. of each top five individual based on the total amount of remuneration, and detailed standards and methods for calculation thereof (limited to where the remuneration paid to each person is not less than the amount prescribed by Presidential Decree within 500 million won);
4. Matters concerning finance;
5. Other matters prescribed by Presidential Decree.
(3) A corporation subject to the first-time business reporting in accordance with paragraph (1) shall submit its business report for the immediately preceding business year to the Financial Services Commission and an exchange within five days from the date the corporation becomes subject to business reporting (or within the time period for submission of the business report under paragraph (1), if the corporation becomes subject to business reporting during that time period): Provided, That the corporation need not submit a business report for the immediately preceding business year, if it has already disclosed the matters equivalent to a business report for the immediately preceding year through its registration statement, etc. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
(4) In preparing the business report under paragraph (1), a corporation subject to business reporting shall follow the method of description and use the form prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
(5) Deleted. <Deleted by Act No. 9408, Feb. 3, 2009>
(6) A corporation subject to business reporting may make a forward-looking statement in the business report. In such cases, the forward-looking statement shall be made in the manners set forth in Article 125 (2) 1, 2, and 4.
(7) To submit a business report, the representative director (referring to the representative executive officer in cases of a company with executive officer system) of a corporation and the director responsible for the submission of the business report as at the time of submission shall review and confirm the matters prescribed by Presidential Decree, such as the facts that there is no false statement or representation of a material fact in the business report nor omission of a statement or representation of a material fact therein, and each of them shall sign and seal, respectively. <Amended by Act No. 11845, May 28, 2013>
<<Enforcement Date: Mar. 30, 2018>> Article 159 (2)
 Article 160 (Submission of Half-Yearly and Quarterly Reports)
A corporation subject to business reporting shall submit a business report for the six-month period beginning on the first day of the pertinent business year (hereinafter referred to as "half-yearly report") and a business report respectively for the three-month period and the nine-month period beginning on the first day of the pertinent business year (hereinafter referred to as "quarterly report") to the Financial Services Commission and an exchange within 45 days of the closing of each term. However, if a corporation subject to business reporting submits a half-yearly report and quarterly reports prepared based on the consolidated financial statements to the Financial Services Commission and an exchange, stating the matters on finance, the supplementary schedules and the matters prescribed and publicly notified by the Financial Services Commission, the corporation may submit the half-yearly report and quarterly reports within 60 days of the closing of each term only for the first business year and the following business year. In this regard, Article 159 (2) (in the case of a quarterly report, excluding subparagraph 3 and 3-2 of the same paragraph), (4), (6), and (7) shall apply mutatis mutandis. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009; Act No. 14130, Mar. 29, 2016>
[Enforcement Date of the Latter Part of Article 160 (limited to the part that excludes subparagraph 3-2 in connection with quarterly reports): Mar. 30, 2018]
 Article 161 (Submission of Reports on Material Facts)
(1) Where any of the following events occurs, a corporation subject to business reporting shall submit a report on the details of such event (hereinafter referred to as "material fact report") to the Financial Services Commission by the day immediately following the day such event occurs (where an event referred to in subparagraph 6 occurs, within three days from the date of occurrence of such event). In this regard, Article 159 (6) and (7) shall apply mutatis mutandis: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013; Act No. 12892, Dec. 30, 2014; Act No. 14130, Mar. 29, 2016>
1. Where a bill or check issued by the corporation is dishonored or its current account transactions with a bank are suspended or banned;
2. Where its business activities are completely suspended or a substantial part thereof is partially suspended, or where the board of directors, etc. passes a resolution on such suspension;
3. Where an application is filed to commence proceedings for rehabilitation or simplified proceedings for rehabilitation under the Debtor Rehabilitation and Bankruptcy Act;
4. Where any ground occurs for the corporation's dissolution under this Act, the Commercial Act, or any other Act;
5. Where the board of directors, etc. passes a resolution to adjust any of the capital or liabilities meeting the conditions prescribed by Presidential Decree;
6. Where a cause or event set forth in Article 360-2, 360-15, 522, or 530-2 of the Commercial Act occurs;
7. Where a resolution to acquire by transfer, an essential business or asset specified by Presidential Decree, or to transfer such business or asset, is passed;
8. Where a resolution to acquire (including execution of a trust contract for the acquisition of treasury stocks), or to dispose of treasury stocks (including a termination of a trust contract for the acquisition of treasury stocks), is passed;
9. Where there occurs any other cause or event specified by Presidential Decree, which may have a significant impact on the management, assets, etc. of the corporation.
(2) Where a corporation subject to business reporting submits a material fact report in accordance with paragraph (1), it shall attach the documents specified by Presidential Decree to the material fact report for each case provided for in the subparagraphs of paragraph (1).
(3) In preparing a material fact report, a corporation subject to business reporting shall follow the method of description and use the Form prescribed and publicly notified by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(4) Where it is necessary to promptly inform the public of the contents of the material fact report submitted because such report is likely to significantly influence investors' investment judgment, the Financial Services Commission may request administrative agencies and other related institutions to furnish or exchange information as necessary. In this regard, the agencies and institutions in receipt of such requests shall cooperate therein, except in extenuating circumstances. <Amended by Act No. 8863, Feb. 29, 2008>
(5) Upon receipt of a material fact report submitted in accordance with paragraph (1), the Financial Services Commission shall forward it to an exchange without delay. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 161-2 (Right to Request Data, etc.)
(1) A corporation subject to business reporting among the corporations subject to the preparation of consolidated financial statements may request its subsidiary to submit related data to the extent required for the preparation of a business report, etc under Article 162 (1).
(2) A corporation subject to business reporting among the corporations subject to the preparation of consolidated financial statements may examine the business affairs and financial standing of its subsidiary, when it is unable to obtain the data necessary for the preparation of the report, etc. under Article 162 (1) or when it is necessary to check the contents of the data submitted by its subsidiary.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 162 (Liability for Damage Caused by False Description, Etc.)
(1) Each of the following persons shall be liable for any damage sustained by a person who acquired or disposed of a security (including depositary receipts related to the security and other securities specified by Presidential Decree; hereafter the same shall apply in this Article) issued by a corporation subject to business reporting due to a false statement or representation of a material fact in a business report, half-yearly report, quarterly report, or material fact report submitted under Article 159 (1) (hereinafter referred to as "business report, etc.") or an accompanying document (excluding an audit report prepared by an auditor), or due to an omission of a statement or representation of a material fact therein: Provided, That a person held liable for such damage shall not be liable if the person proves that he/she was unable to know such fact although he/she exercised reasonable care, or that the person who acquired or disposed of such security knew the fact as at the time he/she acquired or disposed of that security: <Amended by Act No. 9407, Feb. 3, 2009>
1. A person who submitted the business report, etc. and the directors of the corporation subject to business reporting as at the time of the submission;
2. A person referred to in any subparagraph of Article 401-2 (1) of the Commercial Act, who instructed or executed the preparation of the business report, etc.;
3. A person specified by Presidential Decree, including a certified public accountant, a certified appraiser or a credit rating specialist (including an organization with which each of them is affiliated), who certified that the descriptions of the business report, etc. and the accompanying document was true and accurate by affixing his/her signature thereto;
4. A person who consented to include his/her statement of appraisal, analysis, or verification in the descriptions of the business report, etc. and the accompanying document, and confirmed the contents as described therein.
(2) If a forward-looking statement is made as provided for in the following, none of the persons referred to in the subparagraphs of paragraph (1) shall be liable for damage caused by the forward-looking statement, notwithstanding paragraph (1): Provided, That each of the persons referred to in the subparagraphs of paragraph (1) shall be liable for such damage, if the person who acquired or disposed of the relevant security was not aware of the existence of a false statement or representation of a material fact, or an omission to state or represent a material fact, in the forward-looking statement, as at the time he/she acquired or disposed of the security, and if the person proves that there was an intentional or grossly negligent act on the part of each of the persons referred to in the subparagraphs of paragraph (1) in connection with such statement or representation:
1. It was clearly stated that the statement or representation at issue was a forward-looking statement;
2. The grounds for assumption or judgment related to the predictions or projections were clearly stated;
3. The statement or representation at issue was made in good faith based on the reasonable ground or assumption;
4. It shall be accompanied by cautionary statements that actual results may differ from the estimates in relation to the statement or representation.
(3) The amount of damages for which a person shall be held liable in accordance with paragraphs (1) and (2) shall be estimated by calculating the difference between the amount actually paid or received by the claimant as the price for acquisition or disposition of a security and any of the following amounts (only subparagraph 1 shall apply in the case of disposition):
1. The market price (referring to an estimated disposal price if there is no market price available) of the security at the time of closing the proceedings of the lawsuit filed to claim such damages in accordance with paragraphs (1) and (2);
2. The disposal price, if the security was disposed of before the closing of proceedings under subparagraph 1.
(4) Notwithstanding paragraph (3), a person who shall be liable under paragraphs (1) and (2) shall not be held liable for partial damages if the person proves that all or part of the damage sustained by the claimant was not caused by a false statement or representation of a material fact, or an omission to state or represent a material fact.
(5) The liability for damages under paragraphs (1) and (2) ceases, if the claimant fails to exercise the right to claim within one year from the date on which he/she becomes aware of the fact, or within three years from the date of submission.
 Article 163 (Public Notice of Business Report, etc.)
The Financial Services Commission and an exchange shall keep business reports, etc. for three years, and shall also disclose them to the public through its website, etc. In this regard, the matters specified by Presidential Decree may be excluded from such availability and disclosure in consideration of the balance between confidentiality in corporate management, etc. and the protection of investors, etc. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 164 (Inspection and Disposition)
(1) The Financial Services Commission may, if necessary for the protection of investors, order a corporation subject to business reporting or other related person, to submit a report or materials for reference, or may get the Governor of the Financial Supervisory Service to inspect account books, documents, and other materials. In this regard, Article 131 (2) shall apply mutatis mutandis. <Amended by Act No. 8863, Feb. 29, 2008>
(2) The Financial Services Commission may, in any of the following cases, order a corporation subject to business reporting to disclose relevant facts to the public, after showing the grounds therefor, and make a correction, and it may suspend or prohibit issuance of securities or any other transaction, or take any of measures prescribed by Presidential Decree, if necessary. In such cases, the procedures and guidelines necessary for taking such measures shall be prescribed by Ordinance of the Prime Minister: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 9407, Feb. 3, 2009>
1. When a business report, etc. has not been submitted;
2. When there exists a false description or representation of a material fact, or an omission of a description or representation of a material fact, in a business report, etc.
 Article 165 (Special Cases concerning Submission of Business Reports, etc.)
(1) Notwithstanding the provisions of Articles 159 through 161, foreign corporations, etc. may be differently treated in application of the provisions in accordance with the guidelines and methods prescribed by Presidential Decree, including exemption from the duty of submission and a different deadline for submission. <Amended by Act No. 12102, Aug. 13, 2013>
(2) Notwithstanding Article 160, corporations that have issued stock certificates listed on the securities market prescribed by Presidential Decree that trades stock certificates issued by small and medium businesses under Article 2 of the Framework Act on Small and Medium Enterprises may be differently treated in application of the provisions in accordance with the guidelines and methods prescribed by Presidential Decree, including exemption from the duty of submission of semiannual or quarterly reports and a different deadline for submission. <Newly Inserted by Act No. 12102, Aug. 13, 2013>
CHAPTER III-2 SPECIAL CASES CONCERNING STOCK-LISTED CORPORATIONS
 Article 165-2 (Scope of Application)
(1) This Chapter shall apply to stock-listed corporations not falling under either of the following subparagraphs:
1. Foreign corporations, etc.: Provided, That the same shall not apply to Articles 165-16 and 165-18;
2. Investment companies.
(2) This Chapter shall apply to stock-listed corporations in preference to Part III of the Commercial Act.
[This Article Wholly Amended by No. 11758, Apr. 5, 2013]
 Article 165-3 (Special Cases concerning Acquisition and Disposition of Own Stocks)
(1) A stock-listed corporation may acquire its own stocks by either of the following methods:
1. The method specified in Article 341 (1) of the Commercial Act;
2. The method of recovering from a trust business entity that has acquired its own stocks under a trust contract, at the time the trust contract is cancelled or terminated (limited to cases where the trust business entity has acquired such own stocks of the relevant stock-listed corporation by the method specified in Article 341 (1) of the Commercial Act).
(2) In cases falling under paragraph (1), the total amount of acquisition of one’s own stocks shall not exceed the limit for payment of dividends under Article 462 (1) of the Commercial Act:
(3) Where a stock-listed corporation intends to acquire its own stocks by a method falling under paragraph (1) or under any subparagraph of Article 341 (1) of the Commercial Act, it may do so by resolution of the board of directors, notwithstanding Article 341 (2) of the same Act.
(4) Where a stock-listed corporation acquires its own stocks under paragraph (1) (including conclusion of a trust contract with a trust business entity that agrees to acquire its own stock) or dispose of its own stocks so acquired (including termination of a trust contract with a trust business entity that agrees to acquire its own stocks), it shall follow the guidelines for requirements, methods, etc. prescribed by Presidential Decree.
[This Article Wholly Amended by No. 11758, Apr. 5, 2013]
 Article 165-4 (Special Cases concerning Mergers, etc.)
(1) A stock-listed corporation shall comply with the guidelines, such as requirements and methods prescribed by Presidential Decree, if it intends to engage in any of the following activities (hereafter in this Articler eferred to as "merger, etc."): <Amended by Act No. 11845, May 28, 2013>
1. Merger with another corporation;
2. Acquisition or transfer of essential business or assets prescribed by Presidential Decree;
3. All-inclusive swap or transfer of stocks;
4. Split-off, or split and merger.
(2) Where a stock-listed corporation intends to conduct a merger, etc. with another company, it shall undergo the assessment of the merger price, etc. and other matters prescribed by Presidential Decree, by a specialized assessment institution (hereafter in this Article and Article 165-18, referred to as "external assessment institution"), as prescribed by Presidential Decree for the protection of investors and sound trading practices. <Newly Inserted by Act No. 11845, May 28, 2013>
(3) Where the assessment result of a merger, etc. conducted by an external assessment institution is deemed significantly insufficient, or where it is likely to undermine the protection of investors or sound trading practices in circumstances prescribed by Presidential Decree, the Financial Services Commission may limit the services of assessment pursuant to paragraph (2). <Newly Inserted by Act No. 11845, May 28, 2013>
(4) The scope of external assessment institutions, methods for limiting assessment services under paragraph (3) and other relevant matters shall be prescribed by Presidential Decree. <Newly Inserted by Act No. 11845, May 28, 2013>
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-5 (Special Cases concerning Appraisal Rights of Shareholders)
(1) A shareholder (including shareholders of classes of shares having no, or limited voting rights under Article 344-3 (1) of the Commercial Act; hereafter the same shall apply in this Article) who is opposed to the resolution of the board of directors with respect to the matters for resolution specified by a stock-listed corporation under Articles 360-3, 360-9, 360-16, 374, 522, 527-2 and 530-3 (limited to the split and merger under Article 530-2 of the same Act and the split under the same Article which is prescribed by Presidential Decree) of the Commercial Act may request the corporation to purchase the stocks he/she owns (limited to stocks proven by shareholders who reported his/her opposition that such stocks had been acquired prior to public notice of the resolution of the board of directors pursuant to Article 391 and the stocks proven that such stocks fall under the cases prescribed by Presidential Decree even though they have been acquired after the public notice of the resolution of the board of directors) within 20 days from the date when the resolution of the general meeting of shareholder is made (in cases of the shareholders of the company becoming a complete subsidiary under Article 360-9 of the Commercial Act and shareholders of a company to be extinguished under Article 527-2 of the same Act, the date two weeks lapse from the date when the public notice or notification under Articles 360-9 (2) and 527-2 (2) of the same Act is made), in writing by indicating the type and number of stocks, only when the shareholder has informed the corporation of his/her intention to oppose the resolution in writing prior to the general meeting of shareholder (in cases of shareholders of the company becoming a complete subsidiary under Article 360-9 of the Commercial Act and shareholders of a company to be extinguished under Article 527-2 of the same Act, within two weeks from the date when the public notice or notification under Articles 360-9 (2) and 527-2 (2) of the same Act is made). <Amended by Act No. 11758, Apr. 5, 2013; Act No. 11845, May 28, 2013>
(2) The relevant corporation which receives the request under para- graph (1) shall purchase the stocks within one month from the expiration of the period for exercising appraisal rights.
(3) The purchase price of stocks under paragraph (2) shall be determined by the consultation between shareholders and the relevant corporation: Provided, That if the consultation is not made, the purchase price shall be the amount calculated in a manner prescribed by Presidential Decree based on the transaction price of the stocks traded on the securities market prior to the date when the resolution of the board of directors is made, and if the corporation or shareholders who requested for the purchase opposes such purchase price, the determination of a purchase price may be filed with a court.
(4) A stock-listed corporation shall dispose of the stocks purchased pursuant to paragraph (1) within the period prescribed by Presidential Decree. <Amended by Act No. 11758, Apr. 5, 2013>
(5) Where a stock-listed corporation provides notification or public notice on the convocation of a general meeting of shareholders with respect to the matters specified under Article 360-3, 360-16, 374, 522 and 530-3 (limited to split and merger under Article 530-2 of the Commercial Act and the split under the same Article which is prescribed by Presidential Decree) of the same Act pursuant to Article 363 of the same Act, or provides notification or public notice pursuant to Articles 360-9 (2) and 527-2 (2) of the same Act, the stock-listed corporation shall indicate the details of, and methods of exercising, appraisal rights of shareholders under paragraph (1). In such cases, the corporation shall provide such notification or public notice to the shareholders of shares having no, or limited voting rights under Article 344-3 (1) of the same Act. <Amended by Act No. 11758, Apr. 5, 2013; Act No. 11845, May 28, 2013>
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-6 (Special Cases concerning Issuance, Allocation of Stocks, etc.)
(1) Allocation of new stocks (including stocks already issued in cases falling under subparagraph 3; hereafter the same shall apply in this paragraph and paragraph (4)) by a stock-listed corporation shall be subject to the following methods:
1. Offering shareholders an opportunity to make subscriptions for new stocks in order to allocate new stocks in proportion to the number of stocks held by them;
2. Offering specified persons (including persons holding stocks of the relevant stock-listed corporation) an opportunity to make subscription for new stocks, in order to allocate new stocks to them through other methods than that prescribed in subparagraph 1, where it is necessary to achieve the managerial purpose of the corporation, such as for the introduction of a new technology or the improvement of financial structure;
3. Offering unspecified persons (including persons holding stocks of the relevant stock-listed corporation) an opportunity to make subscription for new stocks through other methods than that prescribed in subparagraph 1, and allocating new stocks to those who have made subscriptions taking advantage of such opportunity.
(2) Where a stock-listed corporation allocates new stocks, the issuance of the stocks for which no subscription has been made or the price of which has not been paid until the date of allocation (hereafter in this Article and Article 165-18 referred to as "forfeited stocks") shall be withdrawn: Provided, That the same shall not apply to cases where new stocks are issued at a price higher than that prescribed and publicly notified by the Financial Services Commission, in any of the following cases:
1. Where an investment trader who is not in a special relationship prescribed by Presidential Decree concludes a contract with the relevant stock-listed corporation for the purpose of acquiring all the forfeited stocks as an underwriter, if any forfeiture of stocks occurs;
2. In cases falling under paragraph (1) 1, where the relevant stock-listed corporation and a shareholder agree separately at the time the subscription is made to make a subscription for stocks exceeding the number of stocks to be allocated under the subscription for new stocks (hereafter in this subparagraph referred to as "excessive subscription"), with the purpose of allocating the forfeited stocks preferentially to such shareholder who has made the excessive subscription. In such cases, the number of forfeited stocks to be allocated shall not exceed the number of stocks calculated by multiplying the number of stocks to be allocated under the subscription for new stocks, by the percentage prescribed by Presidential Decree;
3. Other cases prescribed by Presidential Decree taking into comprehensive consideration the efficiency of fund raising by stock-listed corporations, protection of shareholders, etc., and the need to maintain fair market order.
(3) In allocating new stocks in the manner prescribed in paragraph (1) 1, a stock-listed corporation shall issue preemptive rights certificates to shareholders, notwithstanding subparagraphs 5 and 6 of Article 416 of the Commercial Act. In such cases, it shall ensure that the preemptive rights certificates are traded by the method prescribed by Presidential Decree, taking into consideration the protection of shareholders, etc. and necessity of maintaining fair market order.
(4) Where new stocks are allocated in the manner referred to in paragraph (1) 3, they shall be allocated by any of the following methods in accordance with a resolution adopted by the board of directors in accordance with the articles of incorporation. In such cases, Article 418 (1) and the proviso to Article 418 (2) of the Commercial Act shall not apply:
1. Allocating new stocks to unspecified subscribers without categorizing persons to be offered an opportunity for making subscriptions for new stocks;
2. Offering unspecified persons an opportunity to make subscriptions for new stocks including the stocks that have been allocated to the members of an employee stock ownership association under Article 165-7 but failed to obtain their subscriptions;
3. Offering unspecified persons an opportunity to make subscriptions for new stocks for which a preferential opportunity has been given to shareholders to make subscriptions therefor but failed to get their subscriptions;
4. Offering specifically categorized persons an opportunity to make subscriptions for new stocks in accordance with reasonable standards prescribed by Presidential Decree, such as a demand forecast prepared by an investment trader or investment broker as an underwriter or intermediary, which is a method acknowledged by the Financial Services Commission.
[This Article Wholly Amended by Act No. 11845, May 28, 2013]
 Article 165-7 (Special Cases concerning Allocation of Stocks, etc. to Members of Employee Stock Ownership Associations)
(1) Where a stock-listed corporation prescribed by Presidential Decree or a corporation intending to list its stock certificates on the securities market prescribed by Presidential Decree (hereafter referred to as "relevant corporation" in this Article) intends to publicly offer or sell its stocks, it shall allocate 20 percent of the total number of stocks subject to the public offering or sale to members of an employee stock ownership association (referring to members of an employee stock ownership association established under the Framework Act on Labor Welfare; hereinafter the same shall apply) of the relevant corporation, notwithstanding Article 418 of the Commercial Act: Provided, That the same shall not apply in any of the following cases: <Amended by Act No. 10361, Jun. 8, 2010; Act No. 11758, Apr. 5, 2013; Act No. 11845, May 28, 2013>
1. Where a corporation prescribed by Presidential Decree, from among foreign-capital invested companies as defined in the Foreign Investment Promotion Act, issues stocks;
2. Other cases prescribed by Presidential Decree where it is impracticable for the relevant corporation to preferentially allocate its stocks to members of an employee stock ownership association.
(2) Paragraph (1) shall not apply where the number of stocks held by members of an employee stock ownership association exceeds 20 percent of the total number of stocks that have been issued and are newly issued.
(3) Where new stocks are issued in the manner provided for in Article 165-6 (1) 1, Article 419 (1) through (3) of the Commercial Act shall not apply to the portion allocated to members of an employee stock ownership association pursuant to paragraph (1). <Newly Inserted by Act No. 11845, May 28, 2013>
(4) The Financial Services Commission may determine and publicly notify standards necessary for the allocation of stocks to members of an employee stock ownership association under paragraph (1) and the disposal thereof, etc.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-8 (Special Cases concerning Issuance Less Than Par Value)
(1) Notwithstanding Article 417 of the Commercial Act, a stock-listed corporation may issue stocks at a price less than their par value only with the resolution of the general meeting of shareholders under Article 434 of the same Act without the authorization of a court: Provided, That the same shall not apply to cases where the corporation fails to complete the amortization of the total amount of the prices less than their par value. <Amended by Act No. 11758, Apr. 5, 2013>
(2) The resolution of the general meeting of shareholders under paragraph (1) shall determine the minimum issue value of stocks. In such cases, the minimum issue value shall be at least the price calculated by the methods prescribed by Presidential Decree.
(3) A stock-listed corporation shall issue stocks under paragraph (1) within one month from the date when the resolution of a general meeting of shareholders is made, except as otherwise determined by the general meeting of shareholders.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-9 (Special Cases concerning Notification or Public Notice to Shareholders)
Article 418 (4) of the Commercial Act shall not apply in cases where a material fact report submitted to the Financial Services Commission under Article 161 (1) 5 is publicly disclosed at the Financial Services Commission and an Exchange under Article 163 at the time new stocks are allocated in the manner prescribed in Article 165-6 hereof or Article 418 (2) of the Commercial Act.
[This Article Wholly Amended by No. 11758, Apr. 5, 2013]
 Article 165-10 (Special Cases concerning Issuance, Allocation, etc. of Bonds)
(1) Articles 165-6 (1), (2) and (4), and 165-9 shall apply mutatis mutandis where a stock-listed corporation issues any of the following bonds (hereinafter referred to as "stock-related corporate bonds"): <Amended by Act No. 14129, Mar. 29, 2016; Act No. 14817, Apr. 18, 2017>
1. Bonds provided for in Article 165-11 (1) (limited to bonds with options to be converted into stocks);
2. Bonds provided for in Articles 469 (2) 2, 513 and 516-2 of the Commercial Act.
(2) In issuing bonds provided for in Article 516-2 (1) of the Commercial Act, no stock-listed corporation may issue corporate bonds allowing a bondholder to transfer only the securities from the preemptive right to new stocks through private placement, notwithstanding Article 516-2 (2) 4 of the same Act. <Amended by Act No. 13448, Jul. 24, 2015>
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 165-11 (Issuance, etc. of Contingent Capital Securities)
(1) A stock-listed corporation (excluding entities that may issue the relevant bonds under Article 33 (1) 2 or 3 of the Banking Act or under Article 15-2 (1) 2 or 3 of the Financial Holding Companies Act) may, by a resolution passed by the board of directors, as prescribed by its articles of incorporation, issue bonds which are different from the bonds provided for in Articles 469 (2), 513 and 516-2 of the Commercial Act, with an option to be converted into stocks, or to mitigate the obligations to redeem and to pay interest, upon the occurrence of a trigger event pre-specified based on the objective and reasonable criteria as at the time of issuance of the bonds, and other bonds prescribed by Presidential Decree. <Amended by Act No. 14129, Mar. 29, 2016; Act No. 14817, Apr. 18, 2017>
(2) Other necessary matters, including the details of bonds to be issued pursuant to paragraph (1), details of issuance, methods of circulation, etc. and detailed terms and conditions, shall be prescribed by Presidential Decree.
[This Article Wholly Amended by Act No. 11845, May 28, 2013]
 Article 165-12 (Special Cases concerning Dividends)
(1) A stock-listed corporation which sets a period for the settlement of accounts once a year may pay dividends (hereinafter referred to as "quarterly dividends") in the form of a cash payout to shareholders as of the last days of the third month, sixth month and ninth month, respectively, from the date of commencement of a business year during the business year by resolution of the board of directors, as prescribed by its articles of incorporation.
(2) The board of directors shall pass a resolution under paragraph (1) within 45 days from the last days under paragraph (1).
(3) The quarterly dividends referred to in paragraph (1) shall be paid within 20 days from the date the board of directors passes a resolution: Provided, That if the articles of incorporation otherwise prescribe a period for the payment of dividends, such period shall apply.
(4) Quarterly dividends shall be limited to the amount calculated by deducting the following amounts from the net assets on the balance sheet of the immediately preceding period for the settlement of accounts:
1. The amount of capital of the immediately preceding period for the settlement of accounts;
2. The total amount of capital reserve and earned surplus reserve accumulated until the immediately preceding period for the settlement of accounts;
3. The amount determined for dividends at the general meeting of shareholders of the immediately preceding period for the settlement of accounts;
4. The total amount of earned reserves to be accumulated in the relevant period for the settlement of accounts according to quarterly dividends.
(5) Where there is a concern over the net assets on the balance sheet of the relevant period for the settlement of accounts falling short of the aggregate amounts provided for in the subparagraphs of Article 462 (1) of the Commercial Act, no quarterly dividends shall be paid.
(6) Where a director supports the resolution of the board of directors for paying dividends although the net assets on the balance sheet of the relevant period for the settlement of accounts fall short of the aggregate of the amounts provided for in the subparagraphs of Article 462 (1) of the Commercial Act, the director shall be jointly liable for the difference (where the aggregate of quarterly dividends is less than the difference, the aggregate of quarterly dividends) to the corporation: Provided, That if the director proves that he/she could not know there is a concern provided for in paragraph (5) although hi/she exercised reasonable care, the director shall not be held liable for such difference.
(7) For the purposes of Articles 340 (1), 344 (1), 350 (3) (including the case to which such provisions shall apply mutatis mutandis under Article 423 (1), 516 (2), and 516-9 of the same Act; hereafter the same shall apply in this paragraph), 354 (1), 370 (1), 457 (2), 458, 464 and subparagraph 3 of Article 625 of the Commercial Act, quarterly dividends shall be deemed to be dividends of earnings under Article 462 (1) of the same Act; for the purposes of Article 350 (3) of the same Act, the last day referred to in paragraph (1) shall be deemed to be the end of the business year; and for the purposes of Article 635 (1) 22-2 of the Commercial Act, the period referred to in paragraph (3) shall be deemed to be the period referred to in Article 464-2 (1) of the Commercial Act.
(8) Articles 399 (3) and 400 of the Commercial Act shall apply mutatis mutandis where a director has joint liabilities pursuant to paragraph (6), and Articles 462 (2) and (3) of the Commercial Act shall apply mutatis mutandis to dividends paid in violation of paragraph (4).
(9) Where a stock-listed corporation decides to pay dividends by resolution of the board of directors under the proviso to Article 462 (2) of the Commercial Act, a director shall report the matters prescribed by Presidential Decree, such as the basis for computation of dividends, at a general meeting of shareholders. <Newly Inserted by Act No. 14130, Mar. 29, 2016>
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-13 (Special Cases concerning Stock Dividends)
(1) Notwithstanding the proviso to Article 462-2 (1) of the Commercial Act, a stock-listed corporation may pay dividends using newly issued stocks up to the limit of the amount equivalent to the total amount of dividends: Provided, That if the market price of relevant stock falls short of its par value, the proviso to Article 462-2 (1) of the Commercial Act shall apply.
(2) The methods of calculating a market price of a stock under the proviso to paragraph (1) shall be prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-14 Special Cases concerning Dividends of Public Purpose Corporations, etc.)
(1) A public purpose corporation may, when it distributes profits or interests, pay all or part of dividends to be paid to the Government to a person falling under any of the following subparagraphs from among shareholders of the corporation under the conditions prescribed by Presidential Decree, notwithstanding Article 464 of the Commercial Act:
1. Members of an employee stock ownership association of the corporation that has issued the relevant stocks;
2. A person who meets the standards prescribed by Presidential Decree, taking into consideration annual income level and amount of property owned.
(2) Notwithstanding Article 461 (2) of the Commercial Act, a public purpose corporation may, when it capitalizes all or part of reserve, issue all or part of stocks to be issued to the Government to shareholders who have held stocks issued by the public purpose corporation for a certain period under the guidelines and methods prescribed by Presidential Decree.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-15 (Special Cases concerning Stocks with No, or Limited Voting Rights)
(1) In applying the limit on the total number of stocks with no, or limited voting rights under Article 344-3 (1) of the Commercial Act, stocks without voting rights issued by a stock-listed corporation (including a corporation which publicly offers or sell stocks for the purpose of listing them initially; hereafter in this Article, the same shall apply) shall not be included in the calculation of such limit in either of the following cases: <Amended by Act No. 11758, Apr. 5, 2013; Act No. 11845, May 28, 2013>
1. Where a stock-listed corporation issues stocks in a foreign country in a manner prescribed by Presidential Decree or issues stock-issued-in-a foreign-country-related corporate bonds, and other securities related to stocks as a result of exercising its rights of convertible bonds;
2. Where stocks are issued by a corporation meeting standards prescribed by Presidential Decree, which is recognized by the Financial Services Commission as necessary to issue stocks without voting rights from among corporations engaged in an industry essential to the national economy, such as a national key industry.
(2) The total number of stocks without voting rights falling under any of the subparagraphs of paragraph (1) and stocks with no, or limited voting rights under Article 344-3 (1) of the Commercial Act shall not exceed 1/2 of the total number of issued and outstanding stocks. <Amended by Act No. 11758, Apr. 5, 2013>
(3) A stock-listed corporation of which total number of stocks with no, or limited voting rights exceeds 1/4 of the total number of issued and outstanding stocks may issue stocks with no, or limited voting rights in a manner of exercising preemptive right, capitalization of reserve or stock dividends, etc. as prescribed by Presidential Decree within the ratio provided under paragraph (2). <Amended by Act No. 11758, Apr. 5, 2013>
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-16 (Standards for Financial Management of Stock-listed Corporations)
(1) The Financial Services Commission may, in order to protect investors and establish fair trade order, establish standards for financial management for stock-listed corporations with respect to the following matters and provide them by public notice, or make other necessary recommendations: Provided, That the Commission may set different standards for financial management for corporations under Article 9 (15) 3 (b): <Amended by Act No. 11845, May 28, 2013>
1. Matters concerning requirements for paid-in capital increase;
1-2. Matters concerning issuance of stock-related corporate bonds;
2. Matters concerning dividends;
3. Matters concerning the issuance of overseas securities prescribed by Presidential Decree;
4. Other matters prescribed by Presidential Decree as necessary for the sound management of finance.
(2) A stock-listed corporation shall comply with guidelines for financial management under paragraph (1).
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-17 (Reporting on Granting of Stock Options, Etc.)
(1) When a general meeting of shareholders or the board of directors pass a resolution on the grant of the stock options, a stock-listed corporation that has granted stock options under Article 340-2 or 542-3 of the Commercial Act shall report the fact to the Financial Services Commission and an exchange, as prescribed by Presidential Decree, and the Financial Services Commission and an exchange shall keep record of the fact and make a public disclosure thereof on their websites, etc. during the period from the date of the report to the end of duration of the stock options. <Amended by Act No. 11758, Apr. 5, 2013>
(2) A non-standing director or outside director of a stock-listed corporation who has been appointed in accordance with the Act on the Improvement of Managerial Structure and Privatization of Public Enterprises, the Act on Corporate Governance of Financial Companies or other Acts shall be deemed to be an outside director who has been appointed in compliance with the requirements, procedures, etc. provided for in the Commercial Act. <Amended by Act No. 13453, Jul. 31, 2015>
(3) When stock-listed corporation appoints or dismisses an outside director or an outside director resigns due to a reason other than the expiry of his/her term of office, it shall report the fact to the Financial Services Commission and an exchange by date immediately following the date of such appointment, dismissal or resignation.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-18 (Measures against Stock-Listed Corporations)
In any of the following cases, the Financial Services Commission may order a stock-listed corporation to disclose the relevant facts to the public, specify the grounds therefor and to make a correction thereof, and recommend a general meeting of shareholders to dismiss an executive officer, restrict the issuance of securities for a certain period or take any of the measures prescribed by Presidential Decree, if necessary. In such cases, procedures and guidelines necessary for taking such measures shall be prescribed by Ordinance of the Prime Minister: <Amended by Act No. 11758, Apr. 5, 2013; Act No. 11845, May 28, 2013; Act No. 14129, Mar. 29, 2016; Act No. 14817, Apr. 18, 2017>
1. Where the stock-listed corporation acquires its treasury stocks, in violation of Article 165-3 (2);
2. Where the stock-listed corporation acquires (including conclusion of a trust contract with a trust business entity that agrees to acquire its treasury stocks) or disposes of (including termination of a trust contract with a trust business entity that agrees to acquire its treasury stocks) its treasury stocks, in violation of Article 165-3 (4);
3. Where the stock-listed corporation engages in any of the activities referred to in subparagraphs of Article 165-4 (1), in violation of the same paragraph;
4. Where the stock-listed corporation fails to undergo an assessment conducted by an external assessment institution, in violation of Article 165-4 (2);
5. Where the stock-listed corporation fails to dispose of relevant stocks within one month from the expiry of the period for exercising appraisal rights, in violation of Article 165-5 (2);
6. Where the stock-listed corporation fails to dispose of stocks within the period prescribed by Presidential Decree, in violation of Article 165-5 (4);
7. Where the stock-listed corporation provides any notification or public notice, in violation of the procedures provided for in Article 165-5 (5), or fails to provide notification or public notice required under the same paragraph;
8. Where the stock-listed corporation fails to withdraw the issuance of forfeited stocks, in violation of Article 165-6 (2);
9. Where the stock-listed corporation fails to issue a preemptive rights certificate or fails to ensure the trading thereof, in violation of Article 165-6 (3);
10. Where the stock-listed corporation allocates new stocks to unspecified subscribers (including persons who hold stocks of the relevant stock-listed corporation), in violation of Article 165-6 (4);
11. Where the stock-listed corporation allocates any stocks to members of an employee stock ownership association, in violation of Article 165-7;
12. Where the stock-listed corporation issues a stock at a price less than its par value, in violation of the proviso to Article 165-8 (1);
13. Where the stock-listed corporation fails to determine the minimum issue value, in violation of Article 165-8 (2), or fails to calculate the minimum issue value by the methods specified in the latter part of the same paragraph;
14. Where the stock-listed corporation fails to issue stocks within one month from the date the resolution of the general meeting of shareholders is passed, in violation of Article 165-8 (3);
15. Where the stock-listed corporation issues any stocks, in violation of Article 165-10;
16. Where the stock-listed corporation issues any contingent capital securities, in violation of Article 165-11;
17. Where the stock-listed corporation pays any quarterly dividends without a resolution passed at the board of directors, in violation of Articles 165-12 (1) and (2);
18. Where the stock-listed corporation fails to pay quarterly dividends, in violation of Article 165-12 (3);
19. Where the stock-listed corporation pays quarterly dividends, in violation of Article 165-12 (5);
20. Where the stock-listed corporation pays stock dividends, in violation of Article 165-13 (1);
21. Where the stock-listed corporation calculates the market price of a stock, in violation of Article 165-13 (2);
22. Where the stock-listed corporation issues stocks with no or limited voting rights, in violation of Article 165-15 (2);
23. Where the stock-listed corporation fails to comply with any of the guidelines for financial management, in violation of Article 165-16 (2);
24. Where the stock-listed corporation fails to report the granting of stock options by the methods specified in Article 165-17 (1), in violation of the same paragraph;
25. Where the stock-listed corporation fails to report the appointment, dismissal or resignation of an outside director, in violation of Article 165-17 (3).
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 165-19 (Special Cases concerning Outside Directors and Standing Auditors)
Articles 542-8 (excluding the proviso to paragraph (1), and paragraphs (4) and (5)) and 542-10 of the Commercial Act shall not apply to corporations that have issued stock certificates listed on the securities market prescribed by Presidential Decree that trades stock certificates issued by small and medium businesses under Article 2 of the Framework Act on Small and Medium Enterprises.
[This Article Newly Inserted by Act No. 12102, Aug. 13, 2013]
CHAPTER IV OVER-THE-COUNTER TRADING, ETC.
 Article 166 (Over-the-Counter Trading)
Where financial investment instruments are traded or otherwise transacted outside an exchange market or an alternative trading system, matters pertaining to the methods related to such trading or transactions, the payment method therefor and other relevant matters shall be prescribed by Presidential Decree. <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
 Article 166-2 (Trading, etc. of Over-the-Counter Derivatives)
(1) An investment trader or investment broker shall comply with the following guidelines when engaging in the investment trading or investment brokerage of over-the-counter derivatives: <Amended by Act No. 10063, Mar. 12, 2010; Act No. 14827, Apr. 18, 2017>
1. Where the investment trader or investment broker trades or acts as an intermediary, a broker or an agent in the trading of an over-the-counter to an ordinary investor, such trading shall be limited to where the ordinary investor makes transactions for the purpose of hedging risk prescribed by Presidential Decree. In such cases, the investment trader or investment broker shall confirm the type and amount of the risk that the ordinary investor intends to hedge through the trading of over-the-counter derivatives and shall keep relevant materials;
2. The amount of risk (referring to the amount of risk prescribed and publicly notified by the Financial Services Commission) incurred from the trading over-the-counter derivatives shall not exceed the limit prescribed and publicly notified by the Financial Services Commission;
3. Where an amount obtained by dividing the amount calculated by subtracting gross risks from net operating capital by the aggregate of equity capital for each authorized or registered business unit required under Article 15, 20, 117-4 (8), or 249-3 (8) (referring to the relaxed requirements prescribed in Presidential Decree in each relevant provision) falls below 150/100 (in cases of concurrently-run financial investment entities, referring to cases prescribed and publicly notified by the Financial Services Commission), trading of new over-the-counter derivatives shall be suspended to the date when such shortage is resolved and only business related to concluding outstanding transactions or hedging risks shall be conducted;
4. The investment trader or investment broker shall obtain approval from a person in charge of derivatives business appointed under Article 28-2 whenever trading an over-the-counter derivative: Provided, That the same shall not apply where an over-the-counter derivative is traded under the conditions predetermined between counter-parties by contract which meets the guidelines prescribed and publicly notified by the Financial Services Commission;
5. The investment trader or investment broker shall report the details of the over-the-counter derivatives (including derivatives-linked securities) he/she has traded or has acted as an intermediary, a broker or an agent in the trade of which, to the Financial Services Commission on a monthly basis by the tenth day of the following month;
6. The investment trader or investment broker shall undergo prior deliberation by the Association to newly deal with any of the following over-the-counter derivatives: Provided, That the same shall not apply in cases prescribed by Presidential Decree:
(a) An over-the-counter derivative, the underlying assets of which are those referred to in Article 4 (10) 4 or 5;
(b) An over-the-counter derivative for ordinary investors.
(2) Management of risks linked to the transactions of over-the-counter derivatives and other matters necessary for the protection of investors shall be prescribed and publicly notified by the Financial Services Commission.
(3) The Governor of the Financial Supervisory Service shall supervise the compliance with the guidelines provided for in each subparagraph of paragraph (1) with respect to the transactions, etc. of over-the-counter derivatives by investment traders or investment brokers.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 166-3 (Obligation to Clear Over-the-Counter Transactions)
Where a financial investment business entity trades over-the-counter derivatives prescribed by Presidential Decree or engages in any other over-the-counter transaction (limited to where the default from such transaction is likely to have a material effect on the domestic capital market; hereafter in this Article referred to as "transaction subject to clearing") with another financial investment business entity or a person prescribed by Presidential Decree (hereafter in this Article referred to as "counterparty to the transaction"), it shall require a central counterparty or any other entity corresponding thereto which is prescribed by Presidential Decree to bear obligations of itself and the counterparty to the transaction incurred in connection with such transaction subject to clearing, through assumption of the obligations, novation, or through an analogous legally binding arrangement.
[This Article Newly Inserted by No. 11758, Apr. 5, 2013]
 Article 167 (Limitations on Ownership of Stocks Issued by Public Purpose Corporations)
(1) No one shall own any stocks issued by a public purpose corporation in whosever name on his/her account in excess of the following guidelines. In this regard, non-voting stocks shall not be included in the total number of outstanding stocks, and any stock owned in the name of his/her related person shall be deemed to be acquired on his/her account:
1. The holding ratios, in the case of a shareholder who owns not less than 10 percent of the total number of outstanding stocks as at the time the stocks are listed;
2. The ratio provided for in the articles of incorporation within three percent of the total number of outstanding stocks, in the case of any person other than the shareholder referred to in subparagraph 1.
(2) Notwithstanding paragraph (1), where a person obtains approval from the Financial Services Commission in respect to the holding ratio limit, the person may own stocks issued by a public purpose corporation to the limit approved. <Amended by Act No. 8863, Feb. 29, 2008>
(3) No person who actually owns stocks in excess of the ratio or limit set forth in paragraphs (1) and (2) shall exercise voting rights in relation to the stock held in excess, and the Financial Services Commission may order the person who in fact owns stocks in excess of the ratio or limit to take corrective measures to meet the ratio or limit within a prescribed period, not exceeding six months. <Amended by Act No. 8863, Feb. 29, 2008>
 Article 168 (Restrictions on Foreigners' Trading of Securities and Exchange-Traded Derivatives)
(1) With respect to trading and other transactions involving securities or exchange-traded derivatives by foreigners (referring to individuals with no address or residence for not less than six months in the Republic of Korea; hereafter the same shall apply in this Article), foreign corporations, etc., restrictions may be placed on the limit of acquisition, etc. in accordance with the guidelines and methods prescribed by Presidential Decree. <Amended by Act No. 9407, Feb. 3, 2009>
(2) With respect to the acquisition of stocks of a public purpose corporation by foreigners, foreign corporations, etc., a separate restriction may be set in accordance with the articles of incorporation of the public purpose corporation in addition to the restrictions placed under paragraph (1).
(3) No person who has acquired any stock, in violation of paragraph (1) or (2) shall be entitled to exercise a voting right in relation to the stock, and the Financial Services Commission may order a person who has traded a security or exchange-traded derivative, in violation of paragraph (1) or (2) to take corrective measures within a prescribed period, not exceeding six months. <Amended by Act No. 8863, Feb. 29, 2008>
(4) Other matters pertaining to the protection of investors or sound trading practices in connection with trading and other transactions of securities or exchange-traded derivatives by foreigners, foreign corporations, etc. shall be prescribed by Presidential Decree.
 Article 169 (Audit Certification by Auditors)
(1) A person specified by Presidential Decree among the persons who submit finance-related documents to the Financial Services Commission pursuant to this Part shall be audited as prescribed in the Act on External Audit of Stock Companies: Provided, That the matters specified by Presidential Decree may be exempted from the audit in consideration of the balance between confidentiality of corporate management, the burden to the corporation, etc. and the protection of investors, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(2) If deemed necessary for the protection of investors, the Financial Services Commission may order an auditor who conducted an audit in accordance with paragraph (1) or an audited corporation to submit materials or a report or to take any other measures as may be necessary. <Amended by Act No. 8863, Feb. 29, 2008>
(3) A foreign corporation, etc. audited in accordance with the statutes related to the financial investment business of a foreign country shall be deemed to be audited in accordance with the main sentence of paragraph (1), if the foreign corporation satisfies the guidelines prescribed by Presidential Decree. In this regard, paragraph (2) shall apply mutatis mutandis to the auditor who conducts the audit in accordance with the statutes related to the financial investment business of the foreign country (hereinafter referred to as "foreign auditor") or to the audited foreign corporation, etc.
 Article 170 (Auditor's Liability for Damage)
(1) Where a bona fide investor has sustained any damage by relying on an audit report of an auditor (including a foreign auditor; hereafter the same shall apply in this Article) accompanying the business report, etc., Article 17 (2) through (9) of the Act on External Audit of Stock Companies shall apply mutatis mutandis to the auditor's liability for damage. <Amended by Act No. 9407, Feb. 3, 2009; Act No. 12383, Jan. 28, 2014>
(2) The amount of damages for which a person is liable to pay in accordance with paragraph (1) shall be estimated by calculating the difference between the amount actually paid or received by the claimant as the price for acquisition or disposition of the securities (including depositary receipts related to such securities and other securities specified by Presidential Decree; hereafter the same shall apply in this Article) and any of the following amounts (only subparagraph 1 shall apply in the case of disposition):
1. The market price (referring to an estimated disposal price if there is no market price available) of the securities as at the time of closing the proceedings of the lawsuit filed to claim such damages under paragraph (1);
2. The disposal price if the securities were disposed of before the closing of proceedings under subparagraph 1.
(3) Notwithstanding paragraph (2), a person who is liable in accordance with paragraph (1) shall not be held liable for partial damages, if he/she proves that all or part of the damages sustained by the claimant was not caused by a false statement or representation of any material fact, or by an omission to state or represent such material fact.
 Article 171 (Alternative Payment for Security Deposit, etc.)
(1) Any guarantee money or deposit money specified by Presidential Decree from among the security deposits and deposits payable to the State, a local government, or a public institution referred to in the Act on the Management of Public Institutions (hereafter in this Article referred to as "public institution") may be paid alternatively by listed securities.
(2) The State, a local government, or a public institution shall not refuse to accept the alternative payment by listed securities in accordance with paragraph (1).
(3) The guidelines for evaluating the listed stocks allowable for alternative payment to the State, a local government, or a public institution in accordance with paragraph (1) and the values of such listed stocks shall be prescribed by Presidential Decree.
(4) Where listed stocks paid alternatively in accordance with paragraph (1) are deposited securities, etc. as defined in Article 309 (3) 2, the listed securities may be substituted with a deposit certificate issued by the Securities Depository (hereafter in this Article referred to as "deposit certificate") by the method prescribed by Presidential Decree.
(5) Where a deposit certificate is issued in accordance with paragraph (4), the Securities Depository and a depositor (referring to a depositor as defined in Article 309 (2)) shall enter a note in the depositor account book or the investor account book, stating that the disposition of the listed stocks is restricted from the issue date of the deposit certificate until the deposit certificate is returned.
(6) No person may set off or seize (including provisional seizure) any listed stocks, the disposition of which is restricted under paragraph (5). <Newly Inserted by Act No. 11845, May 28, 2013>
PART IV REGULATION OF UNFAIR TRADING
CHAPTER I INSIDER TRADING, ETC.
 Article 172 (Return of Insider's Short-Swing Profit)
(1) If an executive officer (including any of the persons referred to in the subparagraphs of Article 401-2 (1) of the Commercial Act; hereafter in this Chapter the same shall apply), employee (limited to the person who is in a position to acquire material nonpublic information as defined in Article 174 (1), as specified by Presidential Decree; hereafter in this Article the same shall apply), or a major shareholder of a stock-listed corporation earns a profit by purchasing (including the sale of specific securities, etc., through which he/she becomes a counterparty of a person who exercises a right, and acquires the status of a purchaser; hereafter in this Article the same shall apply) any of the following financial investment instruments (hereinafter referred to as "specific securities, etc.") and then selling (including the purchase of specific securities, etc., in which he/she may exercise a right and acquire the status of a seller; hereafter in this Article the same shall apply) them within six months, or by selling specific securities, etc. and then purchasing them within six months, the corporation may require the executive officer and/or employee or major shareholder to return the profit (hereinafter referred to as "short-swing profit") to the corporation. In such cases, matters pertaining to guidelines for computing such profit, the procedure for returning, etc. shall be prescribed by Presidential Decree:
1. Securities issued by the corporation (excluding securities specified by Presidential Decree);
2. Depositary receipts related to the securities referred to in subparagraph 1;
3. Exchangeable bonds issued by any person other than the corporation, which are exchangeable with the securities referred to in subparagraph 1 or 2;
4. Financial investment instruments, the underlying assets of which only consist of the securities referred to in subparagraphs 1 through 3.
(2) A shareholder (including an owner of any equity security or depositary receipt other than stocks; hereafter the same shall apply in this Article) of a corporation may demand that the corporation make a claim against a person who has earned a short-swing profit as set forth in paragraph (1) to return the short-swing profit, and the shareholder may make the claim on behalf of the corporation, if the corporation fails to make such claim within two months after receiving such demand.
(3) Upon becoming aware of the fact that a short-swing profit has accrued under paragraph (1), the Securities and Futures Commission shall notify the relevant corporation thereof. In such cases, the corporation shall disclose the contents of such notice to the public on its website, etc. in a manner prescribed by Presidential Decree.
(4) If the shareholder who files a lawsuit for the claim under paragraph (1) wins the lawsuit, the shareholder may claim legal expenses from the corporation and all other expenses incurred in relation to the lawsuit.
(5) The rights provided for in paragraphs (1) and (2) cease, if they are not exercised within two years after the profit is acquired.
(6) Paragraph (1) shall not apply in cases prescribed by Presidential Decree, taking into account the nature of the sale or purchase by an executive officer and/or employee, or a major shareholder, other circumstances, etc., and where the major shareholder involved was not a shareholder at the time of either purchase or sale.
(7) Paragraphs (1) and (2) shall apply mutatis mutandis to an investment trader who has underwritten specific securities, etc. publicly offered, privately placed, or sold by a stock-listed corporation during a period prescribed by Presidential Decree.
 Article 173 (Report on Status of Specific Securities, etc. Owned by Executive Officers, etc.)
(1) An executive officer or significant shareholder of a stock-listed corporation shall report the status of specific securities, etc. owned on his/her own account, in whosever name, within five days (excluding the days specified by Presidential Decree; hereafter the same shall apply in this Article) from the day on which he/she became an executive officer or a significant shareholder, or within five days from the day on which any change occurred in the status of specific securities, etc. owned by him/her (excluding insignificant change in status of securities owned which is prescribed by Presidential Decree; hereafter the same shall apply in this Article), to the Securities and Futures Commission and an exchange respectively in a manner prescribed by Presidential Decree. In such cases, the content and timing of the report may be prescribed differently by Presidential Decree, where any change in status of owned specific securities, etc. exists due to any extenuating circumstances, and in cases of the persons prescribed by Presidential Decree among professional investors. <Amended by Act No. 11845, May 28, 2013>
(2) The Securities and Futures Commission and an exchange shall keep such report under paragraph (1) for public inspection for three years, and shall also disclose it through their websites, etc. <Amended by Act No. 9407, Feb. 3, 2009>
 Article 173-2 (Reporting on Exchange-Traded Derivatives, etc. Held in Bulk)
(1) A person who holds (referring to the holding of exchange-traded derivatives on his/her own account in whosever name; hereafter the same shall apply in this paragraph) exchange-traded derivatives (limited to derivatives, the underlying assets of which are ordinary commodities referred to in Article 4 (10) 3 and others prescribed by Presidential Decree that are traded in the derivatives market; hereafter the same shall apply in this Article) of the same item in excess of the quantity prescribed and publicly notified by the Financial Services Commission shall report the status of such holding and other matters prescribed by Presidential Decree to the Financial Services Commission and an exchange in a manner prescribed by Presidential Decree within five days (excluding days specified by Presidential Decree; hereafter the same shall apply in this Article) from the date the person becomes a holder of the stocks in such a quantity, and shall, when the quantity he/she holds is changed in excess of a quantity prescribed and publicly notified by the Financial Services Commission, report such change to the Financial Services Commission and an exchange in a manner prescribed by Presidential Decree within five days from the date of occurrence of such a change. <Amended by Act No. 11845, May 28, 2013>
(2) Any of the following persons who becomes aware of information which could affect market prices in the derivatives market in the course of performing his/her duties and any person who receive such information from the person shall not divulge the information; use it for the trading of an exchange-traded derivative referred to in paragraph (1) and its underlying assets or other transactions; or allow any third person to use it: <Amended by Act No. 11845, May 28, 2013>
1. A person who drafts, establishes, or implements polices that could affect the market prices of exchange-trade derivatives;
2. A person who creates and manages information that could affect the market prices of exchange-traded derivatives;
3. A person who engages in the business of intermediating, circulating, or inspecting underlying assets of exchange-traded derivatives.
[This Article Newly Inserted by Act No. 9407, Feb. 3, 2009]
 Article 174 (Prohibition on Use of Material Nonpublic Information)
(1) None of the following persons (including a person in whose case one year has not passed since he/she no longer fell under any of subparagraphs 1 through 5) shall use any material nonpublic information (referring to any information that may produce a significant impact on investors' investment judgment, and that has not been disclosed yet to unspecified people in a manner prescribed by Presidential Decree; hereafter in this paragraph the same shall apply) related to the business of a listed-corporation (including a corporation which will be listed within six months or an unlisted corporation having the effect of being listed within six months by means of merger with a listed corporation, all-inclusive exchange of stocks, or other methods of corporate combination (hereafter in this paragraph referred to as "corporate, etc. scheduled to be listed"); hereafter in this paragraph and Article 443 (1) 1 the same shall apply) in trading or any other transaction involving specific securities, etc. (including relevant specific securities issued by a corporate scheduled to be listed or others; hereafter the same shall apply in Article 443 (1) 1) or allow another person to use it: <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. The corporation (including its affiliated companies; hereafter the same shall apply in this subparagraph and subparagraph 2) or its executive officer and/or employee, or agent, who becomes aware of the material nonpublic information in the course of performing the business;
2. A significant shareholder of the corporation, who becomes aware of the material nonpublic information in the course of exercising his/her rights;
3. A person having authority to grant permission or authorization, give an instruction, or supervise the corporation or any other power pursuant to a relevant statute, who becomes aware of the material nonpublic information in the course of exercising such authority or power;
4. A person who has entered into a contract with the corporation or is under contract negotiation with the corporation, and becomes aware of the material nonpublic information in the course of entering into, negotiating, or performing such contract;
5. An agent of a person falling under any of subparagraphs 2 through 4 (including executive officers and/or employees, and agents if the principal falling hereunder is a corporation), or a servant or employee of such person (or an executive officer and/or employee, or agent of a corporation if the person falling under any of subparagraphs 2 through 4 is the corporation), who becomes aware of the material nonpublic information in connection with his/her job;
6. A person who received the material nonpublic information from a person falling under any of subparagraphs 1 through 5 (including a person in whose case one year has not passed since the day on which he/she no longer fell under any of subparagraphs 1 through 5).
(2) None of the following persons (including a person in whose case one year has not passed since the day on which he/she no longer fell under any of subparagraphs 1 through 5) shall use material nonpublic information (referring to information not yet disclosed to a multiple number of unspecified people by the method prescribed by Presidential Decree; hereafter the same shall apply in this paragraph) regarding the initiation or discontinuance of a tender offer (referring to the tender offer under Article 133 (1); hereafter in this paragraph the same shall apply) for stocks, etc. in trading or any other transaction involving specific securities, etc. related to the stocks, etc. or allow another person to use such information: Provided, That the same shall not apply to cases where a person who intends to make a public tender offer (hereafter in this Article referred to as "prospective public tender offeror") is deemed to have no intention of utilizing any nonpublic information on the initiation or discontinuation of public tender offer of stocks, etc. in trading specific securities, etc. related to such stocks, etc. or in any other transactions, considering that he/she continues to hold stocks, etc. for a considerable period till after the public announcement for the tender offer is made: <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. A prospective public tender offeror (including its affiliated companies; hereafter the same shall apply in this subparagraph and subparagraph 2) or an executive officer and/or employee, or agent of the prospective tender offeror, who becomes aware of the material nonpublic information regarding the initiation or discontinuance of the tender offer in connection with his/her job;
2. A significant shareholder of the prospective public tender offeror, who becomes aware of the material nonpublic information regarding the initiation or discontinuance of the tender offer in the course of exercising his/her rights;
3. A person having authority to grant permission or authorization, give an instruction, or supervise the prospective public tender offeror or any other power pursuant to a relevant statute, who becomes aware of the material nonpublic information regarding the initiation or discontinuance of the tender offer in the course of exercising such authority or power;
4. A person who has entered into a contract with the prospective public tender offeror or is under contract negotiation with the tender offeror, and becomes aware of the material nonpublic information regarding the initiation or discontinuance of the tender offer in the course of entering into, negotiating, or performing such contract;
5. An agent of a person falling under any of subparagraphs 2 through 4 (including executive officers and/or employees, and agents if the principal falling hereunder is a corporation), or a servant or employee of such person (or an executive officer and/or employee, or agent of a corporation if the person falling under any of subparagraphs 2 through 4 is a corporation), who becomes aware of the material nonpublic information regarding the initiation or discontinuance of the tender offer in connection with his/her job;
6. A person who acquired the material nonpublic information regarding the initiation or discontinuance of the tender offer from the prospective public tender offeror or a person falling under any of subparagraphs 1 through 5 (including a person in whose case one year has not passed since the day on which he/she no longer fell under any of subparagraphs 1 through 5).
(3) None of the following persons (including a person in whose case one year has not passed since the day on which he/she no longer fell under any of subparagraphs 1 through 5) shall use material nonpublic information (referring to information not yet disclosed to a multiple number of unspecified people in a manner prescribed by Presidential Decree; hereafter in this paragraph the same shall apply) regarding acquisition or disposition of stocks, etc. in bulk (referring to an acquisition or disposition that may produce an impact on business control, as prescribed by Presidential Decree; hereafter in this paragraph the same shall apply) for stocks, etc. in trading or any other transaction of specific securities, etc. related to the stocks, etc. or allow another person to use such information: Provided, That the same shall not apply to the cases where a person who intends to acquire or dispose of the stocks, etc. in bulk is deemed to have no intention of utilizing any nonpublic information on initiation or discontinuation of acquisition or disposal of the stocks, etc. in bulk in the trading of specific securities, etc. related to such stocks, etc. or in any other transactions, considering that he/she continues to hold stocks, etc. for a considerable period till after the public announcement therof is made under Article 149: <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. An affiliated company of the person who intends to acquire or dispose of the stocks, etc. in bulk, or an executive officer and/or employee, or agent of the person who intends to acquire or dispose of the stocks, etc. in bulk (including its affiliated companies; hereafter in this subparagraph and subparagraph 2 the same shall apply), who becomes aware of the material nonpublic information regarding the initiation or discontinuance of an acquisition or disposition in bulk in connection with his/her job;
2. A significant shareholder of the person who intends to acquire or dispose of the stocks, etc. in bulk, who becomes aware of the material nonpublic information regarding the initiation or discontinuance of an acquisition or disposition in bulk in the course of exercising his/her rights;
3. A person having authority to grant permission or authorization, give an instruction, or supervise the person who intends to acquire or dispose of the stocks, etc. in bulk, or any other power pursuant to a relevant statute, who becomes aware of the material nonpublic information regarding the initiation or discontinuance of an acquisition or disposition in bulk in the course of exercising such authority or power;
4. A person who has entered into a contract with the person who intends to acquire or dispose of the stocks, etc. in bulk or is under contract negotiation with the person acquiring or disposing of the stocks, etc. in bulk, and becomes aware of the material nonpublic information regarding the initiation or discontinuance of an acquisition or disposition in bulk in the course of entering into, negotiating, or performing such contract;
5. An agent of a person falling under any of subparagraphs 2 through 4 (including executive officers and/or employees, and agents if the principal falling hereunder is a corporation), or a servant or employee of such person (or an executive officer and/or employee, or agent of a corporation if the person falling under any of subparagraphs 2 through 4 is a corporation), who becomes aware of the material nonpublic information regarding the initiation or discontinuance of an acquisition or disposition in bulk in connection with his/her job;
6. A person who acquired the material nonpublic information regarding the initiation or discontinuance of an acquisition or disposition in bulk from the person who intends to acquire or dispose of the stocks, etc. in bulk, or a person falling under any of subparagraphs 1 through 5 (including a person in whose case one year has not passed since the day on which he/she no longer fell under any of subparagraphs 1 through 5).
 Article 175 (Liability for Damage Caused by Use of Material Nonpublic Information)
(1) A person who violates Article 174 shall be liable for any damage sustained by a person who trades, or makes any other transaction of, the relevant specific securities, etc. in connection with the trading or other transaction of securities, etc.
(2) The right to claim damages under paragraph (1) ceases by prescription, if it is not exercised within one year from the date on which the claimant becomes aware of a violation of Article 174, or within three years from the date on which such violation was committed.
CHAPTER II MARKET PRICE MANIPULATION, ETC.
 Article 176 (Prohibition on Market Price Manipulation, Etc.)
(1) No one shall engage in any of the following acts with intent to mislead anyone into misapprehending that the trading of listed securities or exchange-traded derivatives is in bull market, or to mislead any third person into making a wrong judgement:
1. Selling securities or exchange-traded derivatives in collusion with third person to sell the securities or exchange-traded derivatives at the same price as his/her sale price, or at an agreed value at the same time he/she sells them;
2. Purchasing securities or exchange-traded derivatives in collusion with third person to sell the securities or exchange-traded derivatives at the same price as his/her purchase price, or at an agreed value at the same time he/she purchases them;
3. Appearing to trade securities or exchange-traded derivatives with no intent to transfer the interest or right therein;
4. Entrusting or being entrusted with any act set forth in subparagraphs 1 through 3.
(2) No one shall engage in any of the following acts with intent to attract anyone to trade listed securities or exchange-traded derivatives: <Amended by Act No. 11845, May 28, 2013>
1. Misleading any person into misapprehending that the trading of such securities or derivatives is in bull market, or selling or purchasing, or entrusting or being entrusted with the sale or purchase of, such securities or derivatives to cause a fluctuation in the market price (referring to the market price formed in the securities market or the derivatives market, or the market price formed in the course of intermediating the trading of listed stocks through an alternative trading system, or other market price prescribed by Presidential Decree; hereinafter the same shall apply);
2. Disseminating a rumor that a fluctuation in the market price for such securities or derivatives is being caused by his/her or a third person's market manipulation;
3. Making a false or misleading representation concerning a material fact in trading such securities or exchange-traded derivatives.
(3) No one shall engage in making purchases or sales in connection with listed securities or exchange-traded derivatives or shall entrust or be entrusted with such act, with intent to fix or stabilize the market price of the listed securities or exchange-traded derivatives: Provided, That the same shall not apply in any of the following cases:
1. Where an investment trader (limited to an investment trader who has entered into an underwriting contract with the issuer or owner of the securities subject to public offering or sale; hereafter the same shall apply in this Article) trades such securities with intent to make the public offering or sale of the securities smooth by stabilizing the price of the securities (hereafter in this paragraph referred to as "manipulation for stabilization") during the period beginning on a day specified by Presidential Decree not exceeding 30 days before the end of the subscription period for the public offering or sale of the securities, and ending on the expiration of the subscription period;
2. Where an investment trader trades securities to create supply and demand (hereafter in this paragraph referred to as "market creation") for the securities publicly offered or sold in a manner prescribed by Presidential Decree during a period prescribed by Presidential Decree not exceeding six months from the day on which the securities are listed;
3. Where a person specified by Presidential Decree, such as an executive officer of the issuer of securities publicly offered or sold, entrusts an investment trader with manipulation for stabilization;
4. Where an investment trader is entrusted with manipulation for stabilization in accordance with subparagraph 3;
5. Where an underwriter of securities publicly offered or sold, entrusts an investment trader with marker creation;
6. Where an investment trader is entrusted to create market in accordance with subparagraph 5.
(4) Where any of securities, derivatives or underlying assets of the securities or derivatives are listed on an exchange, or in other equivalent circumstances prescribed by Presidential Decree, no one shall engage in any of the following acts in connection with the trade of such securities or derivatives or other transactions (hereafter in this paragraph and Articles 177 and 443 (1) 7 referred to as "trade, etc."): <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. Causing a fluctuation in, or fixing, the market price of underlying assets of certain derivatives with intent to earn or causing a third party to earn unjust profits from the trade, etc. of such derivatives;
2. Causing a fluctuation in, or fixing, the market price of derivatives with intent to earn, or causing a third party to earn, unjust profits from the trade, etc. of such underlying assets of derivatives;
3. Causing a fluctuation in, or fixing, the market price of securities linked to certain securities prescribed by Presidential Decree or underlying assets of such securities with intent to earn, or causing a third party to earn, unjust profits from the trade, etc. of such securities;
4. Causing a fluctuation in, or fixing, the market price of securities with intent to earn, or causing a third party to earn, unjust profits from the trade, etc. of underlying assets of such securities;
5. Causing a fluctuation in, or fixing, the market price of derivatives the underlying assets of which is the same as or similar to those of such derivatives with intent to earn, or causing a third party to earn, unjust profits from the trade, etc. of such derivatives.
 Article 177 (Liability for Damage Caused by Market Price Manipulation)
(1) A person who violates Article 176 shall be liable for damage as classified in the following: <Amended by Act No. 11845, May 28, 2013>
1. Damage sustained by a person who has conducted trading, etc. or has entrusted trading, etc. of the relevant securities or derivatives due to such trading, etc. or entrustment at the price formed by such violation;
2. Damage, other than that referred to in subparagraph 1, sustained by a person who has conducted trading, etc. or has entrusted trading, etc. of other securities, derivatives or underlying assets of such securities or derivatives, the price of which was affected by such violation (limited to a violation provided for in subparagraphs of Article 176 (4)) due to such trading, etc. or entrustment;
3. Damage, other than that referred to in subparagraphs 1 and 2, in connection with securities or derivatives, the exercise of the right or fulfillment of conditions for which is decided or payment is settled depending on the price or figures at a specific point of time due to such violation (limited to a violation provided for in any subparagraph of Article 176 (4)), which is sustained by a person who has held such securities or derivatives and caused by the decision or payment in accordance with the price or figures formed by such violations.
(2) The right to claim damages under paragraph (1) ceases by prescription, if the claimant fails to exercise the right within one year from the time he/she becomes aware of a violation of Article 176, or within three years from the time such violation was committed.
CHAPTER III UNFAIR TRADING, ETC.
 Article 178 (Prohibition on Unfair Trading, etc.)
(1) No one shall commit any of the following acts in connection with trading (including public offering, private placement, and sale in case of securities; hereafter the same shall apply in this Article and Article 179) or other transaction of financial investment instruments:
1. Utilizing an unfair means, scheme, or trick;
2. Attempting to earn money or any interest in property, by using a document containing a false description or representation of a material fact, or an omission of a description or representation of a material fact necessary for preventing others from being misled, or any other description or representation;
3. Using an inaccurate market price with intent to attract another to trade or make any other transaction in financial investment instruments.
(2) No one shall disseminate a rumor, use a deceptive scheme, or make a threat, with intent to trade or make any other transaction in financial investment securities or attempt to cause a fluctuation in the market price.
 Article 178-2 (Prohibition on Market Disturbances)
(1) None of the persons referred to in subparagraph 1 shall use, or allow any third person to use, the information provided for in subparagraph 2 for the sales or purchase of securities listed on the securities market (including securities issued by a corporation, etc. which will be listed under Article 174 (1)), exchange-traded derivatives or derivatives, the underlying assets of which are the securities or exchange-traded derivatives (hereafter referred to as "designated financial investment instruments", inclusive of all the aforementioned in this paragraph) or other transactions (hereafter in this Article referred to as "trade, etc."): Provided, That any act that is unlikely to undermine the protection of investors or sound market practices in circumstances prescribed by Presidential Decree and any of the acts provided for in Article 173-2 (2), 174, or 178 shall be excluded herefrom:
1. Any of the following persons:
(a) A person who receives or subsequently acquires any material nonpublic information or nonpublic information, knowingly that such information has been imparted from a person referred to in any subparagraph of paragraphs of Article 174;
(b) A person who produces or becomes aware of the information provided for in subparagraph 2 (hereafter in this subparagraph referred to as "information") in connection with his/her duty;
(c) A person who becomes aware of the information by hacking, theft, deceit, intimidation, or other wrongful means;
(d) A person who receives or subsequently acquires the information, knowing that such information has been imparted from a person referred to in item (b) or (c);
2. Any of the following information:
(a) Information that could materially affect whether to conduct any trade, etc. or on the conditions of trade, etc. of designated financial investment instruments;
(b) Information regarding the fact unknown to investors and has not been disclosed to be generally available by many, unspecified persons.
(2) No person shall engage in any of the following acts in connection with the trade, etc. of any listed securities or exchange-traded derivatives: Provided, That this shall not apply where such act falls under Article 176 or 178:
1. An act that adversely affects, or is likely to, adversely affect the market price by submitting a large volume of asking prices at which deals are unlikely to be concluded, or by repeatedly correcting or canceling asking prices after submitting them;
2. An act that adversely affects, or is likely to, adversely affect the market price by conducting a false trade with no intent to transfer the right thereof;
3. An act that adversely affects, or is likely to, adversely affect the market price by conducting a trade after conspiring in advance with a third person to purchase the same listed securities or exchange-traded derivatives, at the same price as his/her sale or purchase price or at an agreed value at the same time he/she sells them, for the purpose of transferring a profit or loss or evading a tax;
4. An act that is likely to cause other persons to misjudge or misapprehend the status of supply and demand or the prices of listed securities or exchange-traded derivatives, or is likely to distort the prices of listed securities or exchange-traded derivatives, by spreading a rumor, devising an artifice, etc.
[This Article Newly Inserted by Act No. 12947, Dec. 30, 2014]
 Article 178-3 (Notification, etc. of Unfair Trade Practices)
(1) Where any penalty surcharge case under Article 429 or 429-2 is deemed to be in suspicion of violating Article 173-2 (2), 174, 176 or 178, the Securities and Futures Commission shall notify the Prosecutor General thereof.
(2) The Securities and Futures Commission may provide the relevant information for prosecuting a person who has violated Article 173-2 (2), 174, 176 or 178, in receipt of a request by the Prosecutor General.
[This Article Newly Inserted by Act No. 12947, Dec. 30, 2014]
 Article 179 (Liability for Damage Caused by Unfair Trading, Etc.)
(1) A person who violates Article 178 shall be liable for any damage sustained by any person who trades or makes any other transaction in financial investment instruments due to the violation in connection with such trading or transaction.
(2) The right to claim damages under paragraph (1) ceases by prescription, if the claimant fails to exercise the right within one year from the time he/she becomes aware of a violation of Article 178, or within three years from the time such violation was committed.
 Article 180 (Restriction on Short Sales)
(1) No one shall make any of the following sales (hereinafter referred to as "short sale") of listed securities (limited to securities prescribed by Presidential Decree; hereafter the same shall apply in this Chapter) in the securities market (including transactions involving the sale and purchase of securities via an alternative trading system; hereafter the same shall apply in this Chapter), or entrust someone or be entrusted with such sale: Provided, That such sale may be allowed in cases falling under subparagraph 2 (hereinafter referred to as "covered short sale") and the sale is made in a manner prescribed by Presidential Decree to maintain the stability of the securities market and to form fair market prices: <Amended by Act No. 11845, May 28, 2013; Act No. 14130, Mar. 29, 2016>
1. A sale of listed securities that a person does not own;
2. A sale with intent to make a payment with borrowed listed securities.
(2) Notwithstanding the main sentence of paragraph (1), a sale shall not be deemed a short sale in any of the following cases:
1. When listed securities for which a purchase contract was made in the securities market are sold before the settlement date within the amount of the corresponding quantity;
2. When stocks to be acquired through the exercise of a right to convertible bonds, exchangeable bonds, bonds with stock warrants, etc., a capital increase for value or without compensation, or stock dividends, are sold and it is possible to settle the account because the stocks will be listed by the settlement date;
3. When there is otherwise no possibility of failing to perform the settlement, as prescribed by Presidential Decree.
(3) The Financial Services Commission may restrict the covered short sale, as prescribed by Presidential Decree, if it is likely to undermine the stability of the securities market and formation of fair market prices. <Newly Inserted by Act No. 14130, Mar. 29, 2016>
 Article 180-2 (Reporting on Net Positions)
(1) A person who has conducted covered short sale of stock-listed securities under the proviso to Article 180 (1) (excluding persons who have conducted covered short sale of securities through any transaction prescribed by Presidential Decree; hereafter in this Chapter referred to as "seller") shall file a report on the matters concerning the net position of the seller and other necessary matters with the Financial Services Commission and an exchange, if the net position that he/she holds as a consequence of the purchase of the stock-listed securities or other transactions (hereafter in this Chapter referred to as "net position") exceeds a specified percentage of the number of issued stocks.
(2) If the report filed under paragraph (1) contains any false statement or representation or omits to state or represent any matter required therein, the Financial Services Commission may order that the report be corrected, specifying the grounds therefor.
(3) A professional investor obliged to file a report under paragraph (1) shall keep data concerning the computation of net position for a period prescribed by Presidential Decree, and promptly submit them if requested by the Financial Services Commission.
(4) Detailed scope of sellers, methods of computing net position, standards for filing reports, including the percentage of net position, and other necessary matters to be reported shall be prescribed in Presidential Decree, and the procedures and methods of filing reports shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Act No. 14130, Mar. 29, 2016]
 Article 180-3 (Public Disclosure of Net Positions)
(1) Where the ratio of the net position of each issue of listed securities held by a seller to the total number issued listed securities by issue prescribed by Presidential Decree, meets the criteria prescribed by Presidential Decree, the seller shall disclose matters concerning the seller, matters concerning the net position, and other matters prescribed by Presidential Decree to the public.
(2) Detailed matters necessary for public disclosure, such as the procedures and methods thereof, shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Act No. 14130, Mar. 29, 2016]
PART V COLLECTIVE INVESTMENT SCHEME
CHAPTER I GENERAL PROVISIONS
 Article 181 (Application of Related Acts)
Collective investment schemes shall be governed by the Commercial Act and the Civil Act, except as specifically provided otherwise by this Act.
 Article 182 (Registration of Collective Investment Scheme)
(1) Where a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, an investment limited company, an investment limited partnership company, an investment limited liability company, or an investment limited partnership (hereafter in this Chapter referred to as "investment company, etc." ) creates and establishes a collective investment scheme, it shall register the collective investment scheme with the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
(2) The requirements for registration of a collective investment scheme referred to in paragraph (1) are as follows:
1. None of the following entities shall be in a period of suspension of business:
(a) The collective investment business entity that manages the collective investment property;
(b) The trust business entity that keeps in custody and manages the collective investment property;
(c) The investment trader or the investment broker that sells the collective investment securities;
(d) The fund accounting and administration company (referring to a fund accounting and administration company registered under Article 254; hereinafter the same shall apply) entrusted with the affairs referred to in Article 184 (6) by an investment company, where an investment company is involved;
2. The collective investment scheme shall have been created and established lawfully pursuant to this Act;
3. The collective investment agreement shall neither violate any statute, nor explicitly infringe on any investor's interests;
4. All other requirements prescribed by Presidential Decree shall be met, considering the form, etc. of the collective investment scheme referred to in each subparagraph of Article 9 (18).
(3) When a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. intends to have its collective investment scheme registered, it shall file an application for registration with the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(4) Upon receipt of an application for registration filed under paragraph (3), the Financial Services Commission shall examine the contents of the application, determine whether to approve the registration within 20 days, and give written notice of its determination and the grounds for such determination to the applicant without delay. In such cases, the Commission may request that the applicant correct his/her application, if such application is incomplete. <Amended by Act No. 8863, Feb. 29, 2008>
(5) The duration for correcting an incomplete application for registration or other duration specified by Ordinance of the Prime Minister shall be disregarded for the purposes of calculating the period for examination under paragraph (4). <Amended by Act No. 8863, Feb. 29, 2008>
(6) In determining whether to approve an application for registration under paragraph (4), the Financial Services Commission shall not reject the application for registration, unless any of the following grounds exist: <Amended by Act No. 8863, Feb. 29, 2008>
1. Where the applicant fails to meet any of the requirements provided for in paragraph (2);
2. Where the application for registration filed under paragraph (3) contains false information;
3. Where the applicant fails to correct his/her application as requested under the latter part of (4).
(7) Upon determining to approve an application for registration pursuant to paragraph (4), the Financial Services Commission shall enter the information on necessary matters in the register of collective investment schemes, and shall provide public notice of the contents of the registration on its website, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(8) A collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. shall, whenever any matter registered in accordance with paragraph (1) is changed, file the details of such change as a revised registration with the Financial Services Commission within two weeks, except in circumstances prescribed by Presidential Decree where it is unlikely to undermine the protection of investors. In such cases, paragraphs (2) through (7) shall apply mutatis mutandis. <Amended by Act No. 8863, Feb. 29, 2008>
(9) Matters concerning filing an application for registration and revised registration, including the mandatory descriptions and accompanying documents of the application for registration under paragraphs (1) through (8), and other necessary matters shall be prescribed by Presidential Decree.
 Article 183 (Name of Collective Investment Scheme)
(1) A collective investment scheme shall use the words (referring to words such as securities, real estate, special asset, mixed assets, and short-term finance) indicating the type of collective investment scheme as set forth in the subparagraphs of Article 229 in its trade name or title.
(2) No entity, other than a collective investment scheme registered under this Act, shall use "collective investment", "indirect investment", "investment trust", "investment company", "investment limited company", "investment limited partnership company", "private equity fund", "investment limited liability company", "investment limited partnership", "undisclosed investment association", or any other similar words in its name: Provided, That a collective investment business entity and those referred to in Article 6 (5) 1 may use such words. <Amended by Act No. 11845, May 28, 2013; Act No. 13448, Jul. 24, 2015>
 Article 184 (Business Execution, etc. of Collective Investment Schemes)
(1) Voting rights in relation to equity securities (including depositary receipts related to the equity securities; hereafter the same shall apply in this Article) that belong to the property of an investment trust or an undisclosed investment association shall be exercised by the collective investment business entity of the investment trust or the undisclosed investment association; and voting rights in relation to the equity securities that belong to the collective investment property of an investment company, etc. shall be exercised by the investment company, etc.: Provided, That an investment company, etc. may entrust the collective investment business entity of the investment company, etc. to exercise the voting rights in relation to the equity securities that belong to the collective investment property of the investment company, etc.
(2) Management of the property of an investment trust or an undisclosed investment association shall be conducted by the collective investment business entity of the investment trust or the undisclosed investment association, while management of the collective investment property of an investment company, etc. shall be conducted by the corporate director, the managing member or the manager of the investment company, etc. or the collective investment business entity that is a general partner. <Amended by Act No. 11845, May 28, 2013>
(3) A collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. shall entrust the trust business entity with the custody and management of the collective investment property.
(4) No collective investment business entity shall act as a trust business entity that keeps in custody and manages a collective investment property operated on its behalf.
(5) To sell the collective investment securities of a collective investment scheme, a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. shall execute a sales contract with an investment trader or a sales entrustment contract with an investment broker: Provided, That it is not necessary to execute a sales contract or a sales entrustment contract, where the collective investment business entity of an investment trust or an undisclosed investment association sells the collective investment securities of the collective investment scheme in the capacity of an investment trader or an investment broker.
(6) An investment company shall entrust a fund accounting and administration company with the following affairs:
1. Issuing stocks of the investment company and transferring the title thereto;
2. Computing the property of the investment company;
3. Giving notices and public notices pursuant to relevant statutes or the articles of incorporation;
4. Affairs related to calling and opening the directors' meeting and the general meeting of shareholders, preparation of minutes, etc.;
5. Other matters prescribed by Presidential Decree as necessary for handling the affairs of the investment company.
(7) No investment company, etc. shall have a full-time executive officer and/or employee, nor shall have any sales office other than the head office.
 Article 185 (Joint Liability)
A collective investment business entity, a trust business entity, an investment trader, an investment broker, a fund accounting and administration company, a fund rating company (referring to a fund rating company registered under Article 258) and a bond rating company (referring to a bond rating company registered under Article 263) shall, when they are held liable for any damage sustained by investors pursuant to this Act, be jointly liable for the damage if they are culpable for such damage.
 Article 186 (Restriction, etc. on Acquisition of One's Own Collective Investment Securities)
(1) No investment company, etc. shall acquire collective investment securities issued by itself on its own account nor receive them as the subject matter of a pledge right: Provided, That collective investment securities issued by itself on its own account may be acquired in any of the following cases:
1. When it is necessary for exercising a security right or other right. In this regard, the collective investment securities so acquired shall be disposed of in a manner prescribed by Presidential Decree;
2. When the collective investment securities of an investment company, etc. are redeemed in accordance with Article 235;
3. When stocks are purchased in accordance with Article 201 (4).
(2) The provisions of Articles 87 and 89 through 92 shall apply mutatis mutandis to investment companies, etc. In this regard, the term "collective investment business entity (limited to a collective investment business entity of an investment trust or an undisclosed investment association; hereafter the same shall apply in this Article)" in Article 87 shall be construed as "investment company, etc. (referring to a collective investment business entity in cases where an investment company, etc. entrusts the collective investment business entity to exercise voting rights; hereafter the same shall apply in this Article)," the term "collective investment business entity" in Article 87 as "investment company, etc.," the term "collective investment business entity of an investment trust or an undisclosed investment association" in Article 89 (1) as "investment company, etc.," and the terms "collective investment business entity (limited to the collective investment business entity of an investment trust or an undisclosed investment association; hereafter the same shall apply in this Article)" and "collective investment business entity" in Articles 90 and 92 as "investment company, etc." respectively, while the term "collective investment business entity (limited to the collective investment business entity of an investment trust or an undisclosed investment association, but including the investment trader or the investment broker that sold the relevant collective investment securities; hereafter the same shall apply in this Article)" in Article 91 shall be construed as "investment company, etc. (including the investment trader or the investment broker that sold the relevant collective investment securities; hereafter the same shall apply in this Article)" and the term "collective investment business entity" in Article 91 as "investment company, etc." respectively. <Amended by Act No. 9407, Feb. 3, 2009>
 Article 187 (Keeping and Maintaining Records of Data)
(1) An investment company, etc. shall keep and maintain records of data related to its business by categories of data as specified by Presidential Decree during the period prescribed by Presidential Decree.
(2) An investment company, etc. shall establish and implement measures appropriate for preventing the records of data to be kept and maintained in accordance with paragraph (1) from being destroyed, counterfeited, or altered.
CHAPTER II ORGANIZATION, ETC. OF COLLECTIVE INVESTMENT SCHEMES
SECTION 1 Investment Trust
 Article 188 (Execution, etc. of Trust Contract)
(1) A collective investment business entity shall, when it intends to create an investment trust, execute a trust contract with a trust business entity in a trust contract form that contains the following matters therein:
1. The trade names of the collective investment business entity and the trust business entity;
2. Matters concerning the value of the principal of the trust and the total number of units of beneficiary certificates;
3. Matters concerning the operation and management of the investment trust property;
4. Matters concerning the distribution of income and redemption;
5. Matters concerning the computation method and the time and method of payment of the remuneration and other fees to which the collective investment business entity and the trust business entity shall be entitled: Provided, That the contract shall include a provision that the fees for computation of the base price shall be borne by the relevant investment trust property in cases where the collective investment business entity entrusts someone else with the affairs related to computation of the base price;
6. Matters concerning the general meeting of beneficiaries;
7. Matters concerning public disclosure and reports;
8. Other matters prescribed by Presidential Decree necessary for the protection of beneficiaries.
(2) A collective investment business entity that has created an investment trust shall, when it intends to amend the relevant trust contract, execute an amended contract with the trust business entity. In this regard, in cases where any of the following matters in the trust contract is to be amended, the case shall be brought for resolution in advance to the general meeting of beneficiaries under the main sentence of Article 190 (5): <Amended by Act No. 11845, May 28, 2013>
1. An increase in the remuneration or any other fee to which the collective investment business entity, the trust business entity, etc. shall be entitled;
2. A change in the nature of the trust business entity (excluding cases where it is changed due to a merger, division, merger after division, or any other reason as specified by Presidential Decree);
3. Amendment of the trust contract term (excluding the cases where the amendment of such term is specified in the trust contract at the time the investment trust is created);
4. Other matters prescribed by Presidential Decree as an important matter related to beneficiaries' interests.
(3) A collective investment business entity that has created an investment trust shall, upon amending the trust contract in accordance with paragraph (2), disclose such amendment through its website, etc., and shall, upon amending the trust contract in accordance with the latter part of paragraph (2), notify the beneficiaries thereof, in addition to disclosing such amendment to the public.
(4) A collective investment business entity shall, when it creates an investment trust in accordance with paragraph (1), pay the full amount of the principal of the trust stipulated in the relevant trust contract to the trust business entity in cash.
 Article 189 (Beneficiary Certificate, etc.)
(1) A collective investment business entity that has created an investment trust shall divide the beneficiary interest in the investment trust equally and indicate the divided right in beneficiary certificates.
(2) Each beneficiary shall have an equal right in the redemption of the principal of the trust, the distribution of profit, etc. in proportion to the number of units of beneficiary certificates.
(3) A collective investment business entity that has created an investment trust shall, upon completing the payment of the full amount of the issue value of the beneficiary certificates, issue beneficiary certificates in a manner set forth in Article 309 (5) subject to confirmation by the trust business entity.
(4) Beneficiary certificates shall be in registered form with no par value.
(5) A collective investment business entity that has created an investment trust shall describe the following matters in the beneficiary certificates, which shall bear the printed names, and affixed seals, or joint signatures, of the representative directors (referring to the representative executive officers in cases of a company with executive officer system) of the collective investment business entity and the trust business entity that keeps in custody and manages the investment trust property: <Amended by Act No. 11845, May 28, 2013>
1. The trade names of the collective investment business entity and the trust business entity;
2. Names or titles of beneficiaries;
3. The value of the principal of the trust at the time of executing the trust contract and the total number of units of beneficiary certificates;
4. The issue date of the beneficiary certificates;
5. Other matters prescribed by Presidential Decree necessary for the protection of beneficiaries.
(6) A collective investment business entity that has created an investment trust shall entrust the Securities Depository with the affairs related to preparation of a list of beneficiaries.
(7) The Securities Depository shall, upon being entrusted in accordance with paragraph (6), prepare and keep the list of beneficiaries containing the following descriptions:
1. Addresses and names of beneficiaries;
2. Number of units of beneficiary certificates owned by each beneficiary;
3. Serial numbers of beneficiary certificates, if they were issued.
(8) The Securities Depository shall not furnish any other person with the information under the subparagraphs of paragraph (7): Provided, That it may be furnished in cases where it is furnished to the collective investment business entity for purposes of opening the general meeting of beneficiaries and other cases prescribed by Presidential Decree.
(9) The provisions of Articles 336 through 340 and 358-2 through 360 of the Commercial Act shall apply mutatis mutandis to beneficiary interest and beneficiary certificates, while Articles 353 and 354 of the Commercial Act shall apply mutatis mutandis to the list of beneficiaries.
 Article 190 (General Meeting of Beneficiaries)
(1) An investment trust shall hold a general meeting of beneficiaries consisting of all beneficiaries, and the general meeting of beneficiaries shall have the power to adopt resolutions for only the matters provided for by this Act or the trust contract.
(2) The general meeting of beneficiaries shall be convened by the collective investment business entity that has created an investment trust.
(3) A collective investment business entity that has created an investment trust shall convene a general meeting of beneficiaries within one month, if the trust business entity that keeps in custody and manages the investment trust property or the beneficiaries who hold at least five percent of the total number of units of beneficiary certificates, request the collective investment business entity in writing to convene the general meeting of beneficiaries, stating the purpose of the general meeting of beneficiaries and the grounds for convening the meeting. In such cases, if the collective investment business entity does not initiate the procedure for convening the general meeting of beneficiaries without good cause, the trust business entity or the beneficiaries who hold at least five percent of the total number of units of beneficiary certificates may hold the general meeting of beneficiaries subject to approval by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(4) Article 363 (1) and (2) of the Commercial Act shall apply mutatis mutandis to a notice for convening a general meeting of beneficiaries. In such cases, "shareholders" shall be construed as "beneficiaries," "list of shareholders" as "list of beneficiaries," and "company" as "collective investment business entity."
(5) The general meeting of beneficiaries shall adopt a resolution by the affirmative vote of a majority of the voting rights of the beneficiaries present at the meeting and not less than 1/4 of the total number of units of outstanding beneficiary certificates: Provided, That a resolution on the matters for which a resolution by the general meeting of beneficiaries is required in accordance with the provisions of the trust contract, other than the matters that require a resolution at the general meeting of beneficiaries pursuant to this Act, may be adopted by the majority of voting rights of the beneficiaries present at the meeting and not less than 1/5 of the total number of units of beneficiary certificates. <Amended by Act No. 11845, May 28, 2013>
(6) A beneficiary may exercise his/her voting rights in writing without attending the general meeting of beneficiaries: Provided, That, if the beneficiary meets each of the following conditions, he/she shall be deemed to have exercised his/her voting rights to the extent that they do not affect the details of the resolutions made by the total number of units of beneficiary certificates owned by beneficiaries present at the general meeting of beneficiaries (hereafter in this paragraph referred to as "deemed exercise of voting rights"): <Amended by Act No. 11845, May 28, 2013>
1. The voting rights have not been exercised despite that a notice on the exercise of voting rights was given in the manner prescribed by Presidential Decree;
2. The method for deemed exercise of voting rights shall be specified in the collective investment agreement;
3. Total number of units of beneficiary certificates the voting rights of which were exercised at the general meeting of beneficiaries shall not be less than 1/10 of the total number of units of outstanding beneficiary certificates;
4. Compliance with other methods and procedures prescribed by Presidential Decree for the protection of beneficiaries.
(7) Where no resolution was adopted at a general meeting of beneficiaries under paragraph (5), a collective investment business entity that has created an investment trust (including a trust business entity or beneficiaries holding not less than five percent of the total number of units of outstanding beneficiary certificates, who convene the general meeting of beneficiaries pursuant to the latter part of paragraph (3); hereafter in this paragraph the same shall apply) shall convene a postponed general meeting of beneficiaries (hereinafter referred to as "postponed general meeting of beneficiaries") within two weeks from the initial date of the general meeting of beneficiaries. <Amended by Act No. 11845, May 28, 2013>
(8) Paragraphs (5) and (6) shall apply mutatis mutandis to the resolution at a postponed general meeting of beneficiaries. In such cases, "not less than 1/4 the total number of units of outstanding beneficiary certificates" shall be construed as "not less than 1/8 of the total number of units of outstanding beneficiary certificates," and "not less than 1/5 of the total number of units of beneficiary certificates" as "not less than 1/10 of the total number of units of beneficiary certificates." <Amended by Act No. 11845, May 28, 2013>
(9) The method of convening the general meeting of beneficiaries and the postponed general meeting of beneficiaries, the method of exercising voting rights in writing, and other matters concerning the general meeting of beneficiaries shall be prescribed by Presidential Decree.
(10) Articles 364, 366-2 (2) and (3), 367, 368 (3) and (4), 368-4, 369 (1) and (2), 371 through 373, 376, 377, and 379 through 381 shall apply mutatis mutandis to the general meeting of beneficiaries. In this regard, "shareholder" shall be construed as "beneficiary," "articles of incorporation" as "trust contract," "stocks" as "beneficiary certificates," "company" as "collective investment business entity," and "resolution at the board of directors" as "resolution at a collective investment business entity." <Amended by Act No. 11845, May 28, 2013>
 Article 191 (Dissenting Beneficiary's Right to Require Purchase of Beneficiary Certificates)
(1) In cases falling under any of the following subparagraphs, a beneficiary of an investment trust may require the collective investment business entity in writing specifying the number of beneficiary certificates to purchase the beneficiary certificates held by him/her: <Amended by Act No. 11845, May 28, 2013>
1. Where a beneficiary who dissents from the resolution adopted by the general meeting of beneficiaries regarding an amendment of the trust contract under the latter part other than the subparagraphs of Article 188 (2) or a merger of the investment trust under Article 193 (2) (limited to cases where he/she has sent a notice of his/her dissent from such resolution to the relevant collective business entity before the opening of the general meeting of beneficiaries) requires to purchase the beneficiary certificates within 20 days from the date the resolution was adopted by the general meeting of beneficiaries;
2. Where a beneficiary who dissents from the merger of the investment trust under the proviso to the part other than subparagraphs of Article 193 (2) requires to purchase the beneficiary certificates in the manner prescribed by Presidential Decree.
(2) Upon receipt of a claim under paragraph (1), the collective investment business entity that has created the investment trust shall not require the beneficiary to bear the fees for purchasing the beneficiary certificates and other expenses.
(3) Upon receipt of a claim under paragraph (1), the collective investment business entity that has created the investment trust shall purchase the beneficiary certificates within 15 days from the expiration of the time period for claiming such purchase with the investment trust property in a manner prescribed by Presidential Decree: Provided, That purchasing the beneficiary certificates may be postponed subject to a prior approval of the Financial Services Commission, if it is impossible to comply with the claim for purchasing because of a lack of funds for purchasing. <Amended by Act No. 8863, Feb. 29, 2008>
(4) A collective investment business entity that has created an investment trust shall, upon purchasing beneficiary certificates in accordance with the main sentence of paragraph (3), retire such beneficiary certificates without delay.
 Article 192 (Termination of Investment Trust)
(1) A collective investment business entity that has created an investment trust may terminate the investment trust subject to prior approval of the Financial Services Commission: Provided, That an investment trust may be terminated without approval of the Financial Services Commission, if it is unlikely to undermine beneficiaries' interests in circumstances prescribed by Presidential Decree. In such cases, the collective investment business entity shall report the termination to the Financial Services Commission without delay. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
(2) A collective investment business entity that has created an investment trust shall terminate the investment trust without delay, if any of the following events occurs. In such cases, the collective investment business entity shall report the termination to the Financial Services Commission immediately: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013; Act No. 13448, Jul. 24, 2015>
1. Expiration of the trust contract term stipulated by the trust contract;
2. Resolution at the general meeting of beneficiaries to terminate the investment trust;
3. Absorbed merger of the investment trust;
4. De-registration of the investment trust;
5. Total number of beneficiaries becomes one: Provided, That cases prescribed by Presidential Decree as unlikely to undermine sound trading practices, shall be excluded herefrom;
6. Where the collective investment business entity is ordered to terminate a hedge fund, which is an investment trust, pursuant to Article 249-9 (1).
(3) Where a collective investment business entity that has created an investment trust terminates the investment trust in accordance with paragraph (1) or (2) (excluding subparagraph 3), it may pay the assets that belong to the investment trust property to the relevant beneficiaries in accordance with the terms and conditions of the trust contract.
(4) The mandatory descriptions of an application and accompanying documents in the case of applying for approval for termination in accordance with paragraph (1), the methods for disposal of receivables, payables, etc. in the case of terminating an investment trust in accordance with paragraph (1) or (2), and other matters pertaining to the termination of an investment trust shall be prescribed by Presidential Decree.
(5) A collective investment business entity that has created an investment trust may terminate a part of an investment trust, where it is necessary for complying with a beneficiary's claim for redemption or any other case as prescribed by Presidential Decree.
 Article 193 (Merger of Investment Trusts)
(1) A collective investment business entity that has created an investment trust may merge the investment trust by absorbing another investment trust operated by the collective investment business entity.
(2) Where a collective investment business entity that has created an investment trust intends to merge the investment trusts in accordance with paragraph (1), it shall prepare a merger plan that shall contain the following matters, and shall present such plan for resolution to the general meetings of beneficiaries of the investment trusts subject to the merger: Provided, That the cases prescribed by Presidential Decree, such as a merger of small-scale investment trusts, which is least likely to undermine sound trading practices, shall be excluded herefrom: <Amended by Act No. 11845, May 28, 2013>
1. The increased value of the trust principal and the number of units of beneficiary certificates of the investment trust surviving the merger of the investment trusts;
2. Matters concerning the distribution of beneficiary certificates to the beneficiaries of the investment trust disappearing through the merger of the investment trusts;
3. The details of payment where the beneficiaries of the investment trust disappearing through the merger of the investment trusts are to be paid in cash;
4. The dates of the general meeting of beneficiaries of each investment trust to be merged;
5. The scheduled date for the merger;
6. Any amended terms and conditions of the trust contract of the investment trust surviving the merger of the investment trusts, if amended;
7. Other matters prescribed by Presidential Decree.
(3) Article 527-5 (1) and (3) of the Commercial Act shall apply mutatis mutandis to the case of a merger of investment trusts that have creditors. In this regard, "company" shall be construed as "collective investment business entity", and "general meeting of shareholders" as "general meeting of beneficiaries", respectively.
(4) A collective investment business entity that has created an investment trust shall keep the following documents at its head office and the sales offices of the investment trader or the investment broker, from two weeks before the date of the general meeting of beneficiaries and until six months have elapsed after the merger. In this regard, beneficiaries and creditors of the investment trust may inspect such documents at any time during business hours, and may also request it to deliver a certified copy or an abstract of the documents:
1. The final version of closing documents of each merged investment trust;
2. A written statement that describes the matters concerning the distribution of beneficiary certificates to the beneficiaries of the investment trust disappearing through the merger and the grounds therefor;
3. The merger plan.
(5) Upon having merged the investment trusts in accordance with paragraph (1), a collective investment business entity that has created an investment trust shall report such merger to the Financial Services Commission without delay. In this regard, it shall also report such merger to an exchange, if the beneficiary certificates of the merged investment trust have been listed in the securities market. <Amended by Act No. 8863, Feb. 29, 2008>
(6) A merger of investment trusts shall become effective at the time the collective investment business entity of the surviving investment trust completes its report to the Financial Services Commission in accordance with paragraph (5). In this regard, the disappearing investment trust shall be deemed terminated. <Amended by Act No. 8863, Feb. 29, 2008>
(7) The investment trust surviving a merger shall succeed to the rights and obligations of the investment trust disappearing through the merger.
(8) The formula for the computation of the merged value of beneficiary certificates, the notice to beneficiaries of the matters approved at the general meeting of beneficiaries, and other matters pertaining to a merger of investment trusts shall be prescribed by Presidential Decree.
SECTION 2 Collective Investment Scheme in Form of Company
Subsection 1 Investment Company
 Article 194 (Incorporation, etc. of Investment Company)
(1) Any person provided for in Article 5 of the Act on Corporate Governance of Financial Companies cannot be a promoter of an investment company. <Amended by Act No. 11845, May 28, 2013; Act No. 13453, Jul. 31, 2015>
(2) Promoters who intend to incorporate an investment company shall prepare articles of incorporation which shall state the following matters, on which all promoters shall print their names and affix their seals or signatures: <Amended by Act No. 9407, Feb. 3, 2009>
1. Purpose;
2. Trade name;
3. Total number of stocks to be issued;
4. Total number and value of stocks issued at the time of incorporation;
5. Address of the company;
6. Matters concerning the operation and management of the investment company's property;
7. Minimum amount of net assets (referring to the amount computed by subtracting liabilities from assets) that the investment company is required to maintain (hereinafter referred to as "minimum net assets");
8. Matters concerning distribution of profit and redemption;
9. Matters concerning public disclosure and reports;
10. Methods of giving public notices;
11. Other matters prescribed by Presidential Decree as necessary for the protection of shareholders.
(3) The capital at the time of incorporation of an investment company shall be the total value of the stocks issued.
(4) The total number of stocks to be issued at the time of incorporation of an investment company may be determined by setting a maximum limit and a minimum limit.
(5) Deleted. <by Act No. 13448, Jul. 24, 2015>
(6) Promoters of an investment company shall subscribe (referring to subscription under Article 293 of the Commercial Act; hereafter the same shall apply in this Chapter) to the total number of stocks issued at the time of incorporation of the investment company.
(7) Promoters who subscribe to stocks in accordance with paragraph (6) shall pay the value of subscribed stocks in cash without delay.
(8) Upon having paid the value of subscribed stocks issued at the time of incorporation of the investment company, promoters shall appoint directors by the affirmative vote of a majority of voting rights without delay, and the directors so appointed shall inspect whether there is any violation of the relevant statutes, or of the articles of incorporation of the investment company, in relation to the incorporation of the investment company and report the findings thereof to the board of directors.
(9) If directors discover any violation of the relevant statutes, or of the articles of incorporation of the investment company, through an inspection conducted under paragraph (8), they shall report their findings to the promoters without delay.
(10) Promoters of an investment company shall complete the registration for incorporation by reporting the following matters along with the accompanying documents prescribed by Presidential Decree within two weeks from the date of completion of the report under paragraph (8):
1. Matters referred to in paragraph (2) 1 through 3 and matters referred to in subparagraphs 5, 7, and 10 of the same paragraph;
2. Where the articles of incorporation provide for the term of existence of the investment company or reasons for dissolution thereof, the details thereof;
3. Names and resident registration numbers of directors (or trade name and business registration number in the cases of a corporation).
(11) No promoter of an investment company shall establish any investment company that invests its investment property in ships, and no investment company shall amend its articles of incorporation after its incorporation to fall within the category of an investment company that invests its investment property in ships. <Amended by Act No. 14130, Mar. 29, 2016>
 Article 195 (Amendment of Articles of Incorporation, etc.)
(1) An investment company may amend its articles of incorporation by a resolution of its board of directors: Provided, That an amendment of any of the following matters requires a resolution of the general meeting of shareholders under the main sentence of Article 201 (2): <Amended by Act No. 11845, May 28, 2013>
1. An increase in the remuneration or any other fee for the collective investment business entity, the trust business entity, etc.;
2. A change in the nature of the collective investment business entity or the trust business entity;
3. An amendment of its continuance term or the grounds for dissolution, if its articles of incorporation provide for the continuance term or the grounds for dissolution;
4. Other matters prescribed by Presidential Decree as important matters related to shareholders' interests.
(2) Notwithstanding paragraph (1), an investment company may amend its articles of incorporation without a resolution of the board of directors or the general meeting of shareholders, in cases where the collective investment business entity or the nature of the trust business entity is changed due to a merger, division, merger after division, or any other event prescribed by Presidential Decree.
(3) An investment company shall, when it amends its articles of incorporation in accordance with paragraph (1) or (2), disclose such amendment through its website, etc., and shall provide notice to its shareholders in addition to public disclosure, in cases where it amends its articles of incorporation in accordance with the proviso to paragraph (1).
 Article 196 (Investment Company's Stocks)
(1) An investment company's stocks shall be in the registered form with no par value.
(2) An investment company shall issue its stocks in a manner provided for in Article 309 (5) on the date of its formation or at the end of the time period for the payment for new stocks without delay.
(3) When an investment company issues new stocks after its formation, the number of new stocks, the issue value and the deadline for the payment therefor shall be determined by its board of directors: Provided, That the provisions of its articles of incorporation shall apply if its articles of incorporation provides otherwise.
(4) When an investment company that is allowed to repurchase its own stocks from a shareholder upon request from the shareholder (hereafter referred to as an "open-end investment company" in this Article) issues new stocks after its formation, its board of directors may determine the following matters. In such cases, such open-end investment company shall post the daily issue value fixed in a manner under subparagraph 3 at the branch offices and sales offices of the investment trader or the investment broker that sells the investment company's stocks, and shall also disclose such information on its website, etc.:
1. The time period for issuance of new stocks;
2. The maximum limit of the number of new stocks issued within the time period for issuance under subparagraph 1;
3. The daily issue value during the time period for issuance under subparagraph 1 and the method for determining the deadline for payment of the stock price.
(5) If an investment company issues new stocks after its formation, it shall make equal the issue value of new stocks issued on the same day and other terms and conditions of issuance. In such cases, the issue value of new stocks shall be determined in a manner prescribed by Presidential Decree based on the net asset value of assets owned by the investment company.
(6) Article 194 (7) shall apply mutatis mutandis to the subscribers for stocks when issuing new stocks.
(7) Where an investment company issues new stocks after its formation, subscribers for the stocks shall acquire the rights and duties of a shareholder simultaneously with the payment of the stock price.
 Article 197 (Classification, etc. of Directors)
(1) Directors of an investment company shall be classified into the director that is the collective investment business entity (hereafter in this Sub-Section referred to as "corporate director") and supervisory directors.
(2) An investment company shall have one corporate director and two or more supervisory directors.
 Article 198 (Corporate Director)
(1) A corporate director shall represent an investment company, and shall execute the business affairs of the investment company.
(2) The corporate director shall obtain a resolution at the board of directors when it intends to execute any of the following business affairs:
1. Execution of a business entrustment contract (including an amendment of the business entrustment contract) with a collective investment business entity, a trust business entity, an investment trader, an investment broker, or a fund accounting and administration company;
2. Payment of remuneration for management, keeping in custody, etc. of assets;
3. Matters concerning the distribution of money and stocks;
4. Other matters provided for in its articles of incorporation as deemed important to the operations of the investment company.
(3) The corporate director shall report the status of execution of its business and the details of asset management to the board of directors at least once every three months.
(4) The corporate director may appoint a person who shall partially perform its duties within the prescribed scope on its behalf from among its executive officers and/or employees. In such cases, the collective investment business entity shall notify the investment company of such appointment in writing.
(5) Acts done by the person notified to the investment company in accordance with paragraph (4) within the scope of his/her duties shall be deemed conducted by the corporate director.
 Article 199 (Supervisory Director)
(1) A supervisory director shall oversee the business affairs executed by a corporate director and may, if necessary for ascertaining the status of business and property of the investment company, demand that the corporate director and the trust business entity that keeps in custody and manages the property of the investment company, the investment trader or the investment broker that sells the investment company's stocks, or the fund accounting and administration company that has been entrusted by the investment company with the business affairs referred to in Article 184 (6), submit a report on the status of the business and property relevant to the investment company.
(2) A supervisory director may, if deemed necessary for performing his/her duties, demand that the auditor referred to in Article 240 (3) submit an audit report.
(3) A person who receives a demand from a supervisory director pursuant to paragraph (1) or (2) shall comply with such demand, unless there are exceptional circumstances.
(4) None of the following persons can be a supervisory director, and the person shall be dismissed from office, where the person is found to fall under any of the following after being appointed as a supervisory director: <Amended by Act No. 11845, May 28, 2013; Act No. 13453, Jul. 31, 2015>
2. A promoter of the relevant investment company (limited to where a supervisory director of the investment company is appointed for the first time in accordance with Article 194 (8));
3. A major shareholder of the investment company or his/her related person;
4. A related person of the corporate director or a person who receives remuneration regularly from the corporate director;
5. A related person of the investment trader or the investment broker that sells the investment company's stocks;
6. A full-time executive officer and/or employee of a corporation, if a director of the investment company takes a concurrent office as a director of the corporation;
7. Other persons specified by Presidential Decree from among those who could compromise the impartiality of a supervisory director.
(5) Article 54 shall apply mutatis mutandis to supervisory directors.
 Article 200 (Directors' Meeting)
(1) The directors' meeting shall be called by a director.
(2) A director who intends to call the directors' meeting shall notify each director of the call to meeting no later than three days before the meeting: Provided, That the period for notice may be shortened by the provisions of the articles of incorporation.
(3) The board of directors shall have the authority to adopt a resolution only for the matters provided for in this Act and the articles of incorporation.
(4) The board of directors shall, whenever it has a vacancy on the board, call a general meeting of shareholders immediately to appoint a director.
(5) A resolution by the directors' meeting requires the attendance of the majority of directors and the affirmative vote of the majority of directors present at the meeting.
 Article 201 (General Meeting of Shareholders)
(1) The general meeting of shareholders of an investment company shall be called by its board of directors.
(2) The general meeting of shareholders shall adopt a resolution by the majority of the voting rights of shareholders present at the meeting and one-fourth or more of the total number of outstanding stocks: Provided, That a resolution on the matters for which a resolution by the general meeting of shareholders is required in accordance with the provisions of the collective investment agreement, other than the matters that require a resolution of the general meeting of shareholders pursuant to this Act may be adopted by the majority of voting rights of the shareholders present at the meeting and one-fifth or more of the total number of number of outstanding stocks. <Amended by Act No. 11845, May 28, 2013>
(3) The provisions of Article 190 (1), (3) and (6) through (9) shall apply mutatis mutandis to the general meeting of shareholders of an investment company. In this regard, the term "investment trust" shall be construed as "investment company", the term "trust contract" as "articles of incorporation", the terms "collective investment business entity that has created an investment trust" and "collective investment business entity" as "board of directors of an investment company" collectively, the term "property of an investment trust" as "property of an investment company", the term "beneficiary certificates" as "stocks", the term "total number of units" as "total number", the term "beneficiaries" as "shareholders", the term "general meeting of beneficiaries" as "general meeting of shareholders", the term "number of units" as "number", and the term "paragraph (5)" in paragraph (8) of the same Article as "paragraph (2)". <Amended by Act No. 11845, May 28, 2013>
(4) Article 191 shall apply mutatis mutandis to an amendment of the articles of incorporation under the proviso to Article 195 (1) or the shareholders dissenting from a merger under Article 204 (2). In this regard, the term "trust contract" shall be construed as "articles of incorporation", the terms "investment trust", "collective investment business entity", and "collective investment business entity that has created an investment trust" as "investment company" collectively, the term "general meeting of beneficiaries" as "general meeting of shareholders", the term "beneficiaries" as "shareholders", the term "beneficiary certificates" as "stocks", and the term "property of an investment trust" as "property of an investment company". <Amended by Act No. 11845, May 28, 2013>
 Article 202 (Dissolution)
(1) An investment company shall be dissolved if any of the following events or causes occurs. In such cases, a liquidator shall file a report on the reason for and date of dissolution, names and resident registration numbers of the liquidator and the liquidation overseer (or the trade name and business registration number, if the liquidator is a corporate director) with the Financial Services Commission within 30 days from the date of dissolution: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
1. Expiration of the term of existence or occurrence of other reasons for dissolution as stipulated in the articles of incorporation;
2. Resolution for dissolution at the general meeting of shareholders;
3. Absorbed merger of the investment company;
4. Bankruptcy of the investment company;
5. Order or judgment of a court;
6. De-registration of the investment company;
7. Total number of shareholders (excluding a shareholder who is a corporate director) becomes one: Provided, That cases prescribed by Presidential Decree as unlikely to undermine sound trading practices shall be excluded herefrom.
(2) When an investment company is dissolved, the investment company shall register the following matters along with the documents prescribed by Presidential Decree, within two weeks from the date of its dissolution, if the corporate director acts as the liquidator, or within two weeks from the date of appointment of a liquidator, if such liquidator is appointed:
1. Name and resident registration number of the liquidator (or the trade name and business registration number, if the liquidator is the corporate director);
2. Details of any agreement by which the representative liquidator shall be appointed among liquidators, or two or more liquidators shall jointly represent the investment company.
(3) When an investment company is dissolved, the investment company shall register the name and resident registration number of the liquidation overseer, along with accompanying documents specified by Presidential Decree, within two weeks from the date of dissolution, if a supervisory director acts as the liquidation overseer, or within two weeks from the date of appointment of the liquidation overseer, if a liquidation overseer is appointed.
(4) When an investment company is dissolved (excluding dissolution due to the cause set forth in paragraph (1) 3 or 4), the investment company shall hold a liquidators' meeting comprised of the liquidator and the liquidation overseers.
(5) When an investment company is dissolved due to the cause set forth in paragraph (1) 1, 2 or 7, the corporate director and the supervisory director shall act as the liquidator and the liquidation overseers, except as provided for otherwise by the articles of incorporation or the general meeting of shareholders. <Amended by Act No. 11845, May 28, 2013>
(6) When any of the following applies to an investment company, the Financial Services Commission shall appoint a liquidator and liquidation overseers at the request of an interested person: <Amended by Act No. 8863, Feb. 29, 2008>
1. When the investment company is dissolved due to the cause set forth in paragraph (1) 5;
2. When neither liquidator nor liquidation overseers exist;
3. When the investment company is liquidated in accordance with Article 193 (1) of the Commercial Act.
(7) When an investment company is dissolved due to the cause set forth in paragraph (1) 6, the Financial Services Commission shall, ex officio, appoint a liquidator and liquidation overseers. <Amended by Act No. 8863, Feb. 29, 2008>
(8) If a liquidator or liquidation overseer is substantially unfit to perform his/her duties or commits any serious violation of a relevant law or statute, the Financial Services Commission may, ex officio or at the request of an interested person, dismiss the liquidator or liquidation overseer. In such cases, the Financial Services Commission may, ex officio, appoint a new liquidator or liquidation overseer. <Amended by Act No. 8863, Feb. 29, 2008>
(9) If any of the following events occurs, the Financial Services Commission shall request the registry office having jurisdiction over the domicile of the investment company to enter the relevant registration along with a written statement that certifies the cause of registration: <Amended by Act No. 8863, Feb. 29, 2008>
1. When an investment company is dissolved due to the cause set forth in paragraph (1) 6;
2. When the Financial Services Commission, ex officio, dismisses a liquidator or liquidation overseer.
 Article 203 (Liquidation)
(1) A liquidator shall inspect the status of property of the investment company immediately after his/her inauguration, prepare a property list and balance sheet within the period prescribed by Ordinance of the Prime Minister, submit it to the liquidators' meeting for approval, and submit a certified copy of such to the Financial Services Commission without delay. <Amended by Act No. 8863, Feb. 29, 2008>
(2) A liquidation overseer shall, when he/she discovers that the liquidator has violated an statute, or the articles of incorporation, in the course of performing his/her duties, or that he/she is otherwise likely to inflict serious damage upon the investment company, report his/ her discovery to the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008>
(3) A liquidator shall provide peremptory notices to creditors of the investment company within one month of his/her inauguration by providing public notice, at least twice, that creditors shall file a statement on their receivables within a certain period and that the receivables on which a statement has not been filed during such period shall be excluded from the liquidation proceedings. In this regard, the period for filing such statement shall be at least one month.
(4) Notwithstanding paragraph (3), a liquidator may omit the procedure for the peremptory notice to a creditor, following the manner prescribed by Presidential Decree, if the investment company involved is subject to a restriction on borrowing loans, guaranteeing obligations, or offering an asset as security: Provided, That the procedure shall not be omitted where there exists an obligation to perform a contract in connection with trading exchange-traded derivatives, or in any other case prescribed by Presidential Decree.
(5) A liquidator shall, upon completion of the liquidation proceedings, prepare a report of the settlement of accounts without delay for approval of the general meeting of shareholders. In this regard, he/she shall provide public notice of the report on the settlement of accounts and submit it to the Financial Services Commission and the Association. <Amended by Act No. 8863, Feb. 29, 2008>
(6) A liquidator or liquidation overseer may receive remuneration from the investment company as prescribed by the articles of incorporation or resolved by the general meeting of shareholders, in cases falling under Article 202 (5), or as determined by the Financial Services Commission in cases where he/she was appointed pursuant to paragraph (6) or (7) of the same Article. <Amended by Act No. 8863, Feb. 29, 2008>
(7) A liquidator shall keep the property list and balance sheet as approved in accordance with paragraph (1) until the liquidation proceedings are closed, and shall dispatch them to the collective investment business entity and the investment trader or investment broker, requiring them to keep the documents in their sales offices.
 Article 204 (Merger)
(1) No investment company may merge with another company unless it conducts a merge by absorbing another company whose corporate director is the same as that of the investment company.
(2) To conduct a merger as prescribed in paragraph (1), an investment company shall obtain a resolution of the general meeting of shareholders under the proviso to Article 201 (2): Provided, That the cases prescribed by Presidential Decree, such as a merger of small-scale investment companies, which is less likely to undermine sound trading practices, shall be excluded herefrom. <Amended by Act No. 11845, May 28, 2013>
(3) Article 193 (4), (5), and (8) shall apply mutatis mutandis to a merger of investment companies. In this regard, "collective investment business entity that created an investment trust", "investment trust", and "collective investment business entity of an investment trust" shall be construed as "investment company" collectively; "general meeting of beneficiaries" as "general meeting of shareholders"; and "beneficiary certificates" as "stocks".
 Article 205 (Special Cases concerning Investment Companies)
(1) Part III of Chapter III shall not apply to investment companies.
(2) Article 33 of the Act on Corporate Governance of Financial Companies shall apply mutatis mutandis to shareholders of an investment company. In this regard, "finance company" shall be construed as "investment company", "10/10,000" in paragraph (1) of the same Article as "10/1,000"; "150/10,000" and "75/10,000" in the forepart of paragraph (2) of the same Article as "30/1,000" and "15/1,000", respectively; "250/100,000" and "125/100,000" in paragraph (3) of the same Article as "50/10,000" and "25/10,000", respectively, "25/1,000,000" and "125/1,000,000" in paragraph (4) of the same Article as "50/100,000" and "25/100,000", respectively; "1/100,000" of paragraph (5) of the same Article as "1/10,000"; and "50/100,000" and "25/100,000" in subparagraph (6) of the same Article as "10/10,000" and "5/10,000", respectively. <Amended by Act No. 13453, Jul. 31, 2015>
 Article 206 (Relation to Commercial Act)
(1) In applying the Commercial Act to investment companies, the term "court" in Articles 259 (4), 298 (4), 299, 299-2, 300, 325, 422, 467 (1) through (3), 536, 539, and 541 of the Commercial Act shall be construed as "Financial Services Commission", while the term "public prosecutor" in Article 176 of the same Act shall be construed as "Financial Services Commission". <Amended by Act No. 8863, Feb. 29, 2008>
(2) Articles 19, 177, 288, 292, 298 (1) through (3), 301 through 313, and 330, 335 (1) (proviso), 335-2 through 335-7, 341, 341-2, 341-3, 342, 342-2, 342-3, 343, 344, 344-2, 344-3, 345 through 351, 365, 374-2, 383, 389 (1), 397, 408-2 through 408-9, 409, 409-2, 410 through 412, 412-2 through 412-5, 413, 413-2, 414, 415, 415-2, 417 through 420, 420-2 through 420-5, 438, 439, 449, 449-2, 450, 458 through 461, 461-2, and 604 of the Commercial Act shall not apply to investment companies. <Amended by Act No. 11845, May 28, 2013>
Subsection 2 Investment Limited Liability Company
 Article 207 (Incorporation of Investment Limited Liability Company, etc.)
(1) A collective investment business entity that intends to incorporate an investment limited liability company shall prepare articles of incorporation, which shall provide for the following matters, and shall print its name and affix its seal thereon, or sign it:
1. Purpose;
2. Trade name;
3. Trade name and business registration number of the corporate director under Article 209 (1);
4. Address of the company;
5. Matters concerning operation and management of the property of the investment limited liability company;
6. Matters concerning distribution of profit and redemption;
7. Matters concerning public disclosure and reports;
8. Other matters prescribed by Presidential Decree as necessary for the protection of partners.
(2) The collective investment business entity shall, upon completing preparation of the articles of incorporation, pay the contribution in cash at the time of incorporation of the investment limited liability company.
(3) The collective investment business entity shall complete the incorporation registration of the following matters, along with the accompanying documents specified by Presidential Decree, within two weeks from the day on which the contribution is paid:
1. Matters under paragraph (1) 1 through 4;
2. Terms and conditions related to the continuance term of the investment limited liability company and the grounds for its dissolution, if the articles of incorporation provide for such terms and conditions.
(4) Contributions by partners of an investment limited liability company shall only be made by cash.
(5) No investment limited liability company shall admit any person other than the collective investment business entity as its partner before it completes the registration under Article 182.
 Article 208 (Equity Securities)
(1) Each partner of an investment limited company shall have an equal right to the return of contributions, the distribution of profit, etc. in proportion to the number of equity securities.
(2) The equity securities of an investment limited company shall bear the following descriptions, and the corporate director under Article 209 (1) shall print its name and affix its seal thereon, or sign them:
1. Trade name of the company;
2. Date of formation of the company;
3. Issue date of the equity securities;
4. Names of partners (or trade name if a partner is a corporation);
5. Other matters prescribed by Presidential Decree as necessary for the protection of partners of an investment limited company.
(3) Article 196 (excluding paragraph (2)) shall apply mutatis mutandis to the equity securities of an investment limited liability company. In such cases, “investment company" shall be construed as "investment limited company," "stocks" as "equity securities," "new stocks" as "new equity securities," "board of directors" as "corporate director," "shareholders" as "partners," and "stock price" as "price for equity securities." <Amended by Act No. 11845, May 28, 2013>
 Article 209 (Corporate Director)
(1) Each investment limited liability company shall have one director who shall be a collective investment business entity (hereafter in this Sub-Section referred to as "corporate director").
(2) Article 198 (1), (4), and (5) shall apply mutatis mutandis to the corporate director of an investment limited liability company. In such cases, "investment company" shall be construed as "investment limited liability company."
 Article 210 (General Meeting of Partners)
(1) The general meeting of partners of an investment limited company shall be called by the corporate director.
(2) The general meeting of partners of an investment limited company shall adopt a resolution by the affirmative vote of a majority of voting rights of partners present at the meeting and not less than 1/4 of the total number of outstanding equity securities: Provided, That a resolution on the matters subject to a resolution by the general meeting of partners in accordance with the provisions of the articles of incorporation, other than the matters subject to a resolution of a general meeting of partners pursuant to this Act may be adopted by a majority of the voting rights of partners present at the meeting and not less than 1/5 of the total number of outstanding equity securities. <Amended by Act No. 11845, May 28, 2013>
(3) Article 190 (1), (3), (4), and (6) through (10) shall apply mutatis mutandis to the general meeting of partners of an investment limited company. In this regard, "collective investment business entity that created an investment trust" and "collective investment business entity" shall be construed as "corporate director of an investment limited company" collectively; "property of an investment trust" as "property of an investment limited company"; "beneficiary certificates" as "equity securities"; "total number of units" as "total number"; "beneficiaries" as "partners"; "general meeting of beneficiaries" as "general meeting of partners"; "list of beneficiaries" as "list of partners"; "number of units" as "number"; and "paragraph (5)" in paragraph (8) of the same Article as "paragraph (2)". <Amended by Act No. 11845, May 28, 2013>
 Article 211 (Provisions Applicable Mutatis Mutandis)
(1) Article 195 shall apply mutatis mutandis to an amendment of the articles of incorporation of an investment limited company. In this regard, "investment company" shall be construed as "investment limited company"; "by a resolution of its board of directors" in paragraph (1) of the same Article as "by the corporate director"; "proviso to Article 201 (2)" as "proviso to Article 210 (2)"; "resolution of the general meeting of shareholders" in paragraph (1) of the same Article and "resolution of the board of directors or the general meeting of shareholders" in paragraph (2) of the same Article as "resolution of the general meeting of partners" collectively; and "shareholders" as "partners".
(2) Articles 202 (excluding paragraphs (3) and (4)), 203 (excluding paragraph (2)), and 204 shall apply mutatis mutandis to the dissolution, liquidation, and merger of an investment limited company. In this regard, "shareholders" shall be construed as "partners (excluding partners who are corporate directors)"; "investment company" as "investment limited company"; "general meeting of shareholders" as "general meeting of partners"; "corporate director and supervisory directors" as "corporate director"; "liquidator and/or liquidation overseers" as "liquidator"; "prepare a property list and balance sheet, and submit them to the liquidators' meeting for approval, and submit a certified copy of them" as "prepare a property list and balance sheet, and submit a certified copy of them"; "proviso to Article 201 (2)" as "proviso to Article 210 (2)"; and "stocks" as "equity securities". <Amended by Act No. 11845, May 28, 2013>
 Article 212 (Relation to Commercial Act)
(1) In applying the Commercial Act to investment limited companies, the term "court" in Articles 582, 613 (1) (only where Articles 259 (4), 536 (2), and 541 (2) shall apply mutatis mutandis), and 613 (2) (only where Article 539 shall apply mutatis mutandis) of the same Act shall be construed as "Financial Services Commission". <Amended by Act No. 8863, Feb. 29, 2008>
(2) Articles 543 (3), 546, 560 (only where Articles 341-3, 342, and 343 (1) shall apply mutatis mutandis), 568 through 570, 575 (proviso), 583 (only where Articles 449 (1) and (2), 450, and 458 through 460 shall apply mutatis mutandis), 584 through 592, 597 (only where Article 439 (1) and (2) shall apply mutatis mutandis), and 607 of the Commercial Act shall not apply to investment limited companies. <Amended by Act No. 11845, May 28, 2013>
Subsection 3 Investment Limited Partnership Company
 Article 213 (Incorporation of Investment Limited Partnership Company, Etc.)
(1) A collective investment business entity that intends to incorporate an investment limited partnership company shall prepare articles of incorporation that shall state the following matters, on which one general partner and one limited partner shall print their names and affix their seals and signatures:
1. Purpose;
2. Trade name;
3. Trade name and business registration number of the managing member;
4. Address of the company;
5. Matters concerning operation and management of the property of the investment limited partnership company;
6. Matters concerning distribution of profit and redemption;
7. Matters concerning public disclosure and reports;
8. Other matters prescribed by Presidential Decree as necessary for the protection of partners.
(2) Upon preparing the articles of incorporation, the collective investment business entity shall pay a contribution in cash at the time of incorporation of the investment limited partnership company.
(3) The collective investment business entity shall complete a registration for incorporation by reporting the following matters, along with the accompanying documents specified by Presidential Decree, within two weeks from the date on which the contribution is paid:
1. Matters referred to in paragraph (1) 1 through 4;
2. Where the articles of incorporation provide for the term of existence of the investment limited partnership company or reasons for dissolution thereof, the details thereof.
(4) Contributions by the partners of an investment limited partnership company shall be made only in cash.
(5) No investment limited partnership company shall admit any person other than the partners referred to in paragraph (1) as its partner before it completes the registration under Article 182.
 Article 214 (Managing Member)
(1) An investment limited partnership company shall not have any general partner in addition to one managing member. In this regard, the managing member shall be a collective investment business entity, notwithstanding Article 173 of the Commercial Act.
(2) Article 198 (1), (4), and (5) shall apply mutatis mutandis to the managing member of an investment limited partnership company. In this regard, "corporate director" shall be construed as "managing member", and "investment company" as "investment limited partnership company", respectively.
 Article 215 (General Meeting of Partners)
(1) An investment limited partnership company shall hold a general meeting of partners, which shall consist of all partners, and the general meeting of partners shall have the power to adopt a resolution only for the matters provided for in this Act or the articles of incorporation.
(2) The general meeting of partners of an investment limited partnership company shall be called by the managing member.
(3) The general meeting of partners of an investment limited partnership company shall adopt a resolution by affirmative vote of a majority of the voting rights of partners present at the meeting and not less than 1/4 of the total number of outstanding equity securities: Provided, That a resolution on the matters subject to a resolution by the general meeting of partners in accordance with the provisions of the articles of incorporation, other than the matters subject to a resolution of the general meeting of partners pursuant to this Act, may be adopted by a majority of voting rights of the partners present at the meeting and not less than 1/5 of the total number of number of outstanding equity securities. <Amended by Act No. 11845, May 28, 2013>
(4) Article 190 (3), (4), and (6) through (10) shall apply mutatis mutandis to the general meeting of partners of an investment limited partnership company. In this regard, "collective investment business entity that has created an investment trust" and "collective investment business entity" shall be construed as "managing member of an investment limited partnership company" collectively; "property of an investment trust" as "property of an investment limited partnership company"; "beneficiary certificates" as "equity securities"; "total number of units" as "total number"; "beneficiaries" as "partners"; "general meeting of beneficiaries" as "general meeting of partners"; "list of beneficiaries" as "list of partners"; "number of units" as "number"; and "paragraph (5)" in paragraph (8) of the same Article as "paragraph (3)", respectively. <Amended by Act No. 11845, May 28, 2013>
 Article 216 (Provisions Applicable Mutatis Mutandis)
(1) Article 195 shall apply mutatis mutandis to an amendment of the articles of incorporation of an investment limited partnership company. In this regard, "investment company" shall be construed as "investment limited partnership company"; "by a resolution of its board of directors" in paragraph (1) of the same Article as "by the managing member"; "proviso to Article 201 (2)" as "Article 215 (3)"; "resolution of the general meeting of shareholders" in paragraph (1) of the same Article and "resolution of the board of directors or the general meeting of shareholders" in paragraph (2) of the same Article as "resolution of the general meeting of partners" collectively; and "shareholders" as "partners", respectively.
(2) Article 208 shall apply mutatis mutandis to equity securities of an investment limited partnership company. In this regard, "investment limited company" shall be construed as "investment limited partnership company"; "corporate director under Article 209 (1)" and "corporate director" as "managing member" collectively; and "partner" in paragraph (1) of the same Article as "limited partner", respectively.
(3) Articles 202 (excluding paragraphs (3) and (4)), 203 (excluding paragraph (2)), and 204 shall apply mutatis mutandis to the dissolution, liquidation, and merger of an investment limited partnership company. In this regard, "shareholders" shall be construed as "partners (excluding managing members); "investment company" as "investment limited partnership company"; "general meeting of shareholders" as "general meeting of partners"; "corporate director" and "corporate director and supervisory directors" as "managing member" collectively; "liquidator and/or liquidation overseers" as "liquidator"; "prepare a property list and balance sheet, and submit them to the liquidators' meeting for approval, and submit a certified copy of them" as "prepare a property list and balance sheet, and submit a certified copy of them"; "proviso to Article 201 (2)" as "Article 215 (3)"; and "stocks" as "equity securities", respectively. <Amended by Act No. 11845, May 28, 2013>
 Article 217 (Relation to Commercial Act)
(1) In applying the Commercial Act to investment limited partnership companies, the term "court" in Articles 200-2, 205, 259, and 277 of the same Act shall be construed as "Financial Services Commission". <Amended by Act No. 8863, Feb. 29, 2008>
(2) Articles 198, 217 through 220, 224, 280, and 286 of the Commercial Act shall not apply to investment limited partnership companies.
(3) Notwithstanding Article 279 of the Commercial Act, a limited partner of an investment limited partnership company shall be liable for obligations of the investment limited partnership company within the limit of the amount that he/she has contributed.
(4) In distributing dividends in accordance with the articles of incorporation, any investment limited partnership company may make distinctions between the general partner and limited partners regarding dividend rate, priority in distribution of dividends, etc.
(5) In allocating losses, no investment limited partnership company shall make a distinction between the general partner and limited partners regarding allocation rate, order of allocation, etc.
Subsection 4 Investment Limited Liability Company
 Article 217-2 (Establishment, etc. of Investment Limited Liability Company)
(1) A collective investment business entity that intends to establish an investment limited liability company shall prepare articles of incorporation which shall state the following matters, on which one partner shall print his/her name and affix his/her seal or signature:
1. Purpose;
2. Trade name;
3. Trade name and business registration number of the manager appointed under Article 217-4 (1);
4. Location of the company;
5. Matters concerning the operation and management of the property of the investment limited liability company;
6. Matters concerning the distribution of profit and redemption;
7. Matters concerning public disclosure and reports;
8. Other matters prescribed by Presidential Decree as necessary for the protection of partners.
(2) Upon having formulated the articles of incorporation, each partner of an investment limited liability company shall pay a contribution in cash until the time the incorporation of the investment limited liability company is registered.
(3) The collective investment business entity shall complete a registration for incorporation by reporting the following matters along with the documents specified by Presidential Decree, within two weeks from the date on which the contribution is paid:
1. Matters referred to in paragraphs (1) 1 through 4;
2. Where the articles of incorporation provide for the term of existence of the investment limited liability company or reasons for dissolution thereof, the details thereof.
(4) Contributions by the partners of an investment limited liability company shall be made only in cash.
(5) No investment limited liability company shall admit any person other than the partners referred to in paragraph (1) as its partner before completing the registration under Article 182.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 217-3 (Equity Securities)
(1) Each partner of an investment limited liability company shall have an equal right to the return of contributions, the distribution of profit, etc. in proportion to the number of equity securities.
(2) The equity securities of an investment limited liability company shall bear the following descriptions, and the executive officer under Article 217-4 (1) shall print his/her name and affix his/her seal thereon, or sign them:
1. Trade name of the company;
2. Date of formation of the company;
3. Issue date of the equity securities;
4. Names of partners (or trade name if a partner is a corporation);
5. Other matters prescribed by Presidential Decree as necessary for the protection of partners of an investment limited liability company.
(3) Article 196 (excluding paragraph (2)) shall apply mutatis mutandis to the equity securities of an investment limited liability company. In this regard, the term "investment company" shall be construed as "investment limited liability company", the term "stocks" as "equity securities", the term "new stocks" as "new equity securities", the term "board of directors" as "corporate director", the term "shareholders" as "partners", and the term "stock price" as "price for equity securities".
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 217-4 (Managers)
(1) Each investment limited liability company shall appoint one manager who is either a partner or an entity other than its partner (hereafter in this Subsection referred to as "manager"). In such cases, the manager shall be a collective investment business entity.
(2) Article 198 (1), (4) and (5) shall apply mutatis mutandis to the manager of an investment limited liability company. In such cases, "corporate director" shall be construed as "manager" and "investment company" as "investment limited liability company."
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 217-5 (General Meeting of Partners)
(1) An investment limited liability company shall hold a general meeting of partners, which shall consist of all partners, and the general meeting of partners shall have the power to adopt a resolution only for the matters provided for in this Act or the articles of incorporation.
(2) The general meeting of partners of an investment limited liability company shall be called by the manager.
(3) The general meeting of partners of an investment limited liability company shall adopt a resolution by the affirmative vote of a majority of the voting rights of partners present at the meeting and not less than 1/4 of the total number of outstanding equity securities: Provided, That a resolution on the matters subject to a resolution by the general meeting of partners in accordance with the provisions of the articles of incorporation, other than the matters subject to a resolution of the general meeting of partners pursuant to this Act, may be adopted by a majority of voting rights of the partners present at the meeting and not less than 1/5 the total number of number of outstanding equity securities.
(4) Article 190 (3), (4), and (6) through (10) shall apply mutatis mutandis to the general meeting of partners of an investment limited liability company. In this regard, "collective investment business entity that has created an investment trust" and "collective investment business entity" shall be construed as "manager of an investment limited liability company" collectively; "property of an investment trust" as "property of an investment limited liability company"; "beneficiary certificates" as "equity securities"; "total number of units" as "total number"; "beneficiaries" as "partners"; "general meeting of beneficiaries" as "general meeting of partners"; "list of beneficiaries" as "list of partners"; "number of units" as "number", respectively; and "paragraph (5)" in paragraph (8) of the same Article as "paragraph (3)".
(5) Article 191 shall apply mutatis mutandis to an amendment of the articles of incorporation of an investment limited liability company under the proviso to Article 195 (1) or to the partners dissenting from a merger under Article 204 (2). In this regard, "trust contract" shall be construed as "articles of incorporation"; "investment trust", "collective investment business entity", and "collective investment business entity that has created an investment trust" as "investment limited liability company" collectively; "general meeting of beneficiaries" as "general meeting of partners"; "beneficiaries" as "partners"; "beneficiary certificates" as "equity securities"; and "property of an investment trust" as "property of an investment limited liability company".
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 217-6 (Provisions Applicable Mutatis Mutandis)
(1) Article 195 shall apply mutatis mutandis to an amendment of the articles of incorporation of an investment limited liability company. In this regard, "investment company" shall be construed as "investment limited liability company"; "by a resolution of its board of directors" in paragraph (1) of the same Article as "by the manager"; "Article 201 (2)" as "Article 217-5 (3)"; "resolution of the general meeting of shareholders" in paragraph (1) of the same Article and "resolution of the board of directors or the general meeting of shareholders" in paragraph (2) of the same Article as "resolution of the general meeting of partners" collectively; and "shareholders" as "partners".
(2) Articles 202 (excluding paragraphs (3) and (4)), 203 (excluding paragraph (2)), and 204 shall apply mutatis mutandis to the dissolution, liquidation, and merger of an investment limited liability company. In this regard, "shareholders" shall be construed as "partners (excluding the partner who is the manager)"; "investment company" as "investment limited liability company"; "general meeting of shareholders" as "general meeting of partners"; "corporate director and supervisory directors" as "manager"; "liquidator and/or liquidation overseers" as "liquidator"; "prepare a property list and balance sheet, and submit them to the liquidators' meeting for approval, and submit a certified copy of them" as "prepare a property list and balance sheet, and submit a certified copy of them"; "proviso to Article 201 (2)" as "Article 217-5 (3)"; and "stocks" as "equity securities".
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
 Article 217-7 (Relation to Commercial Act)
(1) In applying the Commercial Act to investment limited liability companies, the term "court" in Articles 287-13 (only where Article 200 (2) shall apply mutatis mutandis), 287-14, 287-17 (only where Article 205 shall apply mutatis mutandis), and Article 287-45 (only where Article 259 (4) shall apply mutatis mutandis) of the same Act shall be construed as "Financial Services Commission".
(2) Articles 287-9, 287-10, 287-12, 287-15, 287-16, 287-23 (3), and 287-24 through 287-44 of the Commercial Act shall not apply to investment limited liability companies.
[This Article Newly Inserted by Act No. 11845, May 28, 2013]
SECTION 3 Collective Investment Scheme in Form of Association
Subsection 1 Investment Limited Partnership
 Article 218 (Establishment, etc. of Investment Limited Partnership)
(1) A collective investment business entity that intends to establish an investment limited partnership shall prepare a partnership agreement that shall state the following matters, on which one general partner appointed under Article 219 (1) and one limited partner shall print their names and affix their seals or signatures: <Amended by Act No. 11845, May 28, 2013>
1. Purpose;
2. Name of the investment limited partnership;
3. Trade name and business registration number of the general partner;
4. Address of the investment limited partnership;
5. Matters concerning the operation and management of the property of the investment limited partnership;
6. Details of the term of existence or the reasons for dissolution, if stipulated by the partnership agreement;
7. Matters concerning the distribution of profit and redemption;
8. Matters concerning public disclosure and reports;
9. Other matters prescribed by Presidential Decree as necessary for the protection of partners.
(2) Contributions by partners shall be made only in cash.
(3) No investment limited partnership shall admit any person other than the partners referred to in paragraph (1) as its partner before it completes the registration under Article 182. <Amended by Act No. 11845, May 28, 2013>
(4) An investment limited partnership shall complete a registration by reporting the following matters along with the documents prescribed by Presidential Decree, within two weeks from the date of its establishment: <Newly Inserted by Act No. 11845, May 28, 2013>
1. Matters referred to in paragraph (1) 1 through 4;
2. Where the partnership agreement provides for the term of existence of the investment limited partnership or the reasons for dissolution thereof, the details thereof.
 Article 219 (General Partner, etc.)
(1) An investment limited partnership shall be composed of one general partner that shall be a collective investment business entity and shall take unlimited liability for debts of the investment limited partnership, and limited partners, who shall take limited liability for such debts within the limit of the contribution made by each partner. <Amended by Act No. 11845, May 28, 2013>
(2) Article 198 (1), (4), and (5) shall apply mutatis mutandis to the general partner of an investment limited partnership. In this regard, "corporate director" shall be construed as "general partner", while "investment company" shall be construed as "investment limited partnership". <Amended by Act No. 11845, May 28, 2013>
 Article 220 (General Meeting of Partners)
(1) An investment limited partnership shall hold a general meeting of partners, which shall consist of all partners, and the general meeting of partners shall have the power to adopt a resolution only for the matters provided for in this Act or the partnership agreement. <Amended by Act No. 11845, May 28, 2013>
(2) The general meeting of partners of an investment limited partnership shall be called by the general partner. <Amended by Act No. 11845, May 28, 2013>
(3) The general meeting of partners of an investment limited partnership shall adopt a resolution by the affirmative vote of a majority of the voting rights of partners present at the meeting and not less than 1/4 of the total number of outstanding equity securities: Provided, That apart from the matters subject to a resolution of the general meeting of partners pursuant to this Act, a resolution on the matters subject to a resolution by the general meeting of partners in accordance with the provisions of the partnership agreement may be adopted by a majority of voting rights of the partners present at the meeting and not less than 1/5 of the total number of outstanding equity securities. <Amended by Act No. 11845, May 28, 2013>
(4) Article 190 (3), (4), and (6) through (10) shall apply mutatis mutandis to the general meeting of partners of an investment limited partnership. In this regard, "collective investment business entity that has created an investment trust" and "collective investment business entity" shall be construed as “general partner of an investment limited partnership" collectively; "property of an investment trust" as "property of an investment limited partnership"; "beneficiary certificates" as "equity securities"; "total number of units" as "total number"; "beneficiaries" as "partners"; "general meeting of beneficiaries" as "general meeting of partners"; "list of beneficiaries" as "list of partners"; "number of units" as "number"; and "paragraph (5)" in paragraph (8) of the same Article as "paragraph (3)". <Amended by Act No. 11845, May 28, 2013>
 Article 221 (Dissolution and Liquidation of Investment Limited Partnership)
(1) An investment limited partnership shall be dissolved if any of the following events occurs. In this regard, a liquidator shall file a report on the matters prescribed by Presidential Decree to the Financial Services Commission: <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
1. Expiration of the term of existence or occurrence of other reasons for dissolution as stipulated in the partnership agreement;
2. Resolution for dissolution by the general meeting of partners;
3. De-registration of the investment limited partnership;
4. Total number of limited partners becomes one: Provided, That the cases prescribed by Presidential Decree as unlikely to undermine sound trading practices, shall be excluded herefrom.
(2) When an investment limited partnership is dissolved, the general partner shall act as a liquidator, except as provided for otherwise by the partnership agreement or at the general meeting of partners. <Amended by Act No. 11845, May 28, 2013>
(3) When an investment limited partnership fails to, or will not, have a liquidator under paragraph (2), the Financial Services Commission shall, ex officio, appoint a liquidator. <Amended by Act No. 8863, Feb. 29, 2008; Act No. 11845, May 28, 2013>
(4) If a liquidator is substantially unfit to perform his/her duties, or commits any serious violation of a relevant statute, the Financial Services Commission may, ex officio or at the request of an interested person, dismiss the liquidator. In such cases, the Financial Services Commission may, ex officio, appoint a new liquidator. <Amended by Act No. 8863, Feb. 29, 2008>
(5) In distributing the residual property of the investment limited partnership to partners, a liquidator may give assets that belong to the property of the investment limited partnership to the partners as stipulated in the partnership agreement. <Amended by Act No. 11845, May 28, 2013>
(6) Article 203 (excluding paragraph (2)) shall apply mutatis mutandis to the dissolution of an investment limited partnership. In this regard, "investment company" shall be construed as "investment limited partnership"; "prepare a property list and balance sheet, and submit them to the liquidators' meeting for approval, and submit a certified copy of them" as "prepare a property list and balance sheet, and submit a certified copy of them"; "general meeting of shareholders" as "general meeting of partners"; and "liquidator and liquidation overseers" as "liquidator". <Amended by Act No. 11845, May 28, 2013>
 Article 222 (Provisions Applicable Mutatis Mutandis)
(1) Article 195 shall apply mutatis mutandis to an amendment of the limited partnership agreement of an investment limited partnership. In this regard, "investment company" shall be construed as "investment limited partnership"; "by a resolution of its board of directors" in paragraph (1) of the same Article as "by the general partner"; "Article 201 (2)" as "Article 220 (3)"; "resolution of the general meeting of shareholders" in paragraph (1) of the same Article and "resolution of the board of directors or the general meeting of shareholders" in paragraph (2) of the same Article as "resolution of the general meeting of partners" collectively; and "shareholders" as "partners". <Amended by Act No. 11845, May 28, 2013>
(2) Article 208 shall apply mutatis mutandis to equity securities of an investment limited partnership. In this regard, "investment limited company" and "company" shall be construed as "investment limited partnership" collectively; "corporate director under Article 209 (1)" and "corporate director" as "general partner"; "articles of incorporation" as "partnership agreement"; "partner" in paragraph (1) of the same Article as "limited partner"; and "partner" in paragraphs (2) and (3) of the same Article as "partner". <Amended by Act No. 11845, May 28, 2013>
 Article 223 (Relation to Commercial Act and Civil Act)
(1) In applying the Commercial Act to an investment limited partnership, the term "court" in Article 86-8 (2) of the same Act (only where Article 277 shall apply mutatis mutandis) and paragraph (3) of the same Article (only where Article 277 shall apply mutatis mutandis) shall be construed as "the Financial Services Commission" respectively.
(2) Articles 86-8 (2) of the Commercial Act (only where Articles 198, 208 (2) or 287 shall apply mutatis mutandis) shall not apply to investment limited partnerships.
(3) Articles 703, 706 through 713, and 716 through 724 of the Civil Act shall not apply to investment limited partnerships.
(4) Where an investor purchases equity securities of the investment limited partnership, it shall be deemed that he/she is admitted to an investment limited partnership as a partner.
(5) In distributing dividends in accordance with the partnership agreement, an investment limited partnership may make distinctions between the general partner and limited partners in terms of determining dividend rate, priority in distribution of dividends, etc.
(6) In allocating losses, no investment limited partnership shall make a distinction between the general partner and limited partners in terms of allocation rate, order of allocation, etc.
[This Article Wholly Amended by Act No. 11845, May 28, 2013]
Subsection 2 Undisclosed Investment Association
 Article 224 (Establishment of Undisclosed Investment Association, etc.)
(1) A collective investment business entity that intends to establish an undisclosed investment association shall prepare an undisclosed association agreement which shall provide for the following matters, and one business operator and one undisclosed partner shall print their names and affix their seals thereon, or sign it:
1. Purpose;
2. Name of the undisclosed investment association;
3. Trade name and business registration number of the business operator;
4. Address of the undisclosed investment association;
5. Matters concerning operation and management of the property of the undisclosed investment association;
6. Terms and conditions related to the continuance term or the grounds for dissolution, if there are such terms and conditions agreed upon;
7. Matters concerning distribution of profit and redemption;
8. Matters concerning public disclosure and reports;
9. Other matters prescribed by Presidential Decree as necessary for the protection of undisclosed partners.
(2) Contributions by undisclosed partners shall only be made by cash.
(3) The business operator of an undisclosed investment association shall not admit any person other than the undisclosed partner under paragraph (1) as its undisclosed partner before it completes the registration under Article 182.
 Article 225 (Business Operator)
(1) The property of an undisclosed investment association shall be managed by a single business operator, which shall be a collective investment business entity.
(2) Article 198 (1), (4), and (5) shall apply mutatis mutandis to the business operator of an undisclosed investment association. In this regard, the term "corporate director" shall be construed as "business operator," while the term "investment company" shall be construed as "undisclosed investment association."
 Article 226 (General Meeting of Undisclosed Partners)
(1) An undisclosed investment association shall hold a general meeting of undisclosed partners, which shall consist of all undisclosed partners, and the general meeting of undisclosed partners shall have the power to adopt a resolution only for the matters provided for in this Act or the undisclosed association agreement.
(2) A general meeting of undisclosed partners of an undisclosed investment association shall be called by the business operator.
(3) A general meeting of undisclosed partners of an undisclosed investment association shall adopt a resolution by affirmative vote of the majority of the voting rights of undisclosed partners present at the meeting and one-fourth or more of the total number of outstanding equity securities: Provided, That apart from the matters subject to a resolution of the general meeting of undisclosed partners pursuant to this Act, a resolution on the matters subject to a resolution by the general meeting of undisclosed partners in accordance with the provisions of the undisclosed association agreement may be adopted by the majority of voting rights of the undisclosed partners present at the meeting and one-fifth or more of the total number of number of outstanding equity securities. <Amended by Act No. 11845, May 28, 2013>
(4) Article 190 (3), (4), and (6) through (10) shall apply mutatis mutandis to the general meeting of undisclosed partners of an undisclosed investment association. In this regard, the terms "collective investment business entity that has created an investment trust" and "collective investment business entity" shall be construed as "business operator of an undisclosed investment association" collectively, the term "property of an investment trust" as "property of an undisclosed investment association," the term "beneficiary certificates" as "equity securities," the term "total number of units" as "total number," the term "beneficiaries" as "undisclosed partners," the term "general meeting of beneficiaries" as "general meeting of undisclosed partners," the term "list of beneficiaries" as "list of undisclosed partners," the term "number of units" as "number," and the term "paragraph (5)" in paragraph (8) of the same Article as "paragraph (3)," the term "two-thirds or more of the voting rights of the beneficiaries present at the meeting and one-third or more of the total number of outstanding beneficiary certificates" as "two-thirds or more of the voting rights of undisclosed partners present at the meeting," and the terms "majority of the voting rights of the beneficiaries present at the meeting and one-fourth or more of the total number of outstanding beneficiary certificates" and "majority of the voting rights of the beneficiaries present at the meeting" as "two-thirds or more of the voting rights of the undisclosed partners present at the meeting and one-third or more of the total number of outstanding equity securities" and "two-thirds or more of the voting rights of the undisclosed partners present at the meeting" respectively. <Amended by Act No. 11845, May 28, 2013>
 Article 227 (Provisions Applicable Mutatis Mutandis)
(1) Article 195 shall apply mutatis mutandis to an amendment of the undisclosed association agreement of an undisclosed investment association. In this regard, "investment company" shall be construed as "undisclosed investment association"; "by a resolution of its board of directors" in paragraph (1) of the same Article as "by the business operator"; "proviso to Article 201 (2)" as "Article 226 (3)"; "resolution of the general meeting of shareholders" in paragraph (1) of the same Article and "resolution of the board of directors or the general meeting of shareholders" in paragraph (2) of the same Article as "resolution of the general meeting of undisclosed partners" collectively; and "shareholders" as "undisclosed partners".
(2) Article 208 shall apply mutatis mutandis to equity securities of an undisclosed investment association. In this regard, "investment limited company" and "company" shall be construed as "undisclosed investment association" collectively; "corporate director under Article 209 (1)" and "corporate director" as "business operator"; "partner" as "undisclosed partner"; and "articles of incorporation" as "undisclosed association agreement".
(3) Article 221 shall apply mutatis mutandis to the dissolution and liquidation of an undisclosed investment association. In this case, "investment association" shall be construed as "undisclosed investment association"; "limited partner" as "undisclosed partner"; "general meeting of partners" as "general meeting of undisclosed partners"; and "general partner" as "business operator". <Amended by Act No. 11845, May 28, 2013>
 Article 228 (Relation to Other Acts)
(1) Articles 82 (3), 83, and 84 of the Commercial Act shall not apply to undisclosed investment associations.
(2) Chapter III of the Trust Act shall apply mutatis mutandis to undisclosed investment associations. In this regard, the term "trust property" shall be construed as "property of an undisclosed investment association," the term "trustee" as "business operator," the term "entrustment" as "participation in an undisclosed investment association as a partner," and the terms "trustor" and "beneficiary" as "undisclosed partner" collectively.
(3) It shall be deemed that an investor is admitted to an undisclosed in- vestment association as an undisclosed partner when he/she purchases equity securities of the undisclosed investment association.
CHAPTER III TYPES, ETC. OF COLLECTIVE INVESTMENT SCHEMES
SECTION 1 Types of Collective Investment Schemes
 Article 229 (Types of Collective Investment Schemes)
Collective investment schemes shall be categorized into the following according the object in which the collective investment property is invested:
1. Securities fund: A collective investment scheme, neither real estate fund nor special asset fund provided for in subparagraphs 2 and 3, that invests the collective investment property in securities (excluding the securities specified by Presidential Decree, but including derivatives based on underlying assets consisting of any securities other than the securities specified by Presidential Decree; hereafter the same shall apply in this Article) in excess of the ratio prescribed by Presidential Decree, which shall not be less than 40 percent of the collective investment property;
2. Real estate fund: A collective investment scheme that invests the collective investment property in real estate (including investment in derivatives based on underlying assets consisting of real estate, loans to corporations related to the development of real estate, and other investment in real estate in a manner prescribed by Presidential Decree and in real estate-related securities prescribed by Presidential Decree; hereafter the same shall apply in this Article) in excess of the ratio prescribed by Presidential Decree, which shall not be less than 40 percent of the collective investment property;
3. Special asset fund: A collective investment scheme that invests the collective investment property in special assets (referring to investable assets other than securities and real estate) in excess of the ratio prescribed by Presidential Decree, which shall not be less than 40 percent of the collective investment property;
4. Mixed asset fund: A collective investment scheme subject to no restrictions provided for in subparagraphs 1 through 3 in operating the collective investment property;
5. Money market fund: A collective investment scheme that invests the collective investment property in full in short-term financial instruments specified by Presidential Decree, which is managed in any manner prescribed by Presidential Decree.
SECTION 2 Collective Investment Schemes in Extraordinary Form
 Article 230 (Closed-end Fund)
(1) Notwithstanding Article 235 (1), a collective investment business entity, or the promoters of an investment company that intends to create or establish an investment trust, an investment limited company, an investment limited partnership company, an investment limited liability company, an investment limited partnership, or an undisclosed investment association (hereafter in this Section referred to as "collective investment business entity, etc.") may create or establish a collective investment scheme under which the collective investment scheme with a predetermined continuance period shall not allow any claim for redemption of collective investment securities (hereafter in this Article referred to as "closed-end fund"). <Amended by Act No. 11845, May 28, 2013>
(2) The collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. may issue additional collective investment securities for a closed-end fund only when there is no possibility of undermining the existing investors' interests, as prescribed by Presidential Decree.
(3) The collective investment business entity of an investment trust or an investment company shall, if there is no specific method provided for in the trust contract or the articles of incorporation for guaranteeing realizability, etc. to investors, list the collective investment securities within 90 days from the day on which the collective investment securities of a closed-end fund are initially issued.
(4) Article 238 (6) through (8) shall not apply to collective investment securities of a closed-end fund: Provided, That the provisions shall apply when the closed-end fund is allowed to issue additional collective investment securities in accordance with paragraph (2).
(5) A collective investment business entity, etc. shall create or establish a collective investment scheme as a closed-end fund, in cases prescribed by Presidential Decree, considering the circumstances, etc. under which it is difficult to convert the investable assets of the collective investment scheme into cash.
 Article 231 (Multiple Class Fund)
(1) Notwithstanding Articles 189 (2), 196 (5), and 208 (1) (including where the afore-said Article shall apply mutatis mutandis pursuant to Article 216 (2), 222 (2), or 227 (2)), a collective investment business entity, etc. may create or establish a collective investment scheme that issues collective investment securities of the same collective investment scheme in multiple classes with varying base prices or varying sales commissions according to the difference in sales remuneration under Article 76 (4) (hereafter in this Article referred to as "multiple class fund").
(2) Where a resolution by the general meeting of collective investors is required, but such resolution is related only to the interests of the investors of the collective investment securities in a specific class, the multiple class fund may hold a general meeting of investors with the attendance of the investors in the specific class only.
(3) Matters concerning creation and establishment of a multiple class fund, issuance, sale, and redemption of the collective investment securities of such fund, and other matters concerning multiple class funds shall be prescribed by Presidential Decree.
 Article 232 (Umbrella Fund)
(1) Where a collective investment business entity, etc. creates or establishes a collective investment scheme with a mechanism for granting investors a right to convert collective investment securities held by investors of a collective investment scheme into those of another collective investment scheme between a multiple number of collective investment schemes (hereafter referred to as "umbrella fund" in this Article), the collective investment business entity shall satisfy all of the following requirements: <Amended by Act No. 13448, Jul. 24, 2015>
1. There shall be a collective investment agreement applicable in common to a multiple number of collective investment schemes;
2. The collective investment agreement shall prohibit conversion between collective investment schemes referred to in Article 9 (18) 1 through 4, 4-2, 5 and 6, and (19) 1.
(2) Matters concerning the conversion of collective investment securities and other matters concerning the umbrella funds shall be prescribed by Presidential Decree.
 Article 233 (Master-Feeder Fund)
(1) When a collective investment business entity, etc. creates or establishes a collective investment scheme (hereafter in this Article referred to as "feeder fund") with a mechanism for acquiring collective investment securities issued by another collective investment scheme (hereafter in this Article referred to as "master fund"), the collective investment business entity, etc. shall satisfy all of the following requirements:
1. The feeder fund shall not be allowed to acquire any collective investment securities other than those of the master fund;
2. No person other than the feeder fund shall be allowed to acquire collective investment securities of the master fund;
3. The collective investment properties of the feeder fund and the master fund shall be operated by one and the same collective investment business entity.
(2) Article 81 (1) 3 (excluding item (d)) shall not apply where the feeder fund acquires collective investment securities from the master fund.
(3) Matters concerning creation and establishment of a master and feeder fund (hereafter in this Article referred to as "master-feeder fund"), sale and redemption of collective investment securities, and other matters pertaining to master-feeder funds shall be prescribed by Presidential Decree.
 Article 234 (Exchange-Traded Fund)
(1) Articles 34 (1) 1 and 2, 87 (3) (including the case to which such provision shall apply mutatis mutandis under Article 186 (2)), 88, 147, 172, 173, and 235 through 237 shall not apply to any collective investment scheme that meets all of the following requirements (hereafter in this Article referred to as "exchange-traded fund"): <Amended by Act No. 9407, Feb. 3, 2009; Act No. 11845, May 28, 2013>
1. Its purpose shall be to link its operation and management to the fluctuation of indexes indicting the price levels of a multiple number of items for each price or each type of underlying assets in a collective manner. In such cases, the price or type of underlying assets shall meet the requirements prescribed by Presidential Decree;
2. It shall allow redemption of beneficiary certificates or stocks of an investment company;
3. The beneficiary certificates or stocks of an investment company shall be listed in the securities market within 30 days from the date of creation of the relevant investment trust or the date of establishment of the investment company.
(2) A person specified by Presidential Decree among investment traders or investment brokers shall not be deemed to engage in discretionary investment business where the person sells securities on its own account or on a third party's account to create or establish an exchange-traded fund.
(3) When an exchange-traded fund is created or additionally created, or when an exchange-traded fund is established and issues new stocks, the payment therefor may be made with assets other than money, notwithstanding Articles 188 (4) and 194 (7) (including the case to which the aforesaid paragraph shall apply mutatis mutandis pursuant to Article 196 (6)). <Amended by Act No. 9407, Feb. 3, 2009>
(4) Creation, additional creation, establishment and issuance of new stocks of an exchange-traded fund, sale and redemption of collective investment securities, listing and delisting, and public notice of property owned, and other necessary matters shall be prescribed by Presidential Decree. <Amended by Act No. 9407, Feb. 3, 2009>
 Article 234-2 Deleted. <by Act No. 12102, Aug. 13, 2013>
CHAPTER IV REDEMPTION OF COLLECTIVE INVESTMENT SECURITIES
 Article 235 (Claim for Redemption, Manner therefor, etc.)
(1) An investor may make a claim for redemption of collective investment securities at any time.
(2) An investor who intends to make a claim for redemption of collective investment securities shall make such claim to the investment trader or the investment broker that sold the collective investment securities: Provided, That such claim may be made directly to the collective investment business entity of the relevant collective investment scheme in a manner prescribed by Ordinance of the Prime Minister, if the investment trader or the investment broker is unable to perform the redemption due to its dissolution, revoked authorization, suspended business, or any other reason specified by Presidential Decree (hereafter in this paragraph referred to as "dissolution, etc."), while such claim may be made to the trust business entity that keeps in custody and manages the relevant collective investment property, if the collective investment business entity is unable to perform the redemption due to its dissolution, etc. <Amended by Act No. 8863, Feb. 29, 2008>
(3) An investment trader or an investment broker shall, upon receipt of a claim for redemption in accordance with the main sentence of paragraph (2), demand that the collective investment business entity of the relevant investment trust or undisclosed investment association, where the beneficiary certificates or equity securities of the undisclosed investment association are involved, or the investment company, etc., where collective investment securities issued by the investment company, etc. are involved, perform the redemption without delay, and the collective investment business entity or the trust business entity shall, upon receipt of a claim in accordance with the proviso to paragraph (2) for redemption of collective investment securities issued by an investment company, etc., demand that the investment company, etc. perform the redemption without delay.
(4) A collective investment business entity of an investment trust or an undisclosed investment association (including the trust business entity that keeps in custody and manages the relevant collective investment property) or an investment company, etc. shall, upon receipt of a claim for redemption or a demand for performance of the redemption in accordance with paragraph (2) or (3), pay the redemption money on the day prescribed for redemption by the collective investment agreement within 15 days from the day on which the investor made a claim for redemption, except as otherwise provided for by Presidential Decree, considering the realizability of the investable assets of the collective investment scheme.
(5) A collective investment business entity of an investment trust or an undisclosed investment association (including the trust business entity that keeps in custody and manages the relevant collective investment property) or an investment company, etc. shall, when it pays the redemption money in accordance with paragraph (4), make such payment in cash held as part of the collective investment property or raised by disposing of the collective investment property, within the limit of the collective investment property: Provided, That such payment may be made with the collective investment property held by the collective investment scheme if all investors of the collective investment scheme consent to do so.
(6) An investment trader or an investment broker that sells collective investment securities, a collective investment business entity that operates collective investment property, or a trust business entity that keeps in custody and manages collective investment property shall not acquire the collective investment securities, the redemption of which is claimed or the performance of redemption of which is demanded, on its own account or solicit another person to acquire them: Provided, That the investment trader, investment broker, collective investment business entity, or trust business entity may acquire the collective investment securities, the redemption of which is claimed or the performance of redemption of which is demanded, on its own account, if it is necessary for facilitating the redemption of the collective investment securities or if there is no possibility of undermining investors' interests, as prescribed by Presidential Decree.
(7) A collective investment business entity of an investment trust or an undisclosed investment association (including the trust business entity that keeps in custody and manages the relevant collective investment property; hereafter in this Chapter the same shall apply), or an investment company, etc. shall, upon redeeming collective investment securities in accordance with this Chapter, retire the collective investment securities.
 Article 236 (Redemption Price and Commission)
(1) A collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. shall make redemption of the collective investment securities based on a base price computed after the day on which redemption is claimed: Provided, That the base price computed before the day on which redemption is claimed may be applied to redemptions if there is no possibility of undermining investors' interests or the stable management of the collective investment property, as prescribed by Presidential Decree.
(2) The redemption commission charged on redeemed collective investment securities shall be borne by the investor who claims redemption of the collective investment securities in a manner prescribed by Presidential Decree, and the redemption commission paid by the investor shall belong to the collective investment property.
(3) Matters pertaining to the redemption price, including computation of the base price after the day on which redemption is claimed in accordance with paragraph (1), shall be prescribed by Presidential Decree.
 Article 237 (Postponement of Redemption)
(1) Where a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. is unable to redeem collective investment securities on the date of redemption prescribed by the collective investment agreement, owing to impossibility of disposing of assets that belong to the collective investment property or any other cause prescribed by Presidential Decree, it may postpone the redemption of the collective investment securities. In such cases, the collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. shall obtain a resolution (referring to a resolution under the main sentence of Article 190 (5), the proviso to Article 201 (2), the proviso to Article 210 (2), Articles 215 (3), 220 (3) and 226 (3)) on the matters concerning the redemption of the collective investment securities, as prescribed by Presidential Decree, at a general meeting of collective investors held w