Law Viewer

Back Home

ENFORCEMENT DECREE OF THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT

Presidential Decree No. 20947, Jul. 29, 2008

Amended by Presidential Decree No. 21291, Feb. 3, 2009

Presidential Decree No. 21480, May 6, 2009

Presidential Decree No. 21518, May 29, 2009

Presidential Decree No. 21565, jun. 26, 2009

Presidential Decree No. 21611, Jul. 1, 2009

Presidential Decree No. 21744, Sep. 21, 2009

Presidential Decree No. 21765, Oct. 1, 2009

Presidential Decree No. 21835, Nov. 20, 2009

Presidential Decree No. 21898, Dec. 21, 2009

Presidential Decree No. 21904, Dec. 24, 2009

Presidential Decree No. 21978, Jan. 6, 2010

Presidential Decree No. 22003, Jan. 27, 2010

Presidential Decree No. 22151, May 4, 2010

Presidential Decree No. 22197, jun. 11, 2010

Presidential Decree No. 22467, Nov. 2, 2010

Presidential Decree No. 22493, Nov. 15, 2010

Presidential Decree No. 22516, Dec. 7, 2010

Presidential Decree No. 22637, Jan. 24, 2011

Presidential Decree No. 22718, Mar. 22, 2011

Presidential Decree No. 23073, Aug. 11, 2011

Presidential Decree No. 23197, Sep. 30, 2011

Presidential Decree No. 23285, Nov. 4, 2011

Presidential Decree No. 23488, Jan. 6, 2012

Presidential Decree No. 23496, Jan. 6, 2012

Presidential Decree No. 23644, Feb. 29, 2012

Presidential Decree No. 23924, jun. 29, 2012

Presidential Decree No. 24317, Jan. 16, 2013

Presidential Decree No. 24435, Mar. 23, 2013

Presidential Decree No. 24497, Apr. 5, 2013

Presidential Decree No. 24636, jun. 21, 2013

Presidential Decree No. 24655, Jul. 5, 2013

Presidential Decree No. 24841, Nov. 13, 2013

Presidential Decree No. 25050, Dec. 30, 2013

Presidential Decree No. 25279, Mar. 24, 2014

Presidential Decree No. 25532, Aug. 6, 2014

Presidential Decree No. 25553, Aug. 12, 2014

Presidential Decree No. 25843, Dec. 9, 2014

Presidential Decree No. 25945, Dec. 30, 2014

Presidential Decree No. 26135, Mar. 3, 2015

Presidential Decree No. 26190, Apr. 7, 2015

Presidential Decree No. 26600, Oct. 23, 2015

Presidential Decree No. 26817, Dec. 30, 2015

Presidential Decree No. 26898, Jan. 12, 2016

Presidential Decree No. 26961, Feb. 5, 2016

Presidential Decree No. 27037, Mar. 11, 2016

Presidential Decree No. 27115, Apr. 29, 2016

Presidential Decree No. 27205, May 31, 2016

Presidential Decree No. 27290, jun. 28, 2016

Presidential Decree No. 27291, jun. 28, 2016

Presidential Decree No. 27322, Jul. 6, 2016

Presidential Decree No. 27414, Jul. 28, 2016

Presidential Decree No. 27444, Aug. 11, 2016

Presidential Decree No. 27472, Aug. 31, 2016

Presidential Decree No. 27556, Oct. 25, 2016

Presidential Decree No. 27751, Dec. 30, 2016

Presidential Decree No. 27861, Feb. 13, 2017

Presidential Decree No. 28040, May 8, 2017

PART I GENERAL PROVISIONS
 Article 1 (Purpose)
The purpose of this Decree is to provide for matters delegated by the Financial Investment Services and Capital Markets Act and other matters necessary for the enforcement thereof.
 Article 2 (Definitions)
The terms used in this Decree shall be defined as follows: <Amended by Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27414, Jul. 28, 2016>
1. The term "overseas securities market" means an overseas market similar to the securities market;
2. The term "invitation to subscribe" means activities, conducted to invite a certain person to acquire securities, of notifying that securities are to be issued or sold, or providing information on the procedures for acquisition of such securities by placing an advertisement in a newspaper, a broadcasting medium, or a magazine; distributing printed matters, such as informative material or leaflets; holding a presentation session for inducing investments; or using an electronic communication means (including means of advertisements soliciting investment as prescribed in Article 249-5 of the Act), etc.: Provided, That the same shall not apply where information or guidance is provided merely for all or parts of the following matters by an advertisement or any similar means in accordance with the guidelines prescribed and publicly notified by the Financial Services Commission without the name of an underwriter and the issue amount of securities included therein:
(a) The name of an issuer;
(b) The type and amount of securities intended to be issued or sold;
(c) General terms and conditions of the issuance or sale of securities;
(d) Time table for the intended issuance or sale of securities;
(e) Other matters prescribed and publicly notified by the Financial Services Commission, unlikely to undermine the protection of investors;
3. The term "foreign currency asset" means an asset issued, created, or distributed in a foreign country or any other similar asset;
4. The term "related person" means a person as defined in any subparagraph of Article 3 (1) of the Enforcement Decree of the Act on Corporate Governance of Financial Companies;
5. The term "major shareholder" means a person as defined in subparagraph 6 (b) of Article 2 of the Act on Corporate Governance of Financial Companies.
 Article 3 (Scope of Financial Investment Instruments)
(1) "Sums prescribed by Presidential Decree, such as sales commissions" in the main sentence of Article 3 (1) of the Financial Investment Services and Capital Markets Act (hereinafter referred to as the "Act") means the following:
1. Fees collected under Article 58 (1) of the Act, sales commissions collected under Article 76 (4) of the Act (hereinafter referred to as "sales commission"), and other fees or commissions paid by investors and customers in consideration of any service provided;
2. Operating expenses and risk insurance premiums paid under an insurance policy;
3. Other sums prescribed and publicly notified by the Financial Services Commission.
(2) "Sums prescribed by Presidential Decree, such as termination fees" in the main sentence of Article 3 (1) of the Act means the following:
1. Redemption fees charged under Article 236 (2) of the Act (hereinafter referred to as "redemption fees”) and other termination fees paid by investors and other customers for earlier termination (including fees similar thereto);
2. Taxes;
3. Sums that investors and other customers are unable to recover because an issuer or the counterparty to a transaction involved becomes unable to pay money, etc. as originally agreed due to the bankruptcy or adjustment of obligations of the issuer or the counterparty to the transaction, or any other similar cause or event;
4. Other sums prescribed and publicly notified by the Financial Services Commission.
(3) “Financial investment instruments prescribed by Presidential Decree” in Article 3 (1) 3 of the Act means stock options prescribed in Article 340-2 or 542-3 of the Commercial Act. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013>
 Article 3-2 (Securities Only Subject to Regulation of Submission, etc. of Registration Statements)
"Securities prescribed by Presidential Decree" in Article 4 (1) 2 of the Act means securities on which the equity shares of a limited partnership company, a limited liability company, a limited partnership or an undisclosed association established under the Commercial Act is indicated: Provided, That collective investment securities are excluded herefrom.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 4 (Requirements for Corporate Commercial Paper)
"Requirements prescribed by Presidential Decree" in Article 4 (3) of the Act, means instruments tendered by a person falling under any of the following subparagraphs who makes a payment on behalf of a corporation under a commission agreement with the corporation and produced in the form of a bill with the words "corporate commercial paper" printed thereon: <Amended by Presidential Decree No. 26135, Mar. 3, 2015>
1. Any of the following persons (hereafter referred to as "bank"):
(a) A bank established with authorization under the Banking Act (including persons deemed banks under Article 59 of the same Act);
(b) A credit business sector deemed a bank under Article 5 of the Banking Act;
(c) The NongHyup Bank under the Agricultural Cooperatives Act;
2. The Korea Development Bank under the Korea Development Bank Act;
3. The Industrial Bank of Korea under the Industrial Bank of Korea Act.
 Article 4-2 (Financial Investment Instruments Excluded from Derivatives-Combined Securities)
"Financial investment instruments prescribed by Presidential Decree" in Article 4 (7) 5 of the Act means certificates of preemptive rights under Article 420-2 of the Commercial Act and warrant certificates under Article 516-5 of the same Act.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 4-3 (Financial Investment Instruments Excluded from Derivatives)
"Financial investment instruments prescribed by Presidential Decree" in the proviso to Article 5 (1) of the Act means any of the following financial investment instruments:
1. Securities or certificates issued by a financial investment business entity authorized to engage in commercial investment-trading of securities and over-the-counter derivatives bearing the indication of a right to effectuate the purchase and sale of an underlying asset (referring to an underlying asset prescribed and publicly notified by the Financial Services Commission, such as a stock certificate traded in a securities market or overseas securities market; hereafter the same shall apply in this subparagraph) or a transaction of delivering and accepting money according to a predetermined formula tied to fluctuations in the price of any underlying assets, interest rates, an indicator, a unit, an index based upon any of the aforementioned, or any other similar factor;
2. Certificates of preemptive rights under Article 420-2 of the Commercial Act and warrant certificates under Article 516-5 of the same Act.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 5 (Trading of Foreign Derivatives)
"Trading of foreign derivatives prescribed by Presidential Decree" in Article 5 (2) 2 of the Act means any of the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Transaction of metals, conducted over the counter (referring to any market similar to the derivatives market and formed outside an overseas market; hereafter the same shall apply in this Article) in accordance with the regulations of the London Metal Exchange;
2. Transaction of precious metals, conducted in accordance with the regulations of the London Bullion Market Association;
3. Transaction of foreign currencies, conducted over the counter in accordance with the regulations of the United States National Futures Association;
4. Deleted; <by Presidential Decree No. 28040, May 8, 2017>
5. Transaction of freight, conducted in accordance with the regulations of the Forward Freight Agreement Brokers' Association;
6. Other transactions prescribed and publicly notified by the Financial Services Commission, conducted in accordance with internationally standardized terms and conditions or procedures.
 Article 6 (Exclusion of Collective Investments from Application)
(1) "Acts prescribed by Presidential Decree" in Article 6 (5) 1 of the Act means the following Acts: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 26205, Apr. 20, 2015>
(2) "Investors prescribed by Presidential Decree" in Article 6 (5) 1 of the Act means investors, other than the following entities:
1. Any of the entities referred to in the subparagraphs of Article 10 (1);
2. Entities prescribed and publicly notified by the Financial Services Commission, from among those referred to in Article 10 (3) 12 or 13.
(3) "Number prescribed by Presidential Decree" in Article 6 (5) 1 of the Act means 49 persons. In such cases, the number of investors (referring to investors prescribed in paragraph (2)) in another collective investment scheme shall be added to the aforesaid number for the purposes of calculating 49 persons, where another collective investment scheme (excluding any private equity fund of funds under Article 80 (1) 5-2 or any real estate or special asset fund of funds under subparagraph 5-3 of the same paragraph) acquires not less than ten percent of the total number of outstanding collective investment securities issued by the relevant collective investment scheme. <Amended by Presidential Decree No. 28040, May 8, 2017>
(4) "Case prescribed by Presidential Decree" in Article 6 (5) 3 of the Act means any of the following: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 22516 Dec. 7, 2010; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27414, Jul. 28, 2016; Presidential Decree No. 28040, May 8, 2017>
1. Where a depository institution prescribed in Article 74 (3) of the Act (hereinafter referred to as "depository institution") manages and distributes, in accordance with the same paragraph, deposits investors’ deposit referred to in Article 74 (1) of the Act (hereinafter referred to as "investors' deposit");
1-2. Where a comprehensive financial investment business entity designated under Article 77-2 of the Act (hereinafter referred to as "comprehensive financial investment business entity") operates comprehensive investment account business under Article 77-6 (1) 3;
2. Any of the following cases where trust business entities jointly manage the money deposited in a trust to manage the trust property efficiently:
(a) Where the trust is a trust with assets comprehensively entrusted under Article 103 (2) of the Act and the ratio of the money entrusted is not more than 40 percent;
(b) Where it is inevitable for managing the yields earned from the management of the trust property or managing the residual trust property after termination or redemption of the trust;
3. Where a special-purpose company prescribed in Article 249-13 of the Act (hereinafter referred to as "special-purpose company") conducts its business;
4. Where a merchant bank prescribed in Article 336 of the Act (hereinafter referred to as "merchant bank") conducts its business affairs related to cash management accounts under Article 329;
5. Where a corporation that meets the requirements prescribed in Article 51-2 (1) 6 of the Corporate Tax Act, manages and distributes money, etc. received in accordance with the main sentence of Article 3 (1) of the Act (hereinafter referred to as "money, etc.");
6. Where a domestic company, the main business of which is to control business of another company by holding the equity securities of such another company conducts its business;
7. Where the entity engages in franchise business defined in subparagraph 1 of Article 2 of the Fair Transactions in Franchise Business Act;
8. Where the entity engages in a multi-level sales business defined in subparagraph 5 of Article 2 of the Act on Door-to-Door Sales, etc.;
9. Where a person who engages in business, such as manufacturing defined in the Korea Standard Industrial Classification Codes publicly notified by the Commissioner of the Korea National Statistical Office pursuant to the Statistics Act, runs the business with human resources and physical facilities ordinarily required for such business, including executive officers and/or employees, and a place of business, and with money, etc. pooled from investors, and distributes yields earned from such business to investors: Provided, That the same does not apply where the business operator specifies a certain business and distributes the yields earned from the specific business;
10. Where a traditional mutual aid scheme is organized and operated for any academic, religious or philanthropic activity, art, sociality, or other non-profit business;
11. Where a clan or any group organized by members related by blood runs non-profit business for itself or its members;
12. Where a non-profit corporation established under the Civil Act, a public interest corporation established under the Act on the Establishment and Operation of Public Interest Corporations, a social welfare foundation established under the Social Welfare Services Act, an employee stock ownership association established under the Framework Act on Labor Welfare, or any other non-profit organization established with permission, authorization or registration pursuant to the relevant statutes engages in activities for its business purposes stipulated by the relevant articles of association or incorporation;
13. Where money, etc. pooled from investors is managed and distributed in accordance with an agreement of all investors;
14. Where a corporation, the sole business purpose of which is to merge with another corporation and issue stock certificates through a public offering (hereinafter referred to as "special-purpose acquisition company"), satisfies all of the following requirements and engages in any activity serving its business objective:
(a) It shall deposit or trust at least an amount prescribed and publicly notified by the Financial Services Commission, which shall be at least 90 percent of money pooled by issuing stock certificates (excluding the securities issued before the initial public offering) with an institution prescribed and publicly notified by the Financial Services Commission, such as a company that obtained authorization under Article 324 (1) of the Act (hereinafter referred to as "securities finance company"), by the following business day of the payment deadline for the stock price;
(b) It shall neither withdraw nor offer as security money deposited or trusted, as provided for in item (a) before the registration of merger with another corporation is completed: Provided, That where it is unavoidable for operating a special-purpose acquisition company in circumstances prescribed and publicly notified by the Financial Services Commission, such as where it is necessary to purchase the stocks through exercise of the appraisal rights of shareholders under Article 165-5 of the Act, it may withdraw such money;
(c) At least one promoter shall be an investment trader of equity securities (excluding collective investment securities), of at least the scale prescribed and publicly notified by the Financial Services Commission;
(d) None of its executive officers shall fall under any subparagraph of Article 5 (1) of the Act on Corporate Governance of Financial Companies;
(e) It shall list the securities by the initial public offering on the securities market within 90 days from the payment deadline for stock price;
(f) It shall complete the registration of merger with another corporation within 36 months from the payment deadline for stock certificates by the initial public offering;
(g) It shall satisfy criteria prescribed and publicly notified by the Financial Services Commission, as necessary for protecting investors;
15. Where the Financial Services Commission deems, otherwise, that it is not a collective investment, in comprehensive consideration of the following matters:
(a) Whether a professional operator who is paid for operation and management exists;
(b) Whether the investors' motive for investment is based on the professional operator's knowledge, experience, and competency, and whether there is a personal relationship between investors and the professional operator;
(c) Whether the yields earned from operation and management are to be distributed pro rata to invested amounts within a reasonable period;
(d) Whether it is necessary to separate the assets pooled from investors, from the professional operator's proprietary property;
(e) Whether there is a possibility that protection of investors will be apparently impracticable, if it is not deemed a collective investment.
 Article 6-2 (Investable Assets of Investment Advisory Business)
"Investable assets prescribed by Presidential Decree" in Article 6 (6) of the Act means the following assets: <Amended by Presidential Decree No. 26600, Oct. 23, 2015>
1. Real assets;
2. Rights and interests in real estate, such as a surface right, an easement, a right to lease on a deposit basis, leasehold, and a right of residence in a housing unit;
3. Money deposited at financial institutions referred to in subparagraphs of Article 106 (2);
4. Any of the following equity shares or rights (hereinafter referred to as "right to benefit from business"):
(a) Equity shares of a limited partnership company, a limited liability company, a limited partnership or an undisclosed association established under the Commercial Act;
(b) Equity shares of an association established under the Civil Act;
(c) Other contractual equity shares or right entitled to receive distribution of profits generated from a specific business;
5. Any of the following gold bullion (referring to gold bullion defined in Article 106-3 (1) of the Restriction of Special Taxation Act; hereafter the same shall apply in this subparagraph):
(a) Gold bullion traded in the market established by an exchange (referring to the exchange defined in Article 8-2 (2) of the Act; hereinafter the same shall apply) upon obtaining approval under Article 377 (1) 12 of the Act for the trading thereof;
(b) Gold bullion that a bank sells, as an agent, or trades or lends under Article 18 (1) 4 of the Enforcement Decree of the Banking Act.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 6-3 (Scope, etc. of Prime Brokerage Business)
(1) "Investors prescribed by Presidential Decree" in Article 6 (9) of the Act means the following entities: <Amended by Presidential Decree No. 26600, Oct. 23, 2015>
1. An entity referred to in each subparagraph of Article 10 (2);
2. An entity referred to in Article 10 (3) 12 or 13 (including foreign entities corresponding thereto);
3. A private equity fund defined in Article 9 (19) 1 of the Act (hereinafter referred to as "private equity fund");
4. A foreign collective investment scheme prescribed in Article 279 (1) of the Act (limited to collective investment schemes corresponding to privately placed funds defined in Article 9 (19) of the Act).
(2) "Manner prescribed by Presidential Decree" in Article 6 (9) of the Act means providing the services referred to in Article 6 (9) 1 through 3 in combination with the services referred to in subparagraphs of paragraph (3) of this Article. In such cases, the services referred to in Article 6 (9) 2 and 3 shall be included therein.
(3) "Services prescribed by Presidential Decree" in Article 6 (9) 4 of the Act means the following services: <Amended by Presidential Decree No. 26600, Oct. 23, 2015>
1. Performance of offers or orders for the transaction of investors' property (referring to investors' property which is the property of a hedge fund, etc. and the subject-matter of prime brokerage business; hereinafter the same shall apply) of a hedge fund, etc. (referring to a hedge fund prescribed in Article 6 (9) of the Act; hereinafter the same shall apply);
2. Acquisition, disposal, etc. related to the transaction, etc. of investors' property of a hedge fund, etc.;
3. Trading of derivatives, or acting as a broker, an intermediary or an agent for the trading of derivatives;
4. Executing repurchase agreements, or acting as a broker, an intermediary or an agent for the execution of repurchase agreements;
5. Sale of collective investment schemes;
6. Advisory services for banking, financial affairs, etc. related to the management of investors' property of a hedge fund, etc.;
7. Investment in a hedge fund defined in Article 9 (19) 2 of the Act (hereinafter referred to as "hedge fund") to induce or promote other investors' investment (including the purchase of the beneficiary certificates in the case of an investment trust; hereafter the same shall apply in the proviso to Article 271-11 (2) 2).
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 7 (Exemption of Financial Investment Business from Application)
(1) "Derivatives-linked securities prescribed by Presidential Decree" in Article 7 (1) 2 of the Act means derivatives-linked securities, other than those that meet each of the following requirements: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Their underlying assets shall be paid in the local or other foreign currency, or money, etc. recovered shall bear the indication of the local or other foreign currency;
2. Transactions to hedge risks prescribed and publicly notified by the Financial Services Commission shall be made simultaneously with the issuance of the securities;
3. They shall be issued for raising funds required for business;
4. They shall meet other requirements for issuance prescribed by Ordinance of the Prime Minister.
(2) "Securities issued under a contract prescribed by Presidential Decree" in Article 7 (1) 3 of the Act means any of the following (hereinafter referred to as "gold savings account, etc."): <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26135, Mar. 3, 2015>
1. A gold or silver savings account (referring to a derivatives-linked security satisfying the criteria prescribed and publicly notified by the Financial Services Commission, representing the right by which money, etc. to be recovered presently or subsequently are determined according to the price, etc. of gold or silver as the underlying asset, if any investor pays money to a bank, etc.) issued by any entity referred to in any subparagraph of Article 4 (hereafter referred to as "bank, etc." in this subparagraph) in accordance with an agreement concluded with an investor;
2. Other derivatives-linked securities issued by a person authorized to engage in the investment trading of securities and over-the-counter derivatives under an agreement concluded with an investor, which are publicly notified by the Financial Services Commission in consideration of investment risks, structure of profits or losses, etc.
(3) "Cases prescribed by Presidential Decree" in Article 7 (4) of the Act means the following cases, where an investment broker is fully or partially entrusted to determine whether to invest in financial investment instruments (referring to the investment judgment under Article 6 (6) of the Act; hereinafter the same shall apply) without receiving any consideration: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Where an investor designates the trading date (only for one day) of the relevant financial investment instruments and the total volume and amount of the instruments traded on the specific trading date, and the investor entrusts the investment broker with discretion as to the quantity, price, and timing for trading of the financial investment instruments, within the scope of such designation;
2. Where there is an unavoidable cause, such as a sudden price fall of financial investment instruments while an investor is temporarily absent due to travel or illness and the investor pre-authorizes the investment broker to exercise the right of selling the instrument discretionarily in accordance with terms and conditions of the relevant agreement;
3. Where an investor fails to perform an obligation to settle the payments for financial investment instruments traded or any other transaction; an obligation to deposit an additional amount of the guarantee money; an obligation to maintain the collateral ratio in connection with provision of credit under Article 72 of the Act; or an obligation to repay; and where the investor pre-authorized an investment broker to exercise the right of selling the financial investment instruments (including the right to purchase derivatives already sold, if the instruments involved are derivatives) discretionarily in accordance with terms and conditions of the relevant agreement;
4. Where an investor has made a prior agreement with an investment broker to buy or sell collective investment securities, etc. issued by a money market fund under subparagraph 5 of Article 229 of the Act (hereinafter referred to as "money market fund") without necessarily expressing such intent or to buy or sell securities on condition that the securities be redeemed, when the investor deposits money in the account opened by the investment broker or withdraws money from such account; and where the investor authorized an investment broker to exercise the right to buy or sell the relevant collective investment securities discretionarily in accordance with the agreement, or to buy or sell such securities on condition that the securities be redeemed;
5. Other cases determined and publicly notified by the Financial Services Commission where it is unlikely to undermine the protection of investors or sound trading practices.
(4) "Case prescribed by Presidential Decree" in Article 7 (6) 4 of the Act means any of the following cases: <Amended by Presidential Decree No. 21518, May 29, 2009; Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26135, Mar. 3, 2015; Presidential Decree No. 26600, Oct. 23, 2015>
1. Where the State or a local government trades financial investment instruments for public interest pursuant to the relevant statutes;
2. Where the Bank of Korea becomes involved in the operation of the open market pursuant to Article 68 of the Bank of Korea Act;
3. Where a sale and repurchase agreement defined in Article 81 (1) 1 or a purchase and resale agreement defined in subparagraph 3 (b) of Article 85 (hereinafter referred to as "repurchase agreement") is concluded between the following persons:
(a) An entity referred to in any subparagraph of Article 10 (2);
(b) An entity referred to in Article 10 (3) 1 through 4, 4-2, or 9 through 13 (including foreign entities similar thereto);
(c) An entity prescribed and publicly notified by the Financial Services Commission;
4. Where the Korea Financial Investment Association established under Article 283 of the Act (hereinafter referred to as the "Association") performs the business affairs prescribed in Article 286 (1) 5 of the Act;
5. Where a Korean citizen conducts a public offering, private placement or sale of securities outside Korea, and where a foreign investment trader involved (referring to a person who runs business equivalent to the investment trading business in a foreign country in accordance with the statutes of that foreign country; hereinafter the same shall apply) or a foreign investment broker involved (referring to a person who runs investment brokerage business in a foreign country in accordance with the statutes of that foreign country; hereinafter the same shall apply) engages in any of the following activities:
(a) Concluding an underwriting agreement (including a contract for conducting a public offering, private placement, or sale of securities, or for directly or indirectly dividing tasks for conducting a public offering, private placement or sale of securities for the Kore an citizen; hereafter the same shall apply in this subparagraph) in Korea with the Korean citizen in accordance with the guidelines prescribed and publicly notified by the Financial Services Commission, which is approved by the Financial Services Commission;
(b) Engaging in a negotiation to finalize terms and conditions of an underwriting agreement in Korea with the Korean citizen in accordance with the guidelines prescribed and publicly notified by the Financial Services Commission, and relevant data has been submitted in advance to the Financial Services Commission;
5-2. Where a foreign investment trader issues derivatives-linked securities prescribed in paragraph (1) outside Korea, upon fulfilling each of the following guidelines:
(a) The foreign investment trader shall be subject to supervision by the supervisory agency of financial investment business in a foreign country under Article 437 (1) of the Act (hereinafter referred to as "foreign financial investment supervisory agency") over its managerial soundness, prohibition of unfair trading, protection of investors, etc. in connection with the issuance of the derivatives-linked securities;
(b) The foreign investment trader shall meet the criteria prescribed and publicly notified by the Financial Services Commission in terms of its management ability, financial standing, and social credibility;
(c) The foreign investment trader shall be a foreign investment trader of a country where the Financial Services Commission can obtain materials on investigations or inspections conducted as prescribed by the Act, or the statutes of that foreign country corresponding to the Act, against the acts committed by the foreign investment trader violating the Act, or the statutes of that foreign country corresponding to the Act, from the foreign financial investment supervisory agency referred to in item (a), under the principle of reciprocity;
(d) Where the derivatives-linked securities are traded in Korea, the investment trader shall subscribe to the relevant derivatives-linked securities and arrange professional investors (excluding trust business entities that manage specified money trusts referred to in subparagraph 1 of Article 103; hereafter the same shall apply in this item) to acquire them or invite offers from professional investors through investment brokers. In such cases, the investment traders or investment brokers shall have been authorized to engage in investment trading business or investment brokerage business related to securities, and to engage in financial investment business related to over-the-counter derivatives (referring to the over-the-counter derivatives whose price of underlying assets, interest rates, indicator, etc. are the same with the price of underlying assets, interest rates, indicator, etc. of the relevant derivatives-linked securities);
6. Where a foreign investment trader or foreign investment broker engages in any of the following activities outside the Republic of Korea:
(a) Trading financial investment instruments directly with an investment trader, or acting as a broker, an intermediary or an agent for the trading of financial investment instruments through an investment broker;
(b) Trading financial investment instruments directly with a resident in Korea (excluding investment traders and investment brokers; hereafter the same shall apply in this item) by receiving trading orders from the resident, without inviting people to make investments or placing an advertisement soliciting investment under Article 57 of the Act (hereinafter referred to as "advertisement soliciting investment"), or acting as a broker, an intermediary or an agent for the trading of financial investment instruments by receiving trading orders from the resident;
6-2. Where a foreign collective investment business entity (referring to a foreign collective investment business entity prescribed in Article 279 (1) of the Act; hereinafter the same shall apply) or a foreign investment company, etc. (referring to a foreign investment company, etc. prescribed in Article 279 (1) of the Act; hereinafter the same shall apply) of a foreign investment trust (referring to a foreign investment trust prescribed in Article 279 (1) of the Act; hereinafter the same shall apply) or a foreign undisclosed investment association (referring to a foreign undisclosed investment association prescribed in Article 279 (1) of the Act; hereinafter the same shall apply) sells foreign collective investment securities (referring to foreign collective investment securities prescribed in Article 279 (1) of the Act; hereinafter the same shall apply) in Korea upon fulfilling each of the following requirements:
(a) It shall sell the foreign collective investment securities to a collective investment scheme (in cases of an investment trust or undisclosed investment association, including a trust business entity that keeps in custody and manages its collective investment property) that invests up to 100 percent of its total assets in the relevant foreign collective investment securities;
(b) A foreign collective investment scheme (referring to a foreign collective investment scheme prescribed in Article 279 (1) of the Act; hereinafter the same shall apply) that has issued the relevant foreign collective investment securities shall have been registered under Article 279 (1) of the Act and invests not less than 70 percent of its collective investment property in foreign currency assets as prescribed in Article 80 (1) 6 (a);
7. Where a foreign investment advisory business entity referred to in the proviso to Article 18 (2) 1 of the Act (hereinafter referred to as "foreign investment advisory business entity") or a foreign discretionary investment business referred to in the proviso to Article 18 (2) 1 (hereinafter referred to as "foreign discretionary investment business entity") conducts investment advisory business or discretionary investment business overseas for any of the following persons without making investment recommendations or placing an advertisement soliciting investment:
(a) The State;
(b) The Bank of Korea;
(c) An entity referred to in Article 10 (3) 4 or 12;
(d) A person prescribed and publicly notified by the Financial Services Commission;
8. Where advice is provided, without additional consideration paid, on the value of, or investment decision in, a financial investment instrument under Article 6 (6) of the Act, in connection with other business;
9. Where a fund rating company registered under Article 258 of the Act (hereinafter referred to as "fund rating company"); a bond rating company registered under Article 263 of the Act (hereinafter referred to as "bond rating company"); a certified public accountant, an appraiser, a person specializing in credit ratings, an attorney-at-law, a patent attorney, a tax accountant, or any person engaging in an equivalent field of jobs who provides an advisory service under the relevant statutes (including organizations to which each of them belongs), provides information on analysis pertaining to his/her service;
10. Where the management of real estate, including the management of lease of buildings or housing, is performed as an agent, consulting on the use, development and transaction of real estate, or other advice on investment in, and management of, real estate, etc. is provided as a business, under other statutes.
(5) None of the following business shall be deemed financial investment business specified in the corresponding subparagraph pursuant to Article 7 (6) of the Act: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015>
1. For the purposes of Article 7 (6) 1 of the Act: Investment brokerage business;
2. For the purposes of Article 7 (6) 2 of the Act: Investment trading business;
3. For the purposes of Article 7 (6) 3 of the Act: Investment trading business or investment brokerage business;
4. For the purposes of Article 7 (6) 4 of the Act: Any of the following financial investment business:
(a) For the purposes of paragraph (4) 1 through 3: Investment trading business;
(b) For the purposes of paragraph (4) 4: Investment brokerage business;
(c) For the purposes of paragraph (4) 5, 6 or 6-2: Investment trading business or investment brokerage business;
(d) For the purposes of paragraph (4) 7: Investment advisory business or discretionary investment business;
(e) For the purposes of paragraph (4) 8 or 9: Investment advisory business;
(f) For the purposes of paragraph (4) 10: Investment advisory business or discretionary investment business.
 Article 7-2 (Scope of Application)
"Other financial institutions, etc. prescribed by Presidential Decree" in Article 8 (9) 3 of the Act means the following financial institutions, etc.: <Amended by Presidential Decree No. 27414, Jul. 28, 2016>
1. The Korea Development Bank established under the Korea Development Bank Act;
2. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;
3. The Export-Import Bank of Korea established under the Export-Import Bank of Korea Act;
4. A securities finance company;
5. A merchant bank;
6. A fund brokerage company;
7. A foreign exchange brokerage company registered under the Foreign Exchange Transactions Act;
8. The Korea Housing Finance Corporation established under the Korea Housing Finance Corporation Act;
9. Other financial institutions designated and publicly notified by the Financial Services Commission.
 Article 7-3 (Financial Investment Instruments Market, etc.)
(1) "Securities prescribed by Presidential Decree" in Article 8-2 (5) of the Act means the following securities:
1. Depositary receipts related to stock certificates, which are listed on a securities market;
2. Other securities prescribed by Ordinance of the Prime Minister, in consideration of the formation of fair prices, efficiency of trades, etc.
(2) "Where the trade volume of instruments for trade contracts does not exceed the criteria prescribed by Presidential Decree" in Article 8-2 (5) 1 of the Act means where both of the following conditions are met:
1. The average trade volume of instruments for trade contracts through the competitive trading via the relevant alternative trading system (referring to instruments for trade contracts prescribed in Article 8-2 (5) of the Act; hereinafter the same shall apply) by types of securities classified under Article 4 (2) of the Act during the six-month period immediately preceding the end of each month, shall not exceed 5 percent of the average trade volume of instruments for trade contracts (referring to the volume computed by dividing the total quantity of instruments for trade contracts, the trade of which has been concluded, by the number of days on which the trades are effectuated; hereafter the same shall apply in this paragraph and Article 78) in the securities market during the same period;
2. The average trade volume of instruments for trade contracts through competitive trading via the relevant alternative trading system by type of securities during the six-month period immediately preceding the end of each month shall not exceed 10 percent of the average trade volume of instruments for trade contracts by the relevant type of securities.
(3) "Methods prescribed by Presidential Decree" in Article 8-2 (5) 3 of the Act means the methods of conducting a trade of an instrument for trade contracts at a price that coincides with the asking price by a seller and an offeror by types of securities.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Articles 8 and 9 Deleted. <by Presidential Decree No. 27414, Jul. 28, 2016>
 Article 10 (Scope, etc. of Professional Investors)
(1) "Professional investor prescribed by Presidential Decree" in the proviso to Article 9 (5) of the Act means a professional investor, other than the following entities:
1. The State;
2. The Bank of Korea;
3. An entity referred to in any provision of paragraph (2) 1 through 17;
4. An entity referred to in any provision of paragraph (3) 1 through 11;
5. An entity referred to in any provision of paragraph (3) 18 (a) through (c);
6. A foreign entity equivalent to any of those referred to in subparagraph 3 or 4.
(2) "Financial institutions prescribed by Presidential Decree" in Article 9 (5) 3 of the Act means the following financial institutions: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 22493, Nov. 15, 2010; Presidential Decree No. 23496, Jan. 6, 2012; Presidential Decree No. 26135, Mar. 3, 2015; Presidential Decree No. 27414, Jul. 28, 2016; Presidential Decree No. 27556, Oct. 25, 2016>
1. A bank;
2. The Korea Development Bank established under the Korea Development Bank Act;
3. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;
4. The Export-Import Bank of Korea established under the Export-Import Bank of Korea Act;
5. The National Agricultural Cooperative Federation established under the Agricultural Cooperatives Act;
6. The National Federation of Fisheries Cooperatives established under the Fisheries Cooperatives Act;
7. An insurance company registered under the Insurance Business Act (hereinafter referred to as "insurance company");
8. A financial investment business entity (excluding concurrently-run financial investment business entities prescribed in Article 8 (9) of the Act (hereinafter referred to as "concurrently-run financial investment business entity"));
9. A securities finance company;
10. A merchant bank;
11. A fund brokerage company authorized under Article 355 (1) of the Act (hereinafter referred to as "fund brokerage company");
12. A financial holding company registered the Financial Holding Companies Act;
13. A specialized credit-finance company registered under the Specialized Credit Finance Business Act;
14. A mutual savings bank established under the Mutual Savings Banks Act and the National Federation of Mutual Savings Banks;
15. The National Forestry Cooperatives Federation established under the Forestry Cooperatives Act;
16. The National Federation of Community Credit Cooperatives established under the Community Credit Cooperatives Act;
17. The National Credit Union Federation of Korea established under the Credit Unions Act;
18. A foreign financial institution similar to the institutions referred to in subparagraphs 1 through 17.
(3) "Entities prescribed by Presidential Decree" in Article 9 (5) 5 of the Act means the following entities: Provided, That where any of the entities referred to in subparagraphs 12 through 17 trades over-the-counter derivatives with a financial investment business entity, it shall be deemed a professional investor only if it gives written notice to the financial investment business entity of its intention to be treated as a professional investor: <Amended by Presidential Decree No. 21518, May 29, 2009; Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 25279, Mar. 24, 2014; Presidential Decree No. 26961, Feb. 5, 2016; Presidential Decree No. 27037, Mar. 11, 2016; Presidential Decree No. 27205, May 31, 2016; Presidential Decree No. 27291, Jun. 28, 2016>
1. The Korea Deposit Insurance Corporation established and a finance company authorized to perform liquidation under the Depositor Protection Act;
3. The Korea Housing Finance Corporation established under the Korea Housing Finance Corporation Act;
4. The Korea Investment Corporation established under the Korea Investment Corporation Act;
4-2. Deleted; <by Presidential Decree No. 25945, Dec. 30, 2014>
5. The Association;
6. The Korea Securities Depository established under Article 294 of the Act (hereinafter referred to as the "Securities Depository");
7. An exchange;
8. The Financial Supervisory Service established under the Act on the Establishment, etc. of Financial Services Commission (hereinafter referred to as the "Financial Supervisory Service");
9. A collective investment scheme;
10. The Korea Credit Guarantee Fund established under the Korea Credit Guarantee Fund Act;
11. The Korea Technology Guarantee Fund established under the Korea Technology Finance Corporation Act;
12. Funds established under relevant Acts (excluding Funds referred to in subparagraphs 10 and 11) and corporations that manage and operate such Funds;
13. A corporation that manages any mutual aid business under relevant Acts;
14. A local governments
15. A domestic corporation that has issued stocks listed on a foreign securities market;
16. A corporation or an organization that meets each of the following requirements (excluding foreign corporations or organizations):
(a) The corporation or the organization shall submit to the Financial Services Commission, relevant documents evidencing that it meets the requirement prescribed in item (b);
(b) The balance of financial investment instruments as at the day immediately preceding the date it submitted the relevant documents shall not be less than ten billion won (five billion won in cases of a stock company subject to external audit under the Act on External Audit of Stock Companies);
(c) Two years have not passed since it submitted the relevant documents;
17. A private individual who meets each of the following requirements: Provided, That excluded herefrom are foreign private individuals and private individuals who are residents having opened individual savings accounts under Article 91-18 (1) of the Restriction of Special Taxation Act (limited to where a contract for specified money trust has been entered into with a trust business entity under Article 91-18 (3) 2 and where a discretionary investment contract is entered into with a discretionary investment business entity under Article 98 (1) 4-2 and (2) of this Decree):
(a) The private individual shall submit, to the Financial Services Commission, relevant documents evidencing that he/she meets each of the requirements prescribed in items (b) through (d);
(b) The balance of financial investment instruments as at the day immediately preceding the date he/she submitted the relevant documents shall not be less than 500 million won;
(c) One year has passed since he/she opened an account with a financial investment business entity;
(d) Amount of his/her income or property value shall satisfy the criteria prescribed and publicly notified by the Financial Services Commission;
(e) Two years have not passed since he/she submitted the relevant documents;
18. Any of the following foreign entities:
(a) A foreign government;
(b) An international organization established pursuant to a treaty;
(c) A foreign central bank;
(d) Any foreign entity equivalent to those referred to in subparagraphs 1 through 17: Provided, That excluded herefrom are foreign residents who have opened individual savings accounts under Article 91-18 (1) of the Restriction of Special Taxation Act (limited to where a contract for specified money trust has been entered into with a trust business entity under Article 91-18 (3) 2 and where a discretionary investment contract is entered into with a discretionary investment business entity under Article 98 (1) 4-2 and (2) of this Decree).
 Article 11 (Public Offering and Public Sale of Securities)
(1) In calculating 50 persons pursuant to Article 9 (7) and (9) of the Act, the number of persons who have been invited to subscribe for securities of the same class as the securities in the instant case in any manner other than by public offering or public sale within six months before the public invitation to subscribe shall be aggregated: Provided, That any of the following persons are excluded from such aggregation: <Amended by Presidential Decree No. 21765, Oct. 1, 2009; Presidential Decree No. 22516 Dec. 7, 2010; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016; Presidential Decree No. 27414, Jul. 28, 2016>
1. Any of the following professionals:
(a) A professional investor;
(b) Deleted; <by Presidential Decree No. 27291, Jun. 28, 2016>
(c) An accounting firm established under the Certified Public Accountant Act;
(d) A credit rating company (referring to a company authorized to engage in credit rating business under Article 335-3 of the Act; hereinafter the same shall apply);
(e) A person who provides accounting, advisory services or similar services to the issuer with an officially recognized qualification, such as a certified public accountant, appraiser, attorney-at-law, patent attorney or tax accountant;
(f) Any other person prescribed and publicly notified by the Financial Services Commission from among professionals who are in a position to have good knowledge of financial standing, business affairs, etc. of the issuer;
2. Any of the following related persons:
(a) The largest shareholder (referring to the largest shareholder defined in subparagraph 6 of Article 2 of the Act on Corporate Governance of Financial Companies. In this regard, "finance company" shall be construed as "corporation", and “outstanding stocks (including equity shares; hereinafter the same shall apply)" as “outstanding stocks”; hereinafter the same shall apply) of the issuer and shareholders who hold not less than 5 percent of the total number of outstanding stocks;
(b) Executive officers (including a person referred to in each subparagraph of Article 401-2 (1) of the Commercial Act; hereafter the same shall apply in this subparagraph) of the issuer and members of the employee stock ownership association established under the Framework Act on Labor Welfare;
(c) Affiliated companies of the issuer and their executive officers;
(d) Shareholders of an unlisted stock corporation (excluding a corporation that has ever publicly offered or sold its stocks) where the issuer is an unlisted stock corporation;
(e) Executive officers and/or employees of a domestic affiliated company of the issuer, where the issuer is a foreign enterprise established pursuant to the statutes of a foreign country, and sells its stocks of to executive officers and/or employees of the domestic affiliated company in accordance with a stock option plan, etc. for improving the welfare of employees;
(f) Promoters of a company, if the company is incorporated by the issuer;
(g) Other related persons, prescribed and publicly notified by the Financial Services Commission among those who are in a position to have good knowledge of financial standing, business affairs, etc. of the issuer.
(2) Notwithstanding the proviso to paragraph (1), if stock certificates, etc. are issued by a corporation (including corporations that intend to list), the stock certificates of which have been listed on a securities market prescribed and publicly notified by the Financial Services Commission (hereinafter referred to as the "KONEX") established by the Korea Exchange (hereinafter referred to as the "Korea Exchange") deemed to have obtained permission for an exchange under Article 15 (1) of the Addenda to the partially amended Financial Investment Business and Capital Markets Act (Act No. 11845) for trading of stock certificates, etc. issued by small and medium enterprises defined in Article 2 of the Framework Act on Small and Medium Enterprises, any of the following persons are excluded from the aggregation: <Newly Inserted by Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013>
1. Professional investors;
2. Persons provided for in paragraph (1) 1 (c) through (f);
3. Persons provided for in any item of paragraph (1) 2;
4. Collective investment schemes established or created under any of the Acts provided for in the subparagraphs of Article 6 (1);
5. Other persons prescribed and publicly notified by the Financial Services Commission, considering their expertise in investment in small and medium enterprises.
(3) Even if the results of calculation under paragraph (1) or (2) show that the number of persons who have been invited to subscribe is less than 50 persons and thus the invitation does not amount to a public offering of securities, it shall still be deemed a public offering, where the relevant securities may be transferred within one year from the date of issuance and meets the criteria prescribed and publicly notified by the Financial Services Commission for resale, in consideration of the kind of securities, the characteristics of acquirers, etc.: Provided, That the same does not apply where the relevant securities are bonds that cannot be issued through private placement as prescribed in Article 165-10 (2) of the Act. <Amended by Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 27291, Jun. 28, 2016>
(4) In applying paragraphs (1) and (2) to a public sale, the number of persons shall be calculated based on persons who are invited to subscribe outside a securities market and an alternative trading system. <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013>
 Article 12 Deleted. <by Presidential Decree No. 24697, Aug. 27, 2013>
 Article 13 (Scope of Foreign Corporations)
(1) "International organizations prescribed by Presidential Decree" in Article 9 (16) 5 of the Act means international organizations established by treaty.
(2) "Other juristic person, as prescribed by Presidential Decree" in Article 9 (16) 6 of the Act means any of the following persons:
1. A fund or an association created and supervised or managed in accordance with the statutes of a foreign country;
2. A fund or an association created and supervised or managed by a foreign government, a foreign local government, or a foreign public organization;
3. A fund or an association created and supervised or managed by an international organization established pursuant to a treaty.
 Article 14 (Criteria for Privately Placed Funds)
(1) "Investors prescribed by Presidential Decree" in Article 9 (19) of the Act means investors, other than the following:
1. A person referred to in any subparagraph of Article 10 (1);
2. A person prescribed and publicly notified by the Financial Services Commission from among those referred to in Article 10 (3) 12 or 13.
(2) "Number prescribed by Presidential Decree" in Article 9 (19) of the Act means 49 persons. In such cases, the number of investors (referring to the investors prescribed in paragraph (1)) in another collective investment scheme shall be aggregated for the purpose of calculating 49 persons, where another collective investment scheme (excluding any private equity fund of funds under Article 80 (1) 5-2 or any real estate or special asset fund of funds under subparagraph 5-3 of the same paragraph) acquires not less than ten percent of the total number of outstanding collective investment securities issued by a collective investment scheme. <Amended by Presidential Decree No. 28040, May 8, 2017>
 Article 14-2 (Business Entities subject to Clearing and Trades subject to Clearing)
(1) "Person prescribed by Presidential Decree" in Article 9 (25) of the Act means any of the following:
1. The State;
2. The Bank of Korea;
3. A person referred to in any provision of Article 10 (2) 1 through 7 and 9;
4. A person referred to in any provision of Article 10 (3) 1, 2, 10 through 12 and 18 (a) through (c);
5. A foreign financial investment business entity;
6. Other persons prescribed by Ordinance of the Prime Minister considering payment risks contingent on the trading of financial investment instruments, market situations, etc.
(2) "Trading a financial investment instrument prescribed by Presidential Decree" in Article 9 (25) of the Act means any of the following trading:
1. Trading of over-the-counter derivatives;
2. Over-the-counter trading of securities under Article 166 of the Act, which falls under any of the following:
(a) A repurchase agreement;
(b) Securities lending;
(c) Trading of debt securities (excluding trading referred to item (a) and (b));
3. Trading of listed securities (excluding debt securities) on consignment between an investment broker that is a consignee and a financial investment business entity or a business entity prescribed in any subparagraph of paragraph (1) (hereinafter referred to as "business entity subject to clearing") that is a consignor.
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
 Article 14-3 (Objects of Credit Rating)
"Persons prescribed by Presidential Decree" in Article 9 (26) 2 of the Act means any of the following persons:
1. The State;
2. Local governments;
3. Corporations directly established under any Acts;
4. Non-profit corporations established by obtaining permission, authorization, registration, etc. under the Civil Act or other related statutes.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 14-4 (Methods, etc. of Issuing Securities through Crowdfunding Brokerage)
(1) "Method prescribed by Presidential Decree" in Article 9 (27) of the Act means the method of issuing debt securities, equity securities or investment contract securities after making arrangements for the exchange of opinions between the issuer of online small-value securities (hereinafter referred to as "issuer of online small-value securities") referred to in Article 117-7 (3) of the Act and investors, and mutually among investors on the website of a crowdfunding broker (including a site opened by the crowdfunding broker at a cyber space through an application used by mobile communications terminals or any other similar application program; hereafter the same shall apply in Chapter V (excluding Article 118-13 (2)) of Part II) about the matters posted on such website under Article 117-10 (2) of the Act.
(2) Brokerage of public offering or private placement referred to in Article 9 (27) of the Act means engaging in any of the following acts for an issuer of online small-value securities with respect to newly issued securities:
1. Soliciting investors to subscribe for the acquisition of such securities;
2. Taking partial charge of public offering or private placement of securities, either directly or indirectly, with the issuer of the online small-value securities, in addition to the act prescribed in subparagraph 1;
3. Transferring investors’ subscriptions for acquiring such securities to the issuer of the online small-value securities.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 14-5 (Scope of Issuers of Online Small-Value Securities)
(1) "Person prescribed by Presidential Decree" in Article 9 (27) 1 of the Act" means any person, other than the following:
1. A stock-listed corporation (referring to a stock-listed corporation prescribed in Article 9 (15) 3 of the Act; hereinafter the same shall apply);
2. A person who engages in any type of business referred to in any subparagraph of Article 4 of the Enforcement Decree of the Support for Small and Medium Enterprise Establishment Act: Provided, That a person who engages in any type of business prescribed and publicly notified by the Financial Services Commission as requiring smooth financing for a business starter (referring to a business starter defined in subparagraph 2 of Article 2 of the Support for Small and Medium Enterprise Establishment Act; hereinafter the same shall apply) is excluded herefrom.
(2) “Person who meets the requirements prescribed by Presidential Decree” in Article 9 (27) 2 of the Act means any of the following entities: Provided, That a stock-listed corporation is excluded herefrom: <Amended by Presidential Decree No. 27291, Jun. 28, 2016>
1. A venture business established under the Act on Special Measures for the Promotion of Venture Businesses (hereinafter referred to as "venture business") or a technology innovation-oriented small and medium enterprise or a management innovation-oriented small and medium enterprise under the Act on the Promotion of Technology Innovation of Small and Medium Enterprises, which does not fall under paragraph (1) 2;
2. A small and medium enterprise defined in Article 2 of the Framework Act on Small and Medium Enterprises, which meets both of the following requirements:
(a) The small and medium enterprise shall engage in any business eligible for investment under Article 10 (1) 5 of the Support for Small and Medium Enterprise Establishment Act and related to any of the areas prescribed and publicly notified by the Financial Services Commission;
(b) Where the small and medium enterprise engages in the business referred to in item (a) jointly with at least one enterprises (including enterprises other not small and medium enterprises), it shall meet the criteria prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
PART II FINANCIAL INVESTMENT BUSINESSES
CHAPTER I AUTHORIZATION AND REGISTRATION OF FINANCIAL INVESTMENT BUSINESSES
SECTION 1 Requirements and Procedures for Authorization
 Article 15 (Authorized Business Units, etc.)
(1) "Business units defined by Presidential Decree" in the main sentence of Article 12 (1) of the Act means units defined in attached Table 1.
(2) "Instruments prescribed by Presidential Decree" among the securities included in the scope of financial investment instruments in Article 12 (1) 2 of the Act means the following instruments:
1. Debt securities;
2. Local government bonds;
3. Special bonds under Article 4 (3) of the Act (hereinafter referred to as "special bonds");
4. Equity securities (excluding collective investment securities);
5. Listed stock certificates;
6. Collective investment securities;
7. Securities under Article 181 (1) 1.
(3) "Instruments prescribed by Presidential Decree" among the derivatives included in the scope of financial investment instruments in Article 12 (1) 2 of the Act means the following instruments:
1. Derivatives based on any underlying asset other than stocks;
2. Derivatives based on the underlying asset of a certain currency or interest rate.
 Article 16 (Requirements for Authorization, etc.)
(1) "Financial institution prescribed by Presidential Decree" in Article 12 (2) 1 (a) of the Act means any of the following financial institutions: <Amended by Presidential Decree No. 22493, Nov. 15, 2010; Presidential Decree No. 23496, Jan. 6, 2012; Presidential Decree No. 27556, Oct. 25, 2016>
1. The Korea Development Bank established under the Korea Development Bank Act;
2. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;
3. The Export-Import Bank of Korea established under the Export-Import Bank of Korea Act;
4. The National Agricultural Cooperative Federation and NongHyup Bank established under the Agricultural Cooperatives Act;
5. The National Federation of Fisheries Cooperatives and the Suhyup Bank established under the Fisheries Cooperatives Act;
6. Domestic branches of foreign banks established under the Banking Act;
7. Domestic branches of foreign insurance companies established under the Insurance Business Act;
8. Other financial institutions designated and publicly notified by the Financial Services Commission.
(2) Each foreign financial investment business entity prescribed in Article 12 (2) 1 (b) of the Act (hereinafter referred to as "foreign financial investment business entity") shall meet both of the following requirements:
1. It shall meet the requirements prescribed in subparagraph 4 (b) through (e) of attached Table 2;
2. Supervision over the foreign financial investment business entity by a supervisory agency in its home country shall be conducted in accordance with internationally recognized guidelines for supervision.
(3) "Amount prescribed by Presidential Decree" in Article 12 (2) 2 of the Act means the amount specified in attached Table 1.
(4) The business plan referred to in Article 12 (2) 3 of the Act shall meet each of the following requirements: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. The revenue and expenditure outlook shall be reasonable and feasible;
2. Deleted; <by Presidential Decree No. 22197, Jun. 11, 2010>
3. An appropriate internal control system shall be established for risk management and prevention of financial accidents;
4. An appropriate work process shall be established for protecting investors (in cases of authorization for investment trading business and investment brokerage business of collective investment securities, including purchase of an insurance for compensation for damage related to the trade and brokerage of the collective investment securities, in consideration of the adequacy of the relevant applicant's equity capital, etc.);
5. There shall be no possibility of violating any statute or undermining sound practices in financial transactions.
(5) Human resources, electronic computer systems and other physical facilities referred to in Article 12 (2) 4 of the Act shall meet each of the following requirements:
1. The applicant shall hire professionals to take charge of major tasks, who shall have expertise and demonstrate sound practices in the intended financial investment business, (referring to the professional for major tasks prescribed in Article 286 (1) 3 of the Act; hereinafter the same shall apply) and adequate human resources required for performing its business, including operators of electronic computer systems;
2. The applicant shall have the following physical facilities, including electronic computer systems:
(a) Electronic computer systems and means of communications required for performing the intended financial investment business;
(b) Adequate space for business and office equipment, including an office;
(c) Security facilities for protecting physical facilities, including electronic computer systems, safely;
(d) Supplementary facilities required for maintaining the continuity of business in the event of power failure, fire, etc.
(6) Every major shareholder (referring to major shareholders prescribed in Article 12 (2) 6 (a) of the Act; hereafter the same shall apply in this Chapter) shall meet the requirements provided in attached Table 2: Provided, That the Financial Services Commission may publicly notify relaxed requirements applicable in any of the following cases: <Amended by Presidential Decree No. 27414, Jul. 28, 2016>
1. Where a person referred to in any subparagraph of Article 8 (9) of the Act desires to obtain authorization for financial investment business;
2. Where a financial investment business entity is merged with another company, splits off or is merged after split-off.
(7) "Person prescribed by Presidential Decree" in Article 12 (2) 6 (a) of the Act means any of the following persons: Provided, That a person prescribed in subparagraph 1 is excluded herefrom in circumstances prescribed and publicly notified by the Financial Services Commission, in consideration of the nature of the corporation and other factors:
1. The largest shareholder of the corporation that is the largest shareholder itself (including a person who has de facto control, where such person who has de facto control over the corporation that is the largest shareholder is clearly distinct from the largest shareholder of the corporation);
2. The representative of the corporation that is the largest shareholder.
(8) "Good financial standing and social credibility prescribed by Presidential Decree" in Article 12 (2) 6-2 of the Act means the conditions as classified in the following: <Newly Inserted by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 24655, Jul. 5, 2013; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27414, Jul. 28, 2016>
1. Good financial standing: Financial standing that can meet the guidelines for soundness in business management referred to in Article 31 of the Act (referring to the guidelines prescribed by the relevant statutes for soundness in business management, if the entity is a concurrently-run financial investment business entity);
2. Social credibility: Each of the following requirements shall be met: Provided, That violations, etc. deemed minor are excluded herefrom:
(a) The applicant shall not have been subject to a fine or heavier criminal punishment for a violation of any of the statutes set forth in Article 5 of the Enforcement Decree of the Act on Corporate Governance of Financial Companies (hereinafter referred to as "finance-related statutes"), the Monopoly Regulation and Fair Trade Act or the Punishment of Tax Offenses Act for the recent three years: Provided, That where the applicant is punished under the joint penalty provisions prescribed in Article 448 of the Act or other relevant statutes shall be excluded herefrom;
(b) The applicant shall not have undermined sound practices in credit transactions due to default, etc., for the recent three years;
(c) The applicant shall not be designated as an insolvent financial institution in accordance with the Act on the Structural Improvement of the Financial Industry, or shall not be subject to the revocation of permission, authorization, registration, etc. of business in accordance with the finance-related statutes, for the recent five years;
(d) The period classified below shall have passed after the applicant was subject to the closure of its branch or any other business place, or any measure heavier than complete or partial suspension of its business (including administrative disposition equivalent thereto; hereafter the same shall apply in this item) imposed by the Financial Services Commission or other foreign financial supervisory authorities in accordance with the finance-related statutes or finance-related statutes of a foreign country (referring to foreign finance-related statutes corresponding to the finance-related statutes):
(i) Complete suspension of business: Three years after the suspension of business is terminated;
(ii) Partial suspension of business: Two years after the suspension of business is terminated;
(iii) Closure of a branch or any other business place or complete or partial suspension of the business thereof: One year after the relevant measure is imposed.
(9) The system for preventing conflicts of interest referred to in Article 12 (2) 7 of the Act (hereafter referred to as "system for preventing conflicts of interest" in this Section) shall meet both of the following requirements: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 27414, Jul. 28, 2016>
1. Appropriate internal control guidelines (referring to internal control guidelines prescribed in Article 24 (1) of the Act on Corporate Governance of Financial Companies; hereinafter the same shall apply) shall be established for identifying, assessing and managing the likelihood of conflicts of interest in accordance with Article 44 of the Act;
2. An appropriate system shall be established for preventing acts prescribed in the subparagraphs of Article 45 (1) and (2) of the Act.
(10) Where a foreign financial investment business entity, a foreign bank under the Banking Act, or a foreign insurance company under the Insurance Business Act (hereafter referred to as "foreign financial investment business entity, etc." in this paragraph) establishes a branch office or any other business office (hereafter referred to as "branch office, etc." in this paragraph) in Korea to run financial investment business, all of such branch offices, etc. shall be deemed a single financial investment business entity pursuant to Article 12 (3) of the Act. In such cases, a foreign financial investment business entity, etc. shall submit relevant documents to the Financial Services Commission by the method prescribed and publicly notified by the Financial Services Commission, when it intends to establish a branch office, etc. additionally in Korea to run financial investment business. <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 22493, Nov. 15, 2010>
(11) Detailed criteria necessary in connection with the requirements for authorization provided for in paragraphs (2), (4) through (6), and (8) through (10) shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 22197, Jun. 11, 2010>
 Article 17 (Method, Procedures, etc. for Authorization)
(1) Each application for authorization to be filed with the Financial Services Commission under Article 13 (1) of the Act shall contain the following:
1. Trade name;
2. Locations of the head office, branch offices and other business offices;
3. Matters concerning executive officers;
4. Matters concerning the intended business unit requiring authorization (referring to business units requiring authorization under Article 12 (1) of the Act; hereinafter the same shall apply);
5. Matters concerning financial standing, including equity capital;
6. Matters concerning the business plan;
7. Matters concerning human resources and physical facilities, including electronic computer systems;
8. Matters concerning major shareholders or a foreign financial investment business entity;
9. Matters concerning the system for preventing conflicts of interest;
10. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for examining the requirements for authorization.
(2) The application for authorization referred to in paragraph (1) shall be accompanied by the following:
1. Articles of incorporation (including an equivalent document);
2. Documents evidencing the decision made on incorporation or the application for authorization, such as minutes of the general meeting of promoters, the inaugural general meeting of shareholders, or a directors' meeting;
3. Documents stating the locations and names of the head office, branch offices and other business offices;
4. Resumes and certificates of work experience of executive officers;
5. Documents stating the type and work process of the business unit requiring authorization;
6. Financial statements and supplementary schedules for the most recent three business years (a corporation in the process of incorporation is exempted from providing these statements; and a corporation shall submit financial statements and supplementary schedules for the business years since the date of incorporation, if three business years have not passed since its incorporation);
7. Business plans (including estimated financial statements) and a statement on estimated revenue and expenditure for three business years after the commencement of business;
8. Documents substantiating the status of human resources, physical facilities, etc.;
9. Documents stating the names or trade names of shareholders who hold not less than one percent of the total number of outstanding stocks as of the date of filing of the application for authorization (or as of the end of the most recent business year, if the application for authorization is filed to add a business unit requiring authorization or is filed by a concurrently-run financial investment entity) and the number of stocks held by each of such shareholders;
10. Documents substantiating that major shareholders or a foreign financial investment business entity meets the requirements prescribed in the items of Article 12 (2) 6 of the Act;
11. Documents substantiating that the system for preventing conflicts of interest has been established;
12. Other documents prescribed and publicly notified by the Financial Services Commission, as necessary for examining the requirements for authorization.
(3) Where a person has filed an application for preliminary authorization under Article 14 of the Act and there is no change in the application or accompanying documents that have been pre-filed, the person may omit to state some of descriptions in an application for authorization required under paragraph (1), manifesting his/her intent to incorporate the former application into the later application by referring to the former application, or may choose not to submit some of the accompanying documents referred to in paragraph (2) when filing an application for authorization for financial investment business.
(4) Upon receipt of an application for authorization filed under paragraph (1), the Financial Services Commission shall verify the corporation registration certificate by sharing administrative information under Article 36 (1) of the Electronic Government Act. <Amended by Presidential Decree No. 22151, May 4, 2010; Presidential Decree No. 22467, Nov. 2, 2010>
(5) Upon receipt of an application for authorization filed under paragraph (1), the Financial Services Commission shall ascertain that the contents of the application for authorization for financial investment business are true, and examine whether the contents of the application meet the requirements for authorization prescribed in Article 12 (2) of the Act, in consideration of the opinions collected from interested parties.
(6) The Financial Services Commission shall conduct an on-site investigation by interviewing interested parties, promoters, or executive officers, if necessary to examine the contents of an application for authorization for financial investment business in accordance with paragraph (5).
(7) The Financial Services Commission shall issue public notice of the applicant, date of filing, contents of the application, method and time period for presenting opinions on its website or by other means to collect opinions from interested parties, etc. in relation to the contents of the application for authorization for financial investment business in accordance with paragraph (5).
(8) The Financial Services Commission shall notify an applicant for authorization for financial investment business of an opinion considered unfavorable to the applicant, if any, among the opinions filed in accordance with paragraph (7), and may require the applicant to vindicate him/her within a given period.
(9) The Financial Services Commission may hold a public hearing, if granting authorization for financial investment business is likely to affect significantly the financial market or it is deemed necessary otherwise.
(10) A person authorized to engage in financial investment business under Article 13 (2) of the Act shall begin the business within six months from the date the authorization is granted: Provided, That if such period is otherwise set by the Financial Services Commission or such period is extended at the request of the person authorized to engage in financial investment business, the person may begin the authorized business within the period otherwise set or extended.
(11) The Financial Services Commission shall ensure that conditions it has imposed on the authorization for financial investment business are fulfilled.
(12) Except as specifically provided in paragraphs (1) through (11), filing an application for authorization for financial investment business; examination of the application; the form of the application; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 18 (Preliminary Authorization)
(1) A person who intends to apply for a preliminary authorization under Article 14 (1) of the Act shall file an application for preliminary authorization, which shall contain the descriptions referred to in the subparagraphs of Article 17 (1), with the Financial Services Commission.
(2) An application for preliminary authorization filed under paragraph (1) shall be accompanied by the following: <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
1. Articles of incorporation or proposed articles of incorporation (including equivalent documents);
2. Documents evidencing the decision made on incorporation or the application for authorization, such as minutes of the general meeting of promoters, the inaugural general meeting of shareholders, or a directors' meeting;
3. Resumes and certificates of work experience of executive officers (including electees as executive officers);
4. Documents stating the type and work process of the business unit requiring authorization;
5. Financial statements and supplementary schedules for the most recent three business years (a corporation in the process of incorporation is exempted from providing these statements; and a corporation shall submit financial statements and supplementary schedules for the business years since the date of incorporation, if three years have not passed since its incorporation);
6. Business plans (including estimated financial statements) and a statement on estimated revenue and expenditure for three business years after the commencement of business;
7. Documents substantiating the status of human resources, physical facilities, etc. (including human resources and physical facilities that will be employed or purchased);
8. Documents stating the names or trade names of shareholders who hold not less than one percent of the total number of outstanding stocks as of the date the application is filed for preliminary authorization (or as of the end of the most recent business year, if the application for preliminary authorization is filed to add a business unit requiring authorization or is filed by a concurrently-run financial investment entity) and the number of stocks held by each of such shareholders;
9. Documents substantiating that major shareholders or a foreign financial investment business entity meets the requirements prescribed in the items of Article 12 (2) 6 of the Act;
10. Documents substantiating that the system for preventing conflicts of interest has been or can be established;
11. Other documents prescribed and publicly notified by the Financial Services Commission, as necessary for examining the requirements for preliminary authorization.
(3) Article 17 (4) through 9 shall apply mutatis mutandis to the methods and procedures for the examination of applications for preliminary authorization filed under Article 14 (1) of the Act. In such cases, "authorization for financial investment business" shall be construed as "preliminary authorization."
(4) Each person granted preliminary authorization under Article 14 (2) of the Act shall file an application for authorization for financial investment business under Article 12 of the Act (hereafter referred to as "final authorization" in this paragraph) upon fulfilling the terms and conditions of the preliminary authorization within six months from the date the preliminary authorization was granted: Provided, That if the Financial Services Commission otherwise sets the deadline for filing an application for final authorization as at time it grants preliminary authorization, or extends the deadline for filing application for final authorization at the request of the person granted the preliminary authorization, the person may file an application for final authorization within such deadline otherwise set or extended.
(5) Except as otherwise provided for in paragraphs (1) through (4), filing an application for preliminary authorization; examination of the application; the form of the application for preliminary authorization; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 19 (Relaxed Requirements for Maintenance of Authorization)
(1) "Relaxed requirements prescribed by Presidential Decree" in Article 15 of the Act means the following requirements: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 28040, May 8, 2017>
1. For the purposes of Article 12 (2) 2 of the Act: Every person granted authorization shall maintain at least 70 percent of the minimum equity capital set for each authorized business unit in attached Table 1. In such cases, the requirements for maintaining the authorization shall apply as of the end of each fiscal year; and a financial investment business entity that fails to meet the requirements for maintaining the authorization as of the end of a specific fiscal year shall be deemed to meet such requirements for maintaining the authorization until the end of the following fiscal year;
2. For the purposes of Article 12 (2) 6 of the Act: Every person granted authorization shall continue to meet the requirements classified as follows:
(a) Where the major shareholder is any entity referred to in subparagraph 1 through 3 of attached Table 2, the person granted authorization shall continue to meet only the requirements prescribed in subparagraph 1 (e) (i) and (iii) of attached Table 2. In such cases, "for the preceding five years" in subparagraph 1 (e) (i) of attached Table 2 shall be construed as "for the preceding five years for the largest shareholder"; and "fine" as "fine of 500 million won";
(b) Where the major shareholder is any entity referred to in subparagraph 4 or 5 (d) of attached Table 2, the person granted authorization shall continue to meet only the requirements prescribed in subparagraphs 1 (e) (i) and (iii) and 4 (d) of attached Table 2. In such cases, "for the preceding five years" in subparagraph 1 (e) (i) of attached Table 2 shall be construed as "for the preceding five years for the largest shareholder"; "fine" as "fine of 500 million won"; "for the preceding three years" in subparagraph 4 (d) in attached Table 2 as "for the preceding three years for the largest shareholder"; and "fact that it has ever been subject to any criminal punishment equivalent to or heavier than a sentence of fine" as "fact that it has ever been subject to criminal punishment equivalent to the punishment by a fine of 500 million won";
(c) Where the major shareholder is any entity referred to in subparagraph 5 (excluding item (d)) of attached Table 2, the person granted authorization shall continue to meet only the requirements prescribed in subparagraph 1 (e) (i) and (iii) of attached Table 2. In such cases, "for the preceding five years" in subparagraph 1 (e) (i) of attached Table 2 shall be construed as "for the preceding five years for the largest shareholder"; and "fine" as "fine of 500 million won";
(d) Where the person granted authorization is a foreign financial investment business entity referred to in Article 12 (2) 6 (b) of the Act, the person shall continue to meet only the requirements prescribed in item (b) of this subparagraph. In such cases, "largest shareholder" shall be construed as "foreign financial investment business entity."
(2) Where any subparagraph of Article 16 (6) is applicable, the Financial Services Commission may relax the requirements prescribed in the items of paragraph (1) 2 and publicly notify such relaxed requirements.
 Article 19-2 (Mitigation of Requirements for Revision to Authorization)
"Mitigated requirements prescribed by Presidential Decree" in Article 16 (2) of the Act means the requirements under the following classifications: <Amended by Presidential Decree No. 28040, May 8, 2017>
1. Where a major shareholder falls under any of subparagraphs 1 through 3 of attached Table 2: The major shareholder shall meet the requirements under subparagraphs 1 (d) and 1 (e) (i) and (iii) of attached Table 2. In such cases, in subparagraph 1 (e) (i) of the same Table, "for the last five years" shall be construed as "the largest shareholder for the last five years," and "punishment of a fine" as "punishment of a fine of 500 million won";
2. Where a major shareholder falls under subparagraph 4 or 5 (d) of attached Table 2: The major shareholder shall meet the requirements under subparagraphs 1 (e) (i) and (iii) and 4 (d) of attached Table 2. In such cases, in subparagraph (e) (i) of the same Table, "for the last five years" shall be construed as "the largest shareholder for the last five years," and "punishment of a fine" as "punishment of a fine of 500 million won," in subparagraph 4 (d) of the same Table, "for the last three years" as "the largest shareholder for the last three years," and "fact that it has ever been subject to any criminal punishment equivalent to or heavier than a sentence of fine" as "fact that it has ever been subject to criminal punishment equivalent to or heavier than the punishment by a fine of 500 million won";
3. Where a major shareholder falls under subparagraph 5 (excluding item (d)) of attached Table 2: The major shareholder shall meet the requirements under subparagraph 1 (e) (i) and (iii). In such cases, in subparagraph 1 (e) (i) of the same Table, "for the last five years" shall be deemed "the largest shareholder for the last five years", and "punishment of a fine" shall be deemed "punishment of a fine of 500 million won";
4. In cases of a foreign financial investment business entity under Article 12 (2) 6 (b) of the Act: The foreign financial investment business entity shall meet the requirements under subparagraph 2 only. In such cases, "the largest shareholder" shall be deemed "foreign financial investment business entity," respectively.
[This Article Newly Inserted by Presidential Decree No. 22197, Jun. 11, 2010]
SECTION 2 Prerequisites and Procedures for Registration
 Article 20 (Registered Business Units)
(1) "Business units defined by Presidential Decree" in the main sentence of Article 18 (1) of the Act means the business units defined in attached Table 3.
(2) "Assets for investment prescribed by Presidential Decree" in Article 18 (1) 2 of the Act means assets falling under the subparagraphs of Article 6-2. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013>
 Article 21 (Requirements, etc. for Registration)
(1) "Financial institution prescribed by Presidential Decree" in Article 18 (2) 1 (a) of the Act means any of the following financial institutions: <Newly Inserted by Presidential Decree No. 23285, Nov. 4, 2011; Presidential Decree No. 26600, Oct. 23, 2015>
1. The Korea Development Bank established under the Korea Development Bank Act;
2. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;
3. The Export-Import Bank of Korea established under the Export-Import Bank of Korea Act;
4. The NongHyup Bank established under the Agricultural Cooperatives Act;
5. Credit business sector deemed a bank under Article 5 of the Banking Act;
6. Other financial institutions prescribed and publicly notified by the Financial Services Commission where it is unlikely to undermine the protection of investors and sound practices in financial transactions.
(2) "Amount prescribed by Presidential Decree" in Article 18 (2) 2 of the Act means the amount specified in attached Table 3. <Amended by Presidential Decree No. 23285, Nov. 4, 2011>
(3) "Number prescribed by Presidential Decree" in Article 18 (2) 3 (a) of the Act means one full-time executive officer and/or employee: Provided, That it means four full-time executive officers and/or employees, where a merchant bank (limited to a merchant bank newly established or surviving a merger with authorization under Article 4 of the Act on the Structural Improvement of the Financial Industry) is involved. <Amended by Presidential Decree No. 23285, Nov. 4, 2011>
(4) "Number prescribed by Presidential Decree" in Article 18 (2) 3 (b) of the Act means two full-time executive officers and/or employees. <Amended by Presidential Decree No. 23285, Nov. 4, 2011>
(5) "Social credibility prescribed by Presidential Decree" in Article 18 (2) 5 (a) of the Act means the following requirements: <Amended by Presidential Decree No. 23285, Nov. 4, 2011>
1. Where a major shareholder is any entity referred to in subparagraphs 1 through 3 and 5 (excluding item (d)) of attached Table 2, the requirements prescribed in subparagraph 1 (e) of attached Table 2 shall be fulfilled: Provided, That the Financial Services Commission may otherwise prescribe and publicly notify such requirements where a person granted authorization to engage in financial investment business under Article 12 of the Act intends to have his/her financial investment business registered;
2. Where a major shareholder is any entity referred to in subparagraph 4 or 5 (d) of attached Table 2, the requirements prescribed in subparagraph 4 (a), (d), and (e) of attached Table 2. In such cases, "authorization" in subparagraph 4 (a) of the same Table shall be construed as "registration"; and "that intends to obtain authorization" as "that intends to be registered."
(6) "Social credibility prescribed by Presidential Decree" in Article 18 (2) 5 (b) of the Act means the requirements prescribed in subparagraph 4 (a), (d), and (e) of attached Table 2. In such cases, "authorization" in subparagraph 4 (a) of the same Table shall be construed as "registration"; "that intends to obtain authorization" as "that intends to be registered"; and "three years" in item (d) of the same subparagraph as "two years." <Amended by Presidential Decree No. 23285, Nov. 4, 2011>
(7) "Good financial standing and social credibility prescribed by Presidential Decree" in Article 18 (2) 5-2 of the Act means the matters prescribed in Article 16 (8). <Newly Inserted by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 23285, Nov. 4, 2011>
(8) The system for preventing conflicts of interest referred to in Article 18 (2) 6 of the Act (hereafter referred to as "system for preventing conflicts of interest" in this Section) shall meet the following requirements: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 23285, Nov. 4, 2011>
1. Appropriate internal control guidelines shall be prepared for identifying, assessing and managing the likelihood of conflicts of interest in accordance with Article 44 of the Act;
2. An appropriate system shall be established for preventing acts prescribed in the subparagraphs of Article 45 (1) and (2) of the Act.
(9) Detailed criteria necessary in connection with the requirements for registration provided in paragraphs (5) through (8) shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree 22197, Jun. 11, 2010; Presidential Decree No. 23285, Nov. 4, 2011>
 Article 22 (Method, Procedures, etc. for Registration)
(1) Each application for registration to be filed with the Financial Services Commission under Article 19 (1) of the Act shall contain the following:
1. Trade name;
2. Location of the head office;
3. Matters concerning executive officers;
4. Matters concerning the intended business unit requiring registration (referring to the business units requiring registration under Article 18 (1) of the Act; hereinafter the same shall apply);
5. Matters concerning financial standing, including equity capital;
6. Matters concerning investment advisors prescribed in Article 286 (1) 3 (a) of the Act (hereinafter referred to as "investment advisor") or fund managers prescribed in Article 286 (1) 3 (c) of the Act (hereinafter referred to as "fund manager");
7. Matters concerning major shareholders, a foreign investment advisory business entity, or a foreign discretionary investment business entity;
8. Matters concerning a system for preventing conflicts of interest;
9. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for examining registration.
(2) The application for registration referred to in paragraph (1) shall be accompanied by the following:
1. Articles of incorporation (including an equivalent document);
2. A document stating the location and name of the head office;
3. Resumes and certificates of work experience of executive officers;
4. Documents stating the type and work process of the business unit requiring registration;
5. Financial statements and supplementary schedules for the most recent three business years (a corporation in the process of incorporation is exempted from providing these statements; and a corporation shall submit financial statements and supplementary schedules for the business years since the date of incorporation, if three business years have yet passed since its incorporation);
6. Documents substantiating the status of investment advisors or fund managers;
7. Documents stating the names or trade names of major shareholders as of the date of filing of the application for registration (or as of the end of the most recent business year, if the application for registration is filed to add a business unit requiring registration or is filed by a concurrently-run financial investment entity) and the number of stocks held by each of such shareholders;
8. Documents substantiating that major shareholders, a foreign investment advisory business entity, or a foreign discretionary investment business entity meets the requirements prescribed in the items of Article 18 (2) 5 of the Act;
9. Documents substantiating that the system for preventing conflicts of interest has been established;
10. Other documents prescribed and publicly notified by the Financial Services Commission, as necessary for examining the requirements for registration.
(3) Upon receipt of an application for registration filed under paragraph (1), the Financial Services Commission shall verify the corporation registration certificate by sharing administrative information under Article 36 (1) of the Electronic Government Act. <Amended by Presidential Decree No. 22151, May 4, 2010; Presidential Decree No. 22467, Nov. 2, 2010>
(4) Upon receipt of an application for registration filed under paragraph (1), the Financial Services Commission ascertain that the contents of the application for registration of financial investment business are true, and examine whether the contents of the application meet the requirements for registration prescribed in Article 18 (2) of the Act.
(5) Except as specifically provided in paragraphs (1) through (4), filing an application for registration of financial investment business; examination of the application; the form of the application; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 23 (Relaxed Requirements for Maintenance of Registration)
"Relaxed requirements prescribed by Presidential Decree" in Article 20 of the Act means the following: <Amended by Presidential Decree No. 28040, May 8, 2017>
1. For the purposes of Article 18 (2) 2 of the Act: Every registrant shall maintain at least 70 percent of the minimum equity capital for each business unit requiring registration prescribed in attached Table 3. In such cases, the requirements for maintaining the registration shall apply as of the end of each fiscal year; and a financial investment business entity that fails to meet the requirements for maintaining the registration as of the end of a specific fiscal year shall be deemed to meet such requirements for maintaining the registration until the end of the following fiscal year;
2. For purposes of Article 18 (2) 5 of the Act: Every registrant shall continue to meet the requirements classified as follows:
(a) Where the major shareholder is any entity referred to in subparagraphs 1 through 3 or 5 (excluding item (d)) of attached Table 2, the registrant shall continue to meet only the requirements prescribed in subparagraph 1 (e) (i) and (iii) of attached Table 2. In such cases, "for the preceding five years" in subparagraph 1 (e) (i) of the same Table shall be construed as "for the preceding five years for the largest shareholder"; and "fine" as "fine of 500 million won";
(b) Where the major shareholder is any entity referred to in subparagraph 4 or 5 (d) of attached Table 2, the registrant shall continue to meet only the requirements prescribed in subparagraph 1 (e) (i) and (iii) and 4 (d) of attached Table 2. In such cases, "for the preceding five years" in subparagraph 1 (e) (i) of the same Table shall be construed as "for the preceding five years for the largest shareholder"; "fine" as "fine of 500 million won"; "for the preceding three years" in subparagraph 4 (d) in the same Table as "for the preceding three years for the largest shareholder"; and "fact that it has ever been subject to any criminal punishment equivalent to or heavier than a sentence of fine" in the aforesaid item as "fact that it has ever been subject to the punishment by fine of 500 million won;
(c) Where the registrant is a foreign investment advisory business entity or a foreign discretionary investment business entity referred to in Article 18 (2) 5 (b) of the Act, it shall continue to meet only the requirements prescribed in item (b) of this subparagraph. In such cases, "three years" in subparagraph 4 (d) of attached Table 2 shall be construed as "two years". In such cases, "largest shareholder" shall be construed as "foreign investment advisory business entity or foreign discretionary investment business entity"; and "three years" in subparagraph 4 (d) of attached Table 2 as "two years."
 Article 23-2 (Mitigation of Requirements for Revision to Registration)
"Mitigated requirements prescribed by Presidential Decree" in Article 21 (2) of the Act means the requirements under the classification falling under each item of subparagraph 2 of Article 23.
[This Article Newly Inserted by Presidential Decree No. 22197, Jun. 11, 2010]
CHAPTER II GOVERNANCE OF FINANCIAL INVESTMENT BUSINESS ENTITY
 Article 24 [Previous Article 24 Moved to Article 7-2]
 Articles 25 through 32 Deleted. <by Presidential Decree No. 27414, Jul. 28, 2016>
 Article 32-2 (Person in Charge of Derivatives Business)
(1) "Financial investment business entity prescribed by Presidential Decree" in Article 28-2 (1) of the Act means any of the following:
1. A person who engages in the business of investment trading or brokerage of exchange-traded derivatives and has the total amount of assets of at least ten million won as of the end of the most recent business year;
2. A person who engages in the business of investment trading or brokerage of over-the-counter derivatives.
(2) "Person in charge of derivatives business prescribed by Presidential Decree" in Article 28-2 (1) of the Act means one who supervises the derivatives-related business of a financial investment business entity and is none of the persons provided in the subparagraphs of Article 5 (1) of the Act on Corporate Governance of Financial Companies. <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27414, Jul. 28, 2016>
[This Article Newly Inserted by Presidential Decree No. 21611, Jul. 1, 2009]
 Article 33 Deleted. <by Presidential Decree No. 27414, Jul. 28, 2016>
CHAPTER III MAINTENANCE OF SOUND MANAGEMENT
SECTION 1 Supervision over Soundness in Business Management
 Article 34 (Maintenance, etc. of Financial Soundness)
(1) "Financial investment business entities prescribed by Presidential Decree" in the main sentence of Article 30 (1) of the Act means any of the following financial investment business entities: <Amended by Presidential Decree No. 25843, Dec. 9, 2014>
1. Investment advisory business entities or discretionary investment business entities (limited to where it runs no other financial investment business);
2. Collective investment business entities (excluding entities that run investment trading business or investment brokerage business regarding financial investment instruments other than collective investment securities);
3. Deleted. <by Presidential Decree No. 25843, Dec. 9, 2014>
(2) "Period prescribed by Presidential Decree" in Article 30 (3) of the Act means 45 days. <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
 Article 35 (Guidelines for Soundness in Business Management)
(1) "Matters prescribed by Presidential Decree" in Article 31 (1) 4 of the Act means the following:
1. Matters concerning risk management;
2. Matters concerning soundness in foreign exchange;
3. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for ensuring soundness in business management.
(2) "Financial investment business entities prescribed by Presidential Decree" in the proviso to Article 31 (3) of the Act means any of the following entities: <Newly Inserted by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 25843, Dec. 9, 2014>
1. Any financial investment business entity, other than the following, in the case of assessment of the status of business management:
(a) An alternative trading system;
(b) An interdealer broker prescribed in Article 179 (limited to where an interdealer broker runs no other financial investment business);
(c) An investment advisory business entity or discretionary investment business entity (limited to where an interdealer broker runs no other financial investment business);
(d) Branch offices and other business offices of a foreign financial investment business entity;
(e) A collective investment business entity (excluding any entity that runs investment trading business or investment brokerage business concerning financial investment instruments other than collective investment securities);
2. A financial investment business entity meeting both of the following criteria in the case of risk assessment:
(a) An entity whose total amount of assets shall not be less than ten million won as of the end of the recent business year (referring to the amount computed by subtracting the investors’ deposit from the total assets on the balance sheet);
(b) An entity that shall run investment trading business for over-the-counter derivatives or investment trading business for securities (limited to a person who runs underwriting business).
 Article 36 (Deadline, etc. for Submission of Business Reports)
(1) "Period prescribed by Presidential Decree" in Article 33 (1) of the Act means 45 days. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(2) "Event, as prescribed by Presidential Decree" in Article 33 (3) of the Act means the following events: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015>
1. In the case of investment trading business or investment brokerage business:
(a) Where a financial incident or non-performing claim occurs;
(b) Where a timely corrective measure is issued under Article 10 of the Act on the Structural Improvement of the Financial Industry;
(c) Where any event prescribed in any subparagraph of Article 161 (1) of the Act occurs (applicable only to a financial investment business entity that need not submit a business report under Article 159 (1) of the Act);
(d) Where the relevant corporation or any of its executive officers and/or employees has been subject to criminal punishment in connection with the operation of investment trading business or investment brokerage business;
(e) Where it fails to settle payments with a securities market (including trading via an alternative trading system), derivatives market, etc.;
(f) Where there is any other cause or event prescribed and publicly notified by the Financial Services Commission;
2. In the case of collective investment business:
(a) Where any provision of subparagraph 1 (a) through (c) applies to it: Provided, That matters prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors and sound trading practices shall be excluded herefrom;
(b) Where the relevant corporation or any of its executive officers and/or employees has been subject to criminal punishment in connection with the operation of collective investment business;
(c) Where there is any other cause or event prescribed and publicly notified by the Financial Services Commission;
3. In the case of investment advisory business or discretionary investment business:
(a) Where any provision of subparagraph 1 (a) through (c) applies to it;
(b) Where the relevant corporation or any of its executive officers and/or employees has been subject to criminal punishment in connection with the operation of investment advisory business or discretionary investment business;
(c) Where there is any other cause or event prescribed and publicly notified by the Financial Services Commission;
4. In the case of trust business:
(a) Where any provision of subparagraph 1 (a) through (c) applies to it;
(b) Where the relevant corporation or any of its executive officers and/or employees has been subject to criminal punishment in connection with the operation of trust business;
(c) Where the contractor or the trustor defaults on a payment for any cheque or bill, or its banking transactions are suspended or banned;
(d) Where there is any other cause or event prescribed and publicly notified by the Financial Services Commission.
(3) Each business report prepared under Article 33 (1) of the Act (hereinafter referred to as "quarterly business report") and reports indicating monthly business affairs prepared under paragraph (4) of the same Article (hereinafter referred to as "monthly business report") shall contain the following matters: <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
1. An overview of the financial investment business entity;
2. Matters concerning the affairs of the business run by the financial investment business entity;
3. Matters concerning financial standing;
4. Matters concerning business operations;
5. Matters concerning the largest shareholder (including his/her related persons) and major shareholders;
6. Matters concerning transactions with related persons;
7. Matters concerning management of branch offices and other business offices and human resources;
8. Matters concerning the status and protection of investors' property;
9. Matters concerning details of trading of over-the-counter derivatives and other transactions and the status of transactions and valuation profit or loss (including valuation profit or loss from transactions for hedging risks of over-the-counter derivatives);
10. Details of measures taken by the Financial Services Commission, the Governor of the Financial Supervisory Service, or any other similar agency against the relevant financial investment business entity or any of its executive officers and/or employees during the most recent five years, if any;
11. Other matters prescribed and publicly notified by the Financial Services Commission in relation to the business operations and management of financial investment business entities.
(4) Documents disclosed to the public in accordance with Article 33 (2) of the Act shall contain the following matters:
1. Matters referred to in paragraph (3) 1 through 7;
2. Matters prescribed and publicly notified by the Financial Services Commission as those that shall be notified to investors.
(5) If any of the events prescribed in the subparagraphs of paragraph (2) occurs, each financial investment business entity shall report it to the Financial Services Commission by no later than the day immediately after such event occurs, and shall disclose it to the public on its website or by any similar means.
(6) If a financial investment business entity provides false information in disclosing material facts under Article 47 (3) of the Act (hereinafter referred to as "material fact") to the public among the facts that shall be disclosed to the public in accordance with Article 33 (2) or (3) of the Act; omits any material fact, or provides any false information, the Financial Services Commission may require the financial investment business entity to make a corrective public disclosure or reissue the public disclosure.
(7) Except as specifically provided in paragraphs (1) through (6), forms of the quarterly business reports, monthly business reports, documents for public disclosure, and the public disclosure of business management status; instructions to complete the forms; mandatory descriptions; and other detailed standards shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
SECTION 2 Restrictions, etc. on Trading with Major Shareholders
 Article 37 (Restrictions, etc. on Trading, etc. with Major Shareholders)
(1) "Circumstances prescribed by Presidential Decree" in the proviso to Article 34 (1) of the Act means any of the following cases: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 26600, Oct. 23, 2015>
1. Where any of the following events occurs when Article 34 (1) 1 of the Act applies:
(a) Where securities already held become securities issued by a major shareholder due to the change of a major shareholder;
(b) Where the securities in question are acquired in connection with underwriting;
(c) Where a financial institution, etc. permitted to engage in the business of guaranteeing corporate bonds in accordance with relevant statutes acquires the corporate bonds for which it guarantees the payment of principal and interest;
(d) Where special purpose bonds are acquired;
(e) Any other cause or event prescribed and publicly notified by the Financial Services Commission where it is unlikely to undermine a financial investment business entity's soundness in business management;
2. Where any of the following events occurs when Article 34 (1) 2 of the Act applies:
(a) Where stocks, bonds, or promissory notes prescribed in Article 34 (1) 2 of the Act (hereafter in this subparagraph referred to as "promissory notes") already owned become stocks, bonds, or promissory notes, issued by related persons as a consequence of the change of a related persons;
(b) Where any of the events prescribed in subparagraph 1 (b) through (e) occurs;
(c) Where stocks are acquired through contribution to capital prescribed and publicly notified by the Financial Services Commission, including where equity shares are acquired with intent to participate in the management rights of the company;
(d) Where stocks, bonds, or promissory notes are acquired with intent to conduct transactions prescribed and publicly notified by the Financial Services Commission, including arbitrage and transactions for hedging investment risks;
(e) Where the price of stocks, bonds, or promissory notes exceed the ratio prescribed in paragraph (3), due to a change in the equity capital referred to in paragraph (3) or price fluctuation of stocks, bonds, or promissory notes, issued by related persons;
(f) Where stocks are acquired with approval from the Financial Services Commission within the limit of 100 percent of equity capital to establish a foreign collective investment scheme;
(g) Any other cause or event prescribed and publicly notified by the Financial Services Commission where it is unlikely to undermine a financial investment business entity's soundness in business management.
(2) "Person prescribed by Presidential Decree" in the main sentence of Article 34 (1) 2 of the Act means an affiliated company.
(3) "Ratio prescribed by Presidential Decree" in the proviso to Article 34 (1) 2 of the Act means 8 percent of the equity capital prescribed and publicly notified by the Financial Services Commission.
(4) "Activity prescribed by Presidential Decree" in Article 34 (1) 3 of the Act means any of the following activities:
1. Trading under an unfavorable condition for the relevant financial investment business entity when it trades with any of its major shareholders or related persons, compared to trading with any party other than such major shareholder or related person;
2. Any of the following activities done with intent to avoid the restrictions prescribed in Article 34 (1) 1 or 2 of the Act or subparagraph 1 of this paragraph:
(a) Engaging in mutually cross-trading through a third party under an agreement or in collusion with a third party or in any other way;
(b) Using a transaction of over-the-counter derivatives, a trust contract, a linked transaction, etc.
 Article 38 (Limits on Credit Granting)
(1) "Trading prescribed by Presidential Decree" in the main sentence of Article 34 (2) of the Act means the following:
1. A transaction through which collateral is provided for a major shareholder (including his/her related persons; hereafter the same shall apply in this Article);
2. A transaction in which a bill is endorsed for a major shareholder (excluding endorsement without the effect of guarantee under Article 15 (1) of the Bills of Exchange and Promissory Notes Act);
3. A transaction promising to perform contribution to capital for a major shareholder;
4. A transaction lending money, securities, or any other property with economic value to a major shareholder, guaranteeing performance of obligations for a major shareholder, or purchasing securities for funding a major holder, or a transaction made with intent to avoid any of the restrictions on transactions prescribed in subparagraphs 1 through 3, which is any of the following:
(a) A transaction made by mutually cross-trading through a third party under an agreement or in collusion with a third party or in any other way;
(b) A transaction made by using a transaction of over-the-counter derivatives, a trust contract, a linked transaction, etc.;
5. Other transactions prescribed and publicly notified by the Financial Services Commission as accompanying credit risks, such as assumption of an obligation.
(2) "Credit grant prescribed by Presidential Decree" in the proviso to Article 34 (2) of the Act means any of the following: <Amended by Presidential Decree No. 27291, Jun. 28, 2016>
1. Granting credit to an executive officer within the limit of the smaller of either his/her annual salary (referring to the salary paid by the financial investment business entity during his/her period of service, which is subject to the income tax), or 100 million won;
2. Granting credit to an overseas local corporation prescribed and publicly notified by the Financial Services Commission;
3. Any of the following, if each of the activities constitutes the credit granting provided in the main sentence of Article 34 (2) of the Act:
(a) Where engaging in any activity prescribed in any subparagraph of Article 34 (1) of the Act because it is necessary to exercise a security right or any other right;
(b) Where engaging in any activity prescribed in any subparagraph of Article 34 (1) of the Act to manipulate stabilization as prescribed in Article 176 (3) 1 of the Act or to create a market as prescribed in subparagraph 2 of the aforesaid paragraph;
(c) Where any of the events or causes prescribed in the subparagraphs of Article 37 (1) occurs;
(d) Where holding stocks, bonds, or promissory notes (referring to promissory notes prescribed in Article 34 (1) 2 of the Act; hereafter the same shall also apply in Article 39) within the limit of the ratio specified in Article 37 (3): Provided, That holding securities issued by a major shareholder of a financial investment business entity shall be excluded herefrom.
 Article 39 (Transactions, etc. Requiring No Resolution by Board of Directors)
(1) "Act prescribed by Presidential Decree" in the former part of Article 34 (3) and Article 34 (4) of the Act means an act of owning or granting credit limited to the amount of a single transaction prescribed and publicly notified by the Financial Services Commission, which does not exceed a smaller of either the amount equivalent to 0.001 percent of the equity capital (referring to the equity capital prescribed in Article 37 (3)), or one billion won: Provided, That the amount of a transaction made routinely by the relevant financial investment business entity in accordance with terms and conditions as defined in Article 2 (1) of the Act on the Regulation of Terms and Conditions, shall be excluded from such amount of a single transaction.
(2) "Matters prescribed by Presidential Decree" in Article 34 (5) of the Act means the following matters:
1. Where stocks, bonds, or promissory notes are owned in accordance with the proviso to Article 34 (1) 2 of the Act:
(a) Amount of stocks, bonds, or promissory notes owned as of the end of each quarter year;
(b) Details of increase and decrease in stocks, bonds, or promissory notes during each quarter year;
(c) Acquisition price or disposal price;
(d) Other matters prescribed and publicly notified by the Financial Services Commission;
2. Where credit is granted in accordance with the proviso to Article 34 (2) of the Act:
(a) Amount of credit granted as of the end of each quarter year;
(b) Amount of increase and decrease in credit granted during each quarter year;
(c) Terms and conditions of credit granted;
(d) Other matters prescribed and publicly notified by the Financial Services Commission.
 Article 40 (Grounds for Restriction on Transactions with Major Shareholders)
"As specified further by Presidential Decree" in Article 34 (7) of the Act means any of the following cases: <Amended by Presidential Decree No. 21765, Oct. 1, 2009>
1. Where the liabilities of a major shareholder (applicable only to companies, but including specially related companies; hereafter the same shall apply in this Article) exceed its assets;
2. Where a major shareholder is assessed by two or more credit rating companies to non-investment grade.
 Article 41 (Scope of Exercise of Undue Influence)
"Act as specified further by Presidential Decree" in subparagraph 3 of Article 35 of the Act means any of the following acts:
1. Demanding a financial investment business entity to commit an illegal act;
2. Demanding a transaction to be made with a major shareholder him/ herself or a third party under any term or condition different from ordinary terms and conditions related to interest rates, fee, collateral, etc.;
3. Exercising influence in the course of preparing certain research and analysis data under subparagraph 2 of Article 71 of the Act (hereinafter referred to as "research and analysis data").
CHAPTER IV BUSINESS CONDUCT RULES
SECTION 1 Common Rules of Business Conduct
Subsection 1 Duty of Good Faith, etc.
 Article 42 (Restrictions on Trade Name)
(1) "Word as prescribed by Presidential Decree" in Article 38 (1) of the Act means "financial investment" (including its corresponding word in Korean language) or a word with any similar meaning in any other foreign language (including its corresponding word in Korea language). <Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009>
(2) "Word as specified further by Presidential Decree" in the main sentence of and the proviso to Article 38 (2) of the Act means "securities" (including its corresponding word in Korean language) or a word with any similar meaning in any other foreign language (including its corresponding word in Korean language) respectively. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(3) "Word as specified further by Presidential Decree" in Article 38 (3) of the Act means "derivatives" or "futures" (including its corresponding word in Korean language) or a word with any similar meaning in any other foreign language (including the corresponding word in Korean language), respectively. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(4) "Word as specified further by Presidential Decree" in the main sentence of Article 38 (4) of the Act means "collective investment", "pooled investment", "investment trust", "unit trust", or "asset management" (including its corresponding word in Korean language) or a word with any similar meaning in any other foreign language (including the corresponding word in Korean language), and "word as specified further by Presidential Decree" in the proviso to the aforesaid paragraph means "investment trust" (including its corresponding word in Korean language)" or a word with any similar meaning in any other foreign language (including the corresponding word in Korean language), respectively. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(5) "Word as specified further by Presidential Decree" in the main sentence of and the proviso to Article 38 (5) of the Act means "investment advisory" (including its corresponding word in Korean language) or a word with any similar meaning in any other foreign language (including the corresponding word in Korean language), respectively. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(6) "Word as specified further by Presidential Decree" in Article 38 (6) of the Act means "discretionary investment" (including its corresponding word in Korean language) or a word with any similar meaning in any other foreign language (including the corresponding word in Korean language), respectively. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(7) "Word as specified further by Presidential Decree" in the main sentence of and the proviso to Article 38 (7) of the Act means "trust" (including its corresponding word in Korean language) or a word with any similar meaning in any other foreign language (including the corresponding word in Korean language), respectively. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
 Article 43 (Business Scope of Financial Investment Business Entities)
(1) "Financial investment business entities prescribed by Presidential Decree" in the former part of Article 40 of the Act means the following financial investment business entities:
1. A financial investment business entity that does not operate investment trading business or investment brokerage business, when subparagraph 3 or 4 of Article 40 of the Act applies;
2. A financial investment business entity that operates any of the following financial investment business only, when subparagraph 5 of Article 40 of the Act applies:
(a) Investment advisory business;
(b) Discretionary investment business;
(c) Investment advisory business and discretionary investment business;
3. Other financial investment business entities prescribed and publicly notified by the Financial Services Commission.
(2) "Finance-related statutes prescribed by Presidential Decree" in subparagraph 1 of Article 40 of the Act means finance-related statutes. <Amended by Presidential Decree No. 27414, Jul. 28, 2016>
(3) "Financial business prescribed by Presidential Decree" in subparagraph 1 of Article 40 of the Act means the following: <Amended by Presidential Decree No. 21480, May 6, 2009>
1. Business of a fund accounting and administration company registered under Article 254 (8) of the Act (hereinafter referred to as "fund accounting and administration company");
2. Foreign exchange services and brokerage services of foreign exchange provided under the Foreign Exchange Transactions Act;
3. Deleted; <by Presidential Decree No. 21611, Jul. 1, 2009>
4. Business of a retirement pension business operator permitted under the Act on the Guarantee of Workers' Retirement Benefits;
5. Trust business for secured bonds provided in the Secured Bond Trust Act;
6. Business of an asset management company registered under the Real Estate Investment Company Act;
7. Business of a specialized corporate restructuring company registered under Article 14 of the Industrial Development Act (that was in force before being wholly amended by Act No. 9584, Apr. 1, 2009);
8. Business of a small and medium enterprise start-up investment company established under the Support for Small and Medium Enterprise Establishment Act;
9. New technology venture capital business conducted under the Specialized Credit Finance Business Act;
10. Other financial business prescribed and publicly notified by the Financial Services Commission where it is unlikely to undermine the protection of investors and sound trading practices.
(4) "Finance-related statutes prescribed by Presidential Decree" in subparagraph 2 of Article 40 of the Act means finance-related statutes. <Amended by Presidential Decree No. 27414, Jul. 28, 2016>
(5) "Financial business prescribed by Presidential Decree" in subparagraph 5 of Article 40 of the Act means any of the following financial business: Provided, That the business prescribed in subparagraph 4 shall apply only where the investment trading business is conducted for securities; the business prescribed in subparagraph 5 shall apply only where the investment trading business or investment brokerage business is conducted for the corresponding securities; the business prescribed in subparagraph 6 shall apply only where the investment trading business is conducted for securities and over-the-counter derivatives; and the business prescribed in subparagraph 7 or 8 shall apply only where the investment trading business or an investment brokerage business is conducted for debt securities:
1. Business of an asset manager and trustee's business of a specialized securitization company under the Asset-Backed Securitization Act;
2. Management of a third party's security interests in securities, money, etc. in investors' accounts;
3. Trustee's business for public offering of corporate bonds under Article 484 (1) of the Commercial Act;
4. Corporate finance affairs prescribed in subparagraph 3 of Article 71 of the Act and loan services related to other business prescribed and publicly notified by the Financial Services Commission;
5. Transactions borrowing and lending securities and acting as a broker, an intermediary or an agent for such transactions;
6. Guarantee of payment;
7. Trading negotiable certificates of deposit denominated in KRW and acting as a broker, an intermediary or an agent for such trading;
8. Trading loan receivables and other receivables and acting as a broker, an intermediary or an agent for such trading;
9. Acting as a broker, an intermediary or an agent for loans;
10. Other financial business prescribed and publicly notified by the Financial Services Commission where it is unlikely to undermine the protection of investors and sound trading practices.
(6) Matters necessary for the detailed scope of the business provided for in paragraph (5) 4 and 6 shall be prescribed and publicly notified by the Financial Services Commission. <Newly Inserted by Presidential Decree No. 26135, Mar. 3, 2015>
 Article 44 (Public Notice of Incidental Business)
(1) Pursuant to Article 41 (4) of the Act, the Financial Services Commission shall, when a financial investment business entity reports incidental business that it seeks to run, give public notice of the following matters through its website or by other means within seven days from the date the report is filed:
1. Name of the financial investment business entity;
2. Date of report on the incidental business;
3. Date scheduled for commencement of the incidental business;
4. Details of the incidental business;
5. Other matters prescribed and publicly notified by the Financial Services Commission.
(2) The Financial Services Commission shall, when it issues an order of restriction or correction under Article 41 (2) of the Act, give public notice of the details of and grounds for such order through its website or by other means.
 Article 45 (Scope of Affairs Prohibited to be Entrusted)
"Affairs prescribed by Presidential Decree" in the proviso to Article 42 (1) of the Act means the following affairs: Provided, That the affairs prescribed and publicly notified by the Financial Services Commission where it is unlikely to undermine investor protection and sound trading practices shall be excluded herefrom: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 23197, Sep. 30, 2011; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 26898, Jan. 12, 2016; Presidential Decree No. 27414, Jul. 28, 2016; Presidential Decree No. 28040, May 8, 2017>
1. The following affairs (applicable only where the authority to decide on the relevant affairs is entrusted):
(a) Affairs within the scope of works of a compliance officer prescribed in Article 25 (1) of the Act on Corporate Governance of Financial Companies (hereinafter referred to as "compliance officer"), except affairs prescribed and publicly notified by the Financial Services Commission;
(b) Internal audit;
(c) Risk management;
(d) Analysis and assessment of credit risks;
2. The following affairs, applicable depending upon the type of financial investment business:
(a) Where investment trading business is involved, the affairs referred to in Article 47 (1) 1 (a) (excluding simple tasks for opening accounts and verifying real names), (b), and (d);
(b) Where investment brokerage business is involved, the affairs referred to in Article 47 (1) 2 (a) (excluding simple tasks for opening accounts and verifying real names), and (c): Provided, That where crowdfunding brokerage (referring to engaging in the business of the online brokerage of small investment under Article 9 (27) of the Act; hereinafter the same shall apply) is involved, the affairs shall be limited to the conclusion and termination of contracts related to crowdfunding brokerage business (excluding the simple tasks for verifying real names);
(c) Where collective investment business is involved, the affairs referred to in items of Article 47 (1) 3 (limited to where the authority to make decisions on the relevant affairs is also entrusted): Provided, That the following shall be excluded herefrom:
(i) Management of, and instructions for the management of, foreign currency assets among the collective investment property (including the exercise of voting rights in relation to equity securities included in the collective investment property (including depositary receipts related to equity securities); hereafter the same shall apply in this item);
(ii) Management of, and instructions for the management of, assets denominated in KRW (referring to any assets, other than foreign currency assets; hereafter the same shall apply in this subparagraph) included in the collective investment property within 50 percent of the total value of such assets;
(iii) Research and analysis related to the management of, or instructions for the management of, the collective investment property;
(iv) Simple receipt of orders for trading securities, exchange-traded derivatives, or means of foreign payment under the Foreign Exchange Transactions Act included in the collective investment property;
(v) Assessment of the collective investment property (applicable only where the authority to make decisions on the relevant affairs is not entrusted);
(vi) Development, lease, operation, management and renovation of real estate included in the collective investment property; and affairs incidental thereto;
(d) Where investment advisory business is involved, the affairs referred to in Article 47 (1) 4 (a) and (b): Provided, That excluded herefrom are the service of providing judgment on investment of foreign currency assets included in the property under an investment advisory contract and the service of providing judgment on investment of assets denominated in KRW included in the property under an investment advisory contract within 50 percent of the total value of the property under an investment advisory contract;
(e) Where discretionary investment business is involved, the affairs referred to in Article 47 (1) 5 (a) and (b): Provided, That the following shall be excluded herefrom:
(i) Management of foreign currency assets among the discretionary investment property;
(ii) Management of assets denominated in KRW among the discretionary investment property within 50 percent of the total value of the property;
(iii) Research and analysis related to the management of the discretionary investment property;
(iv) Simple receipt of orders for trading securities included in the discretionary investment property, exchange-traded derivatives, or means of foreign payment under the Foreign Exchange Transactions Act;
(v) Development, lease, operation, management and renovation of real estate included in the discretionary investment property; and affairs incidental thereto;
(f) Where trust business is involved, the affairs referred to in Article 47 (1) 6 (a) through (d): Provided, That the following shall be excluded herefrom:
(i) Keeping in custody and management of securities, etc. to be deposited under Article 308 of the Act, or foreign currency assets included in the collective investment property or the trust property (including the management of, and the performance of instructions for management of, foreign currency assets included in the collective investment property);
(ii) Management of foreign currency assets included in the trust property (including the exercise of voting rights in relation to equity securities (including depositary receipts related to equity securities) included in the trust property; hereafter in this item the same shall apply);
(iii) Management of assets denominated in KRW included in the trust property within 20 percent of the total value of the trust property (applicable only where such affairs are entrusted to a financial investment business entity);
(iv) Research and analysis related to the management of the trust property;
(v) Simple receipt of orders for trading securities, exchange-traded derivatives, or means of foreign payment under the Foreign Exchange Transactions Act that belong to trust property;
(vi) Keeping in custody and management of investors' property of a hedge fund, etc. provided as the prime brokerage business.
 Article 46 (Reporting, etc. on Entrusted Affairs)
(1) Each financial investment business entity shall report entrusted affairs to the Financial Services Commission along with the following documents by no later than seven days before the person who are entrusted with the affairs pursuant to Article 42 (1) of the Act intends to perform such affairs: Provided, That in circumstances prescribed and publicly notified by the Financial Services Commission where reported matters are partially changed and the details thereof are insignificant, the Commission may prescribe and publicly notify the different time frame for reporting and accompanying documents: <Amended by Presidential Decree No. 21611, Jul. 1, 2009>
1. A copy of a contract for entrustment of business affairs;
2. Guidelines for the management of entrusted affairs established under Article 42 (7) of the Act (hereafter referred to as "guidelines for the management of entrusted affairs" in this paragraph);
3. A compliance officer's (referring to the auditor's or any other similar person's, if no compliance officer is appointed) review opinion that the contract for entrustment of business affairs neither fall under any subparagraph of Article 42 (3) of the Act nor violate the guidelines for the management of entrusted affairs and supporting materials;
4. A document certifying that the relevant financial investment business entity meets the requirements provided in Article 47 (2), if the essential affairs (referring to the essential affairs prescribed in Article 42 (4) of the Act) have been entrusted to the financial investment business entity in accordance with the latter part of Article 42 (4) of the Act;
5. Other documents prescribed and publicly notified by the Financial Services Commission, as necessary for protecting investors and sound trading practices.
(2) "Matters prescribed by Presidential Decree" in Article 42 (2) 4 of the Act means the following:
1. Matters concerning termination of contracts for entrustment of business affairs;
2. Matters concerning remuneration for entrustment;
3. Matters prescribed and publicly notified by the Financial Services Commission, including the system for preventing conflicts of interest arising from entrustment of affairs.
(3) To place a restriction or to issue a corrective order under Article 42 (3) of the Act, the Financial Services Commission shall give written notice stating the details of, and grounds for, such restriction or corrective order, to the relevant entity.
 Article 47 (Scope, etc. of Essential Affairs)
(1) "Affairs prescribed by Presidential Decree" in the former part of Article 42 (4) of the Act means the following affairs enumerated for each type of financial investment business: Provided, That the affairs related to the development, lease, management and renovation of real estate and the affairs incidental thereto among the affairs referred to in subparagraphs 3 (b) and 5 (b); the affairs related to the collection of receivables among the affairs referred to in subparagraph 6 (b) and (c); and other affairs prescribed and publicly notified by the Financial Services Commission where it is unlikely to undermine the protection of investors and sound trading practices, shall be excluded herefrom: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 26898, Jan. 12, 2016>
1. Where investment trading business is involved, any of the following:
(a) Conclusion and termination of contracts related to the investment trading business;
(b) Presentation of quotations to trade financial investment instruments;
(c) Receipt, delivery, execution, and verification of subscriptions for trades;
(d) Underwriting of securities;
(e) Analysis of the value of securities subject to proposed underwriting;
(f) Determination of the price of securities for underwriting, execution of affairs for subscription, and distribution of stocks;
2. Where investment brokerage business is involved, any of the following: Provided, That where crowdfunding brokerage business is involved, the affairs shall be limited to the conclusion and termination of contracts related to the crowdfunding brokerage business; ascertaining the facts of the matters posted under Article 117-11 of the Act; receipt, delivery, execution and verification of subscriptions:
(a) Conclusion and termination of contracts related to the investment brokerage business;
(b) Settlement of daily transactions;
(c) Management of deposits and closing of transactions;
(d) Receipt, delivery, execution, and verification of trading orders;
3. Where collective investment business is involved, any of the following:
(a) Conclusion and termination of trust contracts to create an investment trust as defined in Article 9 (18) 1 of the Act (hereinafter referred to as "investment trust"); and establishment of an investment limited company as defined in Article 9 (18) 3 of the Act (hereinafter referred to as "investment limited company"), an investment limited liability company as defined in Article 9 (18) 4 of the Act (hereinafter referred to as "investment limited partnership company"), an investment limited liability company as defined in Article 9 (18) 4-2 of the Act (hereinafter referred to as "investment limited liability company"), an investment limited partnership as defined in Article 9 (18) 5 of the Act (hereinafter referred to as "investment limited partnership"), or an undisclosed investment association as defined in Article 9 (18) 6 of the Act (hereinafter referred to as "undisclosed investment association");
(b) Management of, or instructions for the management of, the collective investment property (including the exercise of voting rights in relation to equity securities (including depositary receipts related to equity securities) included in the collective investment property);
(c) Assessment of the collective investment property;
4. Where investment advisory business is involved, any of the following:
(a) Conclusion and termination of contracts for investment advisory services;
(b) Provision of judgment on investment in response to a request for advice on investment;
5. Where discretionary investment business is involved, any of the following:
(a) Conclusion and termination of contracts for discretionary investment;
(b) Management of the discretionary investment property;
6. Where trust business is involved, any of the following:
(a) Conclusion and termination of trust contracts (including trust contracts to create an investment trust) and contracts for keeping in custody and management of the collective investment property (excluding assets held by investment trusts);
(b) Keeping in custody and management of the trust property (excluding assets held by investment trusts; hereafter the same shall apply in this subparagraph);
(c) Keeping in custody and management of the collective investment property (including the management and the performance of instructions for management);
(d) Management of the trust property (including the exercise of voting rights in relation to equity securities (including depositary receipts related to equity securities) included in the trust property).
(2) "Requirements prescribed by Presidential Decree" in the latter part of Article 42 (4) of the Act means that a foreign financial investment business entity runs a business, equivalent to the financial investment business which it intends to be entrusted with or the financial business referred to in subparagraph 1 of Article 40 of the Act, with permission, authorization, or registration with a financial supervisory agency of the foreign country in which the entity is located.
 Article 48 (Scope of Re-Entrustment)
"Circumstances prescribed by Presidential Decree" in the proviso to Article 42 (5) of the Act means where any of the following affairs is entrusted: <Amended by Presidential Decree No. 25843, Dec. 9, 2014>
1. Any of the following affairs as part of the entrusted affairs:
(a) Management and operation of an electronic computer system;
(b) Sending notices, etc.;
(c) Custody business (excluding the custody business that falls under a trust business);
(d) Research and analysis;
(e) Scrutiny of laws;
(f) Management of accounts;
(g) Receipt of documents, etc.;
(h) Collection of receivables;
(i) Other simple affairs prescribed and publicly notified by the Financial Services Commission;
2. Management of, or instructions for the management of, foreign currency assets included in the collective investment property among the affairs referred to in Article 47 (1) 3 (b) (including the exercise of voting rights in relation to equity securities (including depositary receipts related to equity securities) included in the collective investment property) and the affairs referred to in Article 47 (1) 3 (c) (applicable only to the assessment of foreign currency assets, entrusted without delegating the power to make a decision);
3. Management of foreign currency assets included in discretionary investment property, among the affairs referred to in Article 47 (1) 5 (b);
4. Keeping in custody and management of securities, etc. to be deposited under Article 308 of the Act or foreign currency assets (including management of, or performance of instructions for management of, the collective investment property) among the affairs referred to in Article 47 (1) 6 (b) and (c), and management of foreign currency assets included in the trust property (including the exercise of voting rights in relation to equity securities (including depositary receipts related to equity securities) included in the trust property) among the affairs referred to in Article 47 (1) 6 (d).
 Article 49 (Guidelines for Providing Information on Entrusted Affairs)
(1) "Guidelines prescribed by Presidential Decree" in Article 42 (6) of the Act means the following guidelines:
1. The information so provided shall be that relevant to the entrusted affairs;
2. The records of information provided shall be maintained;
3. It shall be possible to control and supervise the trustee's access to the information so provided.
(2) Every financial investment business entity shall include the matters in the guidelines for management of entrusted affairs under Article 42 (7) of the Act:
1. Matters concerning the management and assessment of risks ensuing from entrustment of affairs;
2. Matters concerning the procedure for determination on and termination of entrustment of affairs;
3. Matters concerning the control and management of the trustee;
4. Matters concerning the protection of investors' information;
5. Matters concerning countermeasures against incidents, such as the trustee's default on payments for cheques and bills;
6. Matters concerning securing means of demanding informative documents in relation to entrusted affairs;
7. Other matters prescribed and publicly notified by the Financial Services Commission.
(3) Article 42 (2) and (3) of the Act shall apply mutatis mutandis to amendments to a contract for entrustment of business affairs.
(4) Articles 42 (2) through (4), (5) (main sentence), and (6) through (10), and 43 of the Act, and paragraphs (2), (3), and (5) of this Article shall apply mutatis mutandis respectively to re-entrustment of business affairs. In such cases, when Article 42 (2), (7), or (8) of the Act is applied mutatis mutandis, the person who is obligated to report details of a contract for re-entrustment of business affairs to the Financial Services Commission, the person who is obligated to establish the guidelines for management of re-entrusted affairs, and the person who shall state the details of entrusted affairs in contract documents and notify investors of the details shall be the financial investment business entity that entrusted such affairs initially.
(5) Necessary matters concerning the forms of reports on entrustment of affairs and other documents, the methods of filling in such forms, and accompanying documents shall be prescribed and publicly notified by the Financial Services Commission, in addition to matters provided for in paragraphs (1) through (4).
(6) "Ground prescribed by Presidential Decree" in subparagraph 312 of attached Table 1 of the Act pursuant to Article 43 (2) 4 of the Act means a ground falling under any subparagraph of attached Table 5 of this Decree.
 Article 50 (Suspending Exchange of Information among Financial Investment Business Entities)
(1) "Cases prescribed by Presidential Decree" in Article 45 (1) of the Act means the following cases: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 23197, Sep. 30, 2011; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016>
1. Where such possibility lies between the management of the proprietary property (referring to the affairs of trading or holding financial investment instruments prescribed in paragraph (2) 1 on a person's own account, regardless of in whose name they are held, and which does not belong to the investment trading business or corporate finance affairs defined in Article 68 (2); hereafter the same shall apply in this Article), the investment trading business, or the investment brokerage business, and the collective investment business (limited to the affairs of managing the collective investment property for financial investment instruments; hereafter the same shall apply in this Article) or the trust business (limited to the affairs of managing the trust property for financial investment instruments, and the affairs of keeping in custody and managing financial investment instruments among the collective investment property and trust property; hereafter the same shall apply in this Article): Provided, That it is permitted to engage in any act prescribed in the subparagraphs of Article 45 (1) of the Act in any of the following cases:
(a) Cases arising between the corporate finance affairs (referring to the corporate finance affairs prescribed in subparagraph 3 of Article 71 of the Act, and excluding affairs of underwriting for collective investment securities or affairs of mediating the public offering, public sale or private placement; hereafter the same shall apply in this Article and 51 (3)) among the investment trading business or investment brokerage business and the corporate finance affairs among the collective investment business;
(b) Cases arising between prime brokerage services among the management affairs of proprietary property, investment trading business or investment brokerage business and the trust business which keeps in custody and manages the investors' property of a hedge fund as its prime brokerage services;
(c) Cases arising between the sale of collective investment securities among the investment trading business and investment brokerage business, or other business affairs prescribed and publicly notified by the Financial Services Commission as necessary for providing comprehensive services for the management of investors' assets (hereafter referred to as "sale, etc." in this item) and trust business: Provided, That any act prescribed in the subparagraphs of Article 45 (1) of the Act is prohibited in the following cases:
(i) Cases arising between the sale, etc. and other affairs related to investment trading business, investment brokerage business or management of proprietary property;
(ii) Where an investment trader or investment broker runs investment advisory business or discretionary investment business, cases arising between the investment trading business, investment brokerage business or the management of proprietary property, excluding the investment advisory business, discretionary investment business and sale, etc.;
(iii) Where a trust business entity runs investment advisory business, discretionary investment business or collective investment business, cases arising between the management affairs related to trust property among investment advisory business, discretionary investment business or trust business and the affairs related to depositing or managing collective investment property as collective investment business or trust business;
(d) Cases arising between the management affairs of proprietary property and trust business of a real estate trust business entity (referring to the real estate trust business entity defined in Article 94 (2) of the Act; hereinafter the same shall apply) which does not run investment trading business, investment brokerage business or collective investment business;
(e) Cases arising between the investment trading business, investment brokerage business and collective investment business for collective investment securities of a collective investment scheme managed by a collective investment business entity, which does not run investment trading business, investment brokerage business or trust business, other than investment trading business and investment brokerage business for collective investment securities of the collective investment scheme it manages;
(f) Other cases prescribed and publicly notified by the Financial Services Commission in which information exchange is less likely to cause conflicts of interest;
2. Where such possibility lies between the corporate finance affairs and the management of proprietary property or financial investment business: Provided, That the acts prescribed in the subparagraphs of Article 45 (1) of the Act are permitted in any of the following cases:
(a) Cases arising between corporate finance affairs and any of the following affairs:
(i) Providing funds to enterprises (including the affairs of disposing of assets, such as securities acquired in the course of providing funds) in accordance with the criteria prescribed and publicly notified by the Financial Services Commission;
(ii) Trading securities prescribed and publicly notified by the Financial Services Commission, such as state bonds and local government bonds, or acting as a broker, an intermediary or an agent for such trading;
(iii) Acting as a broker, an intermediary or an agent for the trading of stocks by means of trading in bulk in the stock market hours or after-hours, as prescribed in the Securities Market Business Regulation under Article 393 of the Act or any other similar means;
(iv) Trading certificates of preemptive rights issued by the relevant corporation, or acting as a broker, an intermediary or an agent for such trading in the course of underwriting or arranging the public offering, private placement, or sale thereof;
(v) Selling securities acquired in the course of underwriting affairs or causing any investor to acquire such securities in the course of arranging the public offering, private placement, or sale thereof;
(vi) Investing in a private equity fund;
(vii) Investment affairs involving advisory services on the creation, establishment or management of a real estate fund defined in subparagraph 2 of Article 229 of the Act (hereinafter referred to as "real estate fund") or a special asset fund defined in subparagraph 3 of Article 229 of the Act (hereinafter referred to as "special asset fund"), or the brokerage or arrangement thereof;
(viii) Investment or management affairs of a hedge fund that satisfies the criteria prescribed and publicly notified by the Financial Services Commission in consideration of the relationship, etc. with corporate finance affairs, etc.;
(ix) Other affairs prescribed and publicly notified by the Financial Services Commission in consideration of the relationship, etc. with corporate finance affairs, etc.;
(b) Cases arising between the affairs prescribed in Article 68 (2) 4-3 or 4-4 among corporate finance affairs and the affairs related to the management of proprietary property;
(c) Cases arising between the underwriting of securities prescribed and publicly notified by the Financial Services Commission, such as state bonds and local government bonds or the arrangement of public offering, sale, and private placement thereof among corporate finance affairs and financial investment business;
(d) Cases arising between the management of a private equity fund that aims to invest in securities referred to in subparagraphs of Article 240 (2) or (5) among corporate finance affairs and collective investment business;
(e) Other cases prescribed and publicly notified by the Financial Services Commission, in which exchanging information is less likely to cause conflicts of interest;
3. Where such possibility lies between the prime brokerage services and the management of proprietary property and financial investment business (excluding prime brokerage services): Provided, That the acts prescribed in the subparagraphs of Article 45 (1) of the Act are permitted in any of the following cases:
(a) Cases arising between prime brokerage services and the lending and borrowing of securities for professional investors, or acting as a broker, an intermediary or an agent for such lending and borrowing, or entrusted affairs related to orders for short sales conducted in connection therewith;
(b) Cases arising between prime brokerage services and the affairs related to the sale of derivatives for professional investors, or acting as a broker, an intermediary or an agent for such sale;
(c) Cases arising between prime brokerage services and the affairs related to repurchase agreements for professional investors, or acting as a broker, an intermediary or an agent for such affairs;
(d) Other cases prescribed and publicly notified by the Financial Services Commission, in which information exchange is less likely to cause conflicts of interest;
4. Cases arising between the corporate finance affairs and the prime brokerage services.
(2) "Information related to trading of financial investment instruments or other information prescribed by Presidential Decree" in Article 45 (1) 1 of the Act means any of the following information that has not yet disclosed to many unspecified persons: Provided, That excluded herefrom is information less likely to cause conflicts of interest and furnished in accordance with criteria prescribed and publicly notified by the Financial Services Commission: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 27291, Jun. 28, 2016>
1. Information on the status of financial investment instruments traded or held by financial investment business entities (excluding the financial investment instruments prescribed and publicly notified by the Financial Services Commission);
2. Information on the status of financial investment instruments traded or held by investors: Provided, That excluded herefrom is information concerning the total value of securities deposited by investors and the total value of securities by type, and other information prescribed and publicly notified by the Financial Services Commission;
3. Information on the details of composition of the collective investment property, the discretionary investment property, or the trust property, and the management of such property: Provided, That excluded herefrom is information released one month later in accordance with the criteria prescribed and publicly notified by the Financial Services Commission, among the information concerning the details of composition of the collective investment property, the discretionary investment property, or the trust property, and the management of such property;
4. Material nonpublic information defined in Article 174 (1) of the Act, among the information obtained in the course of performing corporate finance affairs.
(3) "Manner prescribed by Presidential Decree" in Article 45 (1) 3 of the Act means any of the following manners: <Amended by Presidential Decree No. 21611, Jul. 1, 2009>
1. The office space is not partitioned off with walls or partitions, or an entrance is used in common;
2. The electronic data of the information prescribed in Article 45 (1) 1 of the Act is not inspected independently to prevent the sharing of such data.
(4) "Activities prescribed by Presidential Decree" in Article 45 (1) 4 of the Act means the following activities: <Amended by Presidential Decree No. 21611, Jul. 1, 2009>
1. Failure to separate departments in charge of business affairs prescribed in each subparagraph of paragraph (1) into independent departments, or failure of a department in charge to perform its business affairs independently: Provided, That cases prescribed and publicly notified by the Financial Services Commission, in which conflicts of interest are less likely to occur shall be excluded herefrom;
2. Failure to keep records of a meeting or communications in accordance with the methods and procedures prescribed in the internal control guidelines, when executive officers and/or employees who perform the business affairs prescribed in each subparagraph of paragraph (1) have a meeting or communications concerning any of the business affairs, or failure to obtain verification from a compliance officer (referring to an auditor or any other person who performs equivalent duties, if no compliance officer is appointed).
 Article 51 (Suspending Exchange of Information with Affiliated Companies, etc.)
(1) "Company prescribed by Presidential Decree" in Article 45 (2) of the Act means any of the following companies: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 22197, Jun. 11, 2010>
1. If a financial investment business entity runs collective investment business, an investment trader or an investment broker, which sells collective investment securities of a collective investment scheme managed by the financial investment business entity (hereafter referred to as "company selling collective investment securities" in this Article);
2. If the relevant financial investment business entity is a branch office or any other business office of the foreign financial investment business entity, etc. referred to in Article 16 (10), the foreign financial investment business entity, etc.
(2) "Case prescribed by Presidential Decree" in Article 45 (2) of the Act means any case other than the following: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 26135, Mar. 3, 2015; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016>
1. Where any of the following applies for the purpose of Article 45 (2) 1 of the Act:
(a) Where relevant information is furnished to an affiliated company (including entities referred to in paragraph (1) 2; hereafter the same shall apply in this subparagraph) to perform the obligation to report or make public disclosure of stocks, etc. in possession in accordance with local or foreign statutes;
(b) Where information relevant to an affiliated company (excluding information referred to in paragraph (3) 3; hereafter the same shall apply in this item) is provided when the affiliated company intends to conduct an inspection into the business affairs related to compliance with the internal control guidelines of a financial investment entity, and examine whether the financial investment business entity complies with the internal control guidelines; or where information related to the affiliated company is provided when affairs related to financial investment business are jointly conducted with the affiliated company. In such cases, a financial investment business entity shall provide information in accordance with the internal control guidelines confirmed beforehand by the Financial Services Commission;
(c) Where the relevant financial investment business entity runs an investment trading business or an investment brokerage business, and where information on the total value of securities deposited by investors or total value of securities by type, or other information prescribed and publicly notified by the Financial Services Commission is furnished to the relevant affiliated company;
(d) Where simple orders for trading securities, exchange-traded derivatives, or means of foreign payment under the Foreign Exchange Transactions Act, which are included in the collective investment property, the discretionary investment property, or the trust property, are entrusted to an affiliated company, and where information prescribed and publicly notified by the Financial Services Commission, such as the types, prices, quantity, etc. of securities, exchange-traded derivatives, or means of foreign payment under the Foreign Exchange Transactions Act, required for placing such orders for trading, is furnished to the relevant affiliated company in accordance with the criteria prescribed and publicly notified by the Financial Services Commission;
(e) Where information on the details of composition of the collective investment property and the management of such property, is furnished to a company selling collective investment securities after one month in accordance with the criteria prescribed and publicly notified by the Financial Services Commission;
(f) Where the relevant financial investment business entity partially entrusts an affiliated company with its business in accordance with Article 42 (1) of the Act, and where information referred to in Article 42 (6) is furnished to the relevant affiliated company;
(g) Where information referred to in paragraph (3) 3 is furnished to the relevant affiliated company in accordance with the criteria prescribed and publicly notified by the Financial Services Commission, to ensure that the affiliated company complies with the internal control guidelines of a financial investment business entity and inspects whether the internal control guidelines are complied with;
2. Where any of the following applies for the purposes of Article 45 (2) 2 of the Act:
(a) Where a full-time executive officer and/or employee (limited to the full-time executive officers and/or employees performing the affairs of financial investment business in cases of a concurrently-run financial investment business entity; hereafter the same shall apply in this subparagraph) of a financial investment business entity who does not perform the affairs of collective investment business (including business equivalent to the collective investment business performed in a foreign country in accordance with foreign statutes; hereafter the same shall apply in this subparagraph) holds office concurrently as a part-time executive officer and/or employee of an affiliated company (including the persons referred to in paragraph (1) 2; hereinafter the same shall apply in this subparagraph) who does not perform the affairs of collective investment business; or where a part-time executive officer and/or employee of a financial investment business entity (limited to executive officers and/or employees performing the affairs of financial investment business in cases of a concurrently-run financial investment business entity; hereafter the same shall apply in this subparagraph) who does not perform the affairs of collective investment business of an affiliated company, holds office concurrently as an executive officer and/or employee who does not perform the affairs of collective investment business of an affiliated company;
(b) Where the financial investment business entity dispatches its executive officer and/or employee who does not perform the affairs of collective investment business to an affiliated company to perform the affairs other than collective investment business; or where the financial investment business entity assigns any executive officer and/or employee, who is dispatched from an affiliated company and does not perform the affairs of collective investment business, to perform affairs other than collective investment business;
(c) Where a full-time executive and/or employee of the investment advisory business entity or discretionary investment business entity (limited to where it does not run any financial investment business other than investment advisory business or discretionary investment business) holds office concurrently as a part-time executive and/or employee of an affiliated company; or where a part-time executive and/or employee of the relevant investment advisory business entity or discretionary investment business entity holds office concurrently as an executive officer and/or employee of an affiliated company;
(d) Where a full-time executive and/or employee of the collective investment business entity who performs the affairs of collective investment business holds office concurrently as a part-time executive and/or employee who performs the affairs of collective investment business of an affiliated company; or where a part-time executive and/or employee of the collective investment business entity who performs the affairs of collective investment business holds office concurrently as an executive officer and/or employee who performs the affairs of collective investment business of an affiliated company;
(e) Where the collective investment business entity dispatches its executive officer and/or employee who performs the affairs of collective investment business to an affiliated company to perform the affairs of collective investment business at the affiliated company; or where the collective investment business entity assigns any executive officer and/or employee, who is dispatched from an affiliated company and performs the affairs of collective investment business at the affiliated company, to perform the affairs of collective investment business;
(f) Where an executive officer and/or employee of the collective investment business entity holds office concurrently as a part-time executive officer and/or employee of a company (limited to a company serving the purpose of the investment of a private equity fund) in which a private equity fund where the collective investment business entity is a managing member has invested (including a similar privately placed fund established in a foreign country); or where the collective investment business entity dispatches any of its executive officers and/or employees to work for such company;
(g) Where the collective investment business entity creates or establishes a foreign collective investment scheme in a foreign country, and an executive officer and/or employee of that collective investment business entity holds office concurrently as a part-time executive of that foreign collective investment scheme;
(h) Where an executive officer and/or employee of a concurrently-run financial investment business entity, whose duties are irrelevant to financial investment business, holds office concurrently as an executive officer and/or employee whose duties are irrelevant to financial investment business of an affiliated company;
(i) Where the concurrently-run financial investment business entity dispatches its executive officer and/or employee whose duties are irrelevant to financial investment business to an affiliated company to perform the duties irrelevant to financial investment business; or where the concurrently-run financial investment business entity assigns any executive officer and/or employee, who is dispatched from an affiliated company and performs affairs irrelevant to financial investment business at the affiliated company, to perform the affairs irrelevant to financial investment business;
(j) Other cases prescribed and publicly notified by the Financial Services Commission, equivalent to those provided for in items (a) through (i);
3. Where any of the following applies for the purposes of Article 45 (2) 3 of the Act:
(a) Where any office space is jointly used with the affiliated company for performing the affairs of guidance, consulting, recommendation for investment, concluding contracts, etc. meeting investors or other clients face to face together with the affiliated company;
(b) Where an entrance is jointly used with an affiliated company to perform the affairs referred to in item (a).
(3) "Information related to the trading of financial investment instruments or other information prescribed by Presidential Decree" in Article 45 (2) 1 of the Act means any of the following information that has not yet disclosed to many unspecified persons: Provided, That excluded herefrom is information less likely to cause conflicts of interest, and furnished in accordance with the criteria prescribed and publicly notified by the Financial Services Commission: <Amended by Presidential Decree No. 21611, Jul. 1, 2009>
1. Information on the status of financial investment instruments traded or held by financial investment business entities (excluding financial investment instruments prescribed and publicly notified by the Financial Services Commission);
2. Information on the status of financial investment instruments traded or held by investors;
3. Information on the details of composition of collective investment property, discretionary investment property, or trust property, and the management of such property;
4. Material nonpublic information provided in Article 174 (1) of the Act, which is obtained in the course of performing corporate finance affairs.
(4) "Manner prescribed by Presidential Decree" in Article 45 (2) 3 of the Act means any of the following manners: <Amended by Presidential Decree No. 21611, Jul. 1, 2009>
1. The office space is not partitioned off with walls or partitions, or an entrance is used in common;
2. The electronic data of the information prescribed in Article 45 (2) 1 of the Act is not inspected independently to prevent the sharing of such data.
(5) "Activities prescribed by Presidential Decree" in Article 45 (2) 4 of the Act means failure of an executive officer and/or employee of a financial investment business entity, who perform the affairs of the financial investment business, to keep the records of a meeting or communications when the executive officer and/or employee holds a meeting or communicate concerning the affairs of the financial investment business with an executive officer and/or employee of an affiliated company (including persons referred to in paragraph (1) 2) or of a dealer of collective investment securities; or failure to obtain verification from the compliance officer of the relevant financial investment business entity (or an auditor or any other person who performs equivalent duties, if no compliance officer is appointed) in accordance with the methods and procedures prescribed by the internal control guidelines. <Amended by Presidential Decree No. 21611, Jul. 1, 2009>
Subsection 2 Investment Recommendations, etc.
 Article 52 (Verification of Objective of Investment)
"Manner prescribed by Presidential Decree" in Article 46 (2) of the Act means any of the following manners:
1. Electronic mail or any other similar electronic means of communication;
2. Mail;
3. Automatic telephone answering system.
 Article 52-2 (Principle of Propriety)
(1) "Financial investment instruments prescribed by Presidential Decree" in Article 46-2 (1) of the Act means the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 25553, Aug. 12, 2014>
1. Derivatives-linked securities: Provided, That gold savings accounts, etc. shall be excluded;
2. Collective investment securities of a collective investment scheme prescribed in Article 93 (1) of the Act: Provided, That collective investment securities of the collective investment scheme prescribed and publicly notified by the Financial Services Commission shall be excluded;
3. Collective investment securities of a collective investment scheme that invests not less than 50 percent of the collective investment property in derivatives-linked securities;
4. Bonds with an option to be converted into stocks, or to mitigate the obligations to redeem which and to pay interest on which, 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, as prescribed in Article 165-11 (1) of the Act (hereinafter referred to as "contingent capital securities");
5. Beneficiary certificates bearing the beneficial interest under a monetary trust contract referred to in Article 110 (1), invested in derivatives or financial investment instruments referred to in subparagraphs 1 through 4 (including similar instruments bearing the beneficial interest of a trust).
(2) Each financial investment business entity shall notify ordinary investors of the following facts pursuant to Article 46-2 (2) of the Act:
1. Details of the relevant derivatives, etc. (referring to derivatives, etc. prescribed in Article 46-2 (1) of the Act; hereafter the same shall apply in this paragraph);
2. Risks contingent upon investments in the relevant derivatives, etc;
3. The fact that the relevant derivatives, etc. are not appropriate for an ordinary investor in light of the ordinary investor's objective of investment, status of property, experience in investment, etc.
(3) "Manner prescribed by Presidential Decree" in Article 46-2 (2) of the Act means any manner prescribed in each subparagraph of Article 52.
[This Article Newly Inserted by Presidential Decree No. 21611, Jul. 1, 2009]
 Article 53 (Duty to Provide Explanation)
(1) "Matters prescribed by Presidential Decree" in Article 47 (1) of the Act means the following matters: <Amended by Presidential Decree No. 28040, May 8, 2017>
1. Structure and nature of investment risks of financial investment instruments (referring to the investment risks of financial investment instruments under the main sentence of Article 3 (1) of the Act);
2. Matters concerning the fees under Article 58 (1) of the Act;
3. Matters concerning the terms and conditions of early repayment, if such terms and conditions exist;
4. Matters concerning the cancellation and termination of contracts;
5. Where an investment advisory business entity recommends any investment, the following matters:
(a) Whether the investment advisory business entity satisfies the requirements prescribed in items of Article 60 (3) 4;
(b) The types and scope of financial investment instruments, etc. for which advice is given for investment pursuant to Article 6 (6) of the Act;
(c) Procedures for providing advice on investment, scale of related expenses such as investment advisory fees, and methods of calculating them;
(d) Other matters prescribed and publicly notified by the Financial Services Commission, which may cause conflict of interests with investors.
(2) "Manner prescribed by Presidential Decree" in Article 47 (2) of the Act means a manner falling under any subparagraph of Article 52.
 Article 54 (Exception to Prohibition, etc. on Uninvited Recommendations)
(1) "Acts prescribed by Presidential Decree" in the proviso to subparagraph 3 of Article 49 of the Act means recommending investment in securities and exchange-traded derivatives.
(2) "Acts prescribed by Presidential Decree" in the proviso to subparagraph 4 of Article 49 of the Act means any of the following acts:
1. Deleted; <by Presidential Decree No. 25553, Aug. 12, 2014>
2. Recommending re-investment, after lapse of the time period prescribed and publicly notified by the Financial Services Commission, to an investor who had once manifested his/her intent to reject recommendation of investment;
3. Recommending investment in another type of financial investment instrument. In such cases, specific details of different types shall be prescribed and publicly notified by the Financial Services Commission.
 Article 55 (Prohibition on Undue Recommendations)
"Activities prescribed by Presidential Decree" in subparagraph 5 of Article 49 of the Act means recommending investment to an investor (excluding professional investors and ordinary investors who have ever made investments with credit granted under Article 72 (1) of the Act) under the condition that a loan be granted, or the brokerage, intermediary, or agent services for such loan be provided even without the investor’s request for such loan or services.
 Article 56 (Qualifications for Investment Solicitors)
"Qualifications prescribed by Presidential Decree" in Article 51 (1) 2 of the Act means a person who satisfies all of the following requirements:
1. Any person falling under any of the following items:
(a) Any person who has successfully passed an examination administered by the Association pursuant to Article 286 (1) 3 (a) of the Act to test competency of professional advisers for investment recommendation;
(b) Any person who has successfully passed an examination administered by the Association pursuant to Article 286 (1) 3 (c) of the Act to test competency of professional investment managers;
(c) Any private individual who meets the requirements for registration of insurance canvasser, insurance agency, or insurance broker under attached Table 3 of the Enforcement Decree of the Insurance Business Act and who engages in the sale of insurance (applicable only where such person acts as an investment solicitor for collective investment securities);
2. The person shall complete the training course prescribed by the Association and recognized by the Financial Services Commission.
 Article 57 (Entrustment of Affairs of Registration)
The Financial Services Commission shall, when it entrusts the Association with the affairs of registration pursuant to the latter part of Article 51 (3) of the Act, execute a contract for entrustment of business affairs, including the following conditions, with the Association:
1. A condition that the Association comply with Article 51 (5) through (8) of the Act and Article 58 (3) and (4) of this Decree, if the Association performs the affairs of registration entrusted. In such cases, "Financial Services Commission" shall be construed as "Association";
2. A condition that the Association report the current status of registration to the Financial Services Commission on a quarterly basis.
 Article 58 (Method, Procedures, etc. for Registration)
(1) Each application for registration to be filed under Article 51 (4) of the Act shall contain the following:
1. Trade name of the relevant financial investment business entity;
2. Personal data of the person who intends to be registered as an investment solicitor under Article 51 (9) of the Act (hereinafter referred to as "investment solicitor");
3. Scope of financial investment instruments, the investment recommendation of which will be entrusted, and contracts thereon;
4. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for examining registration.
(2) Each application for registration to be filed under paragraph (1) shall be accompanied by the following documents:
1. A copy of the resident registration certificate (including an equivalent document) of the person who intends to be registered as an investment solicitor;
2. A copy of the contract;
3. A document certifying the qualifications prescribed in Article 51 (1) 2 of the Act;
4. Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining registration.
(3) The Financial Services Commission shall ascertain whether the contents of an application filed for registration under Article 51 of the Act are true, and shall examine whether the contents of the application meet the requirements for registration prescribed in Article 51 (1) of the Act.
(4) Where the Financial Services Commission determines that an application for registration meets the requirements for registration, it shall issue to the applicant a registration certificate of investment solicitor with the descriptions prescribed and publicly notified by the Financial Services Commission.
(5) Except as specifically provided for in paragraphs (1) through (4), filing an application for registration; examination of the application; the form of the application; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 59 (Prohibited Acts, etc. of Investment Solicitors)
(1) "Acts prescribed by Presidential Decree" in Article 52 (2) 4 of the Act means any of the following acts:
1. Executing a contract on behalf of an investor;
2. Accepting the power entrusted by an investor to trade financial investment instruments on behalf of the investor;
3. Acting as a broker, an intermediary or an agent to induce a third party to lend money to an investor;
4. Misrepresenting that the discretionary investment property or the trust property is not managed separately for each investor or for each unit of the trust property but is collectively managed, and soliciting investment or making an advertisement on investment to solicit investors to sign a contract for such discretionary investment or trust;
5. Executing contracts on entrustment of investment recommendation with two or more financial investment business entities;
6. Executing a contract for entrustment of investment recommendation by an insurance canvasser referred to in subparagraph 1 (c) of Article 56 with any insurance company other than the insurance company to which the canvasser belongs;
7. Other acts prescribed and publicly notified by the Financial Services Commission as likely to undermine the protection of investors or sound trading practices.
(2) "Matters prescribed by Presidential Decree" in Article 52 (3) 4 of the Act, means the following:
1. The fact that he/she is not permitted to execute any contract on behalf of an investor;
2. The fact that he/she is not permitted to accept the power entrusted by an investor to trade financial investment instruments on behalf of the investor;
3. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors or sound trading practices.
Subsection 3 Prohibition, etc. against Use of Job-related Information
 Article 60 (Advertisement Soliciting Investment)
(1) "Matters prescribed by Presidential Decree" in Article 57 (2) of the Act means the following:
1. A statement that a financial investment business entity prescribed in Article 57 (2) of the Act (hereafter referred to as "financial investment business entity" in this Article) has a duty to provide a full explanation on financial investment instruments;
2. A statement of recommendation to make an investment after hearing an explanation under subparagraph 1 from the financial investment business entity;
3. Details of the fees collected under Article 58 (1) of the Act;
4. Matters prescribed and publicly notified by the Financial Services Commission, in consideration of the person who makes an advertisement soliciting investment, the contents of the advertisement soliciting investment, the medium, the size, time, and other matters of the advertisement soliciting investment.
(2) "Matters prescribed by Presidential Decree" in Article 57 (3) of the Act means the following:
1. Matters concerning the relevant entity, such as the trade name of the collective investment business entity; the trust business entity that keeps in custody and manages the collective investment property; the investment trader or the investment broker that sells the collective investment securities (including the fund accounting and administration company, if a fund accounting and administration company is involved);
2. Matters concerning the remuneration or fee that the entities referred to in subparagraph 1 receive or charge;
3. Matters concerning fund managers of the relevant collective investment scheme;
4. Performance of management, if applicable;
5. Matters concerning the redemption of collective investment securities;
6. Other matters prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors, even if they are included in an advertisement soliciting investment.
(3) Every financial investment business entity shall comply with the following provisions in placing an advertisement soliciting investment: <Amended by Presidential Decree No. 28040, May 8, 2017>
1. In indicating the return on investment or performance of management, it shall refrain from showing the return on investment or performance of management only for the period during which it had good performance results;
2. In making a comparative advertisement on financial investment instruments, it shall refrain from representing, without solid grounds, that a certain financial investment instrument is inferior or disadvantageous;
3. It shall obtain prior verification from the compliance officer (referring to the auditor or any other person who perform equivalent duties, if no compliance officer is appointed), and shall follow the method prescribed and publicly notified by the Financial Services Commission;
4. An investment advisory business entity that intends to indicate a word "independence" or "independent" or any other foreign word which has a similar meaning (including such word written in Korean; hereinafter referred to as "independence, etc.") shall obtain confirmation from the Financial Services Commission in accordance with the procedures prescribed and publicly notified by the Financial Services Commission, after fulfilling the following requirements:
(a) It shall not concurrently run any financial investment business other than discretionary investment business, or any other financial business;
(b) It shall meet other requirements prescribed and publicly notified by the Financial Services Commission to prevent conflict of interests with investors.
 Article 61 (Delivery of Contract Documents and Cancellation of Contacts)
(1) "As prescribed further by Presidential Decree" in the proviso to Article 59 (1) of the Act means any of the following cases:
1. Where the relevant investor creates an account for trading, executes a basic contract for trading financial investment instruments, and continues trading repeatedly in accordance with the terms and conditions of the contract;
2. Where the relevant investor manifests his/her intent to refuse to receive contract documents in writing;
3. Where the relevant investor expresses his/her wish to receive contract documents by mail or electronic mail, and the contract documents are delivered by mail or electronic mail in response to the investor's expression of willingness;
4. Where the Financial Services Commission determines and publicly notifies that there is no foreseeable threat to the protection of investors.
(2) "Contracts prescribed by Presidential Decree" in Article 59 (2) of the Act means contracts for investment advice.
(3) "Amount prescribed by Presidential Decree" in Article 59 (4) and (5) (proviso) of the Act means any of the following amounts, respectively:
1. If the entity does not respond to a request for advice in accordance with a contract for investment advice: An amount equivalent to the expenses incurred in executing the contract for investment advice in light of social norms;
2. If the contract for investment advice provides that the fee shall be calculated according to the number of responses given upon request for advice: An amount equivalent to the fee calculated according to the number of responses given upon request for advice until the contract is cancelled (if the amount so calculated exceeds an amount deemed reasonable as the fee for providing advice in light of social norms, such excess amount shall be subtracted from the amount so calculated);
3. Cases not falling under subparagraph 1 or 2: An amount calculated by dividing the fee for the entire contract period agreed in the contract for investment advice by the total number of days of the contract period and multiplying it by the number of days from the date the contract documents under Article 59 (1) of the Act were delivered until the date the contract is cancelled (if the amount so calculated exceeds an amount deemed reasonable as the fee for providing advice in light of social norms, such excess amount shall be subtracted from the amount so calculated).
 Article 62 (Keeping and Maintaining Records)
(1) Every financial investment business entity shall keep and maintain records of the following data during a period designated for each type of data in the following in accordance with Article 60 (1) of the Act: Provided, That the Financial Services Commission may shorten and publicly notify any of the following periods if it is unlikely to undermine the protection of investors: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Data about business operations:
(a) Data about investment recommendations: Ten years;
(b) Data about investors' trading of financial investment instruments, including records and details of trading orders, other data about trading, and alternative trading services of alternative trading systems (referring to the alternative trading services defined in Article 8-2 (5) of the Act; hereinafter the same shall apply): Ten years;
(c) Data about the management of investors' property, such as the collective investment property, the discretionary investment property, and the trust property: Ten years;
(d) Data about contracts concluded with investors, including creation of, and agreements on, accounts for trading: Ten years;
(e) Data about entrustment of business affairs: Five years;
(f) Data about incidental business affairs: Five years;
(g) Other data about business operations: Five years;
2. Finance-related data: Ten years;
3. Data about business affairs:
(a) Data about resolutions adopted at general meetings of shareholders or by the board of directors: Ten years;
(b) Data about matters that shall be stated in a report on material facts under Article 161 of the Act (hereinafter referred to as "material fact report"): Five years;
(c) Data about the management of proprietary property: Three years;
(d) Data about the purchase and disposition of assets and other business affairs: Three years;
4. Data about internal controls:
(a) Data about monitoring of compliance, including internal control guidelines and risk management: Five years;
(b) Data about qualifications of executive officers, major shareholders, and professional human resources, and details of transactions with interested parties: Five years;
(c) Other data about internal controls: Three years;
5. Other account books and documents that must be prepared and kept pursuant to other statutes: The period prescribed in the relevant statutes (if no period is prescribed by the relevant statutes, the period shall be prescribed and publicly notified by the Financial Services Commission, taking into consideration the periods referred to in subparagraphs 1 through 4).
(2) Further specific guidelines for the types and classification of data referred to in paragraph (1) shall be prescribed and publicly notified by the Financial Services Commission.
 Article 63 (Depositing of Acquired Securities)
(1) "Those prescribed by Presidential Decree" in the main sentence of Article 61 (1) of the Act means the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. A certificate of deposit denominated in KRW;
2. Other instruments prescribed and publicly notified by the Financial Services Commission.
(2) "Cases prescribed by Presidential Decree" in the proviso to Article 61 (1) of the Act means the following cases: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Where it is impracticable to issue the relevant security as a security or certificate that can be deposited in the Securities Depository under the Act, this Decree or any other statutes;
2. Where an issuer concludes an agreement with an investor not to issue the relevant security as a security or certificate that can be deposited in the Securities Depository;
3. Where it is impracticable to deposit a foreign currency security as defined in Article 3 (1) 8 of the Foreign Exchange Transactions Act (hereinafter referred to as "foreign currency security") in the Securities Depository by the method prescribed in paragraph (3) and it is deposited in a foreign depository institution prescribed and publicly notified by the Financial Services Commission;
4. Where it is otherwise prescribed by Ordinance of the Prime Minister as inappropriate to deposit securities, taking into consideration the nature, details of the rights, etc. of the relevant securities.
(3) "Method prescribed by Presidential Decree" in Article 61 (2) of the Act means depositing a security in an account of the Securities Depository opened in a foreign depository institution prescribed and publicly notified by the Financial Services Commission through account transfer, etc. <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
 Article 64 (Trading of Financial Investment Instruments by Executive Officers and/or Employees)
(1) "Financial investment business entity prescribed by Presidential Decree" in Article 63 (1) of the Act means any of the following financial investment business entities: <Amended by Presidential Decree No. 27414, Jul. 28, 2016>
1. An entity referred to in Article 8 (9) 1 or 2 of the Act;
2. Entities referred to in Article 7-2 (1) 1 through 3 and 5 through 9.
(2) Trading of any of the following financial investment instruments under Article 63 (1) of the Act shall be conducted in compliance with each subparagraph of Article 63 (3) of the Act: Provided, That Article 63 (1) 3 of the Act shall not apply where the following financial investment instruments are traded under a contract for discretionary investment services referred to in Article 9 (4) of the Act: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016>
1. Equity securities listed on the securities market (including stock certificates traded through over-the-counter transactions under Article 178): Provided, That the following is excluded herefrom:
(a) Stock certificates issued by an investment company as defined in Article 9 (18) 2 of the Act (hereinafter referred to as "investment company") and equity securities issued by an investment limited company, an investment limited partnership company, investment limited liability company, investment limited partnership, and an undisclosed investment association;
(b) Stocks of a company acquired in the name of an employee stock ownership association established in the same company pursuant to Article 33 of the Framework Act on Labor Welfare;
2. Depositary receipts listed on the securities market (limited to depositary receipts related to the equity securities referred to in subparagraph 1; hereafter the same shall apply in this paragraph);
3. Stock-related corporate bonds (referring to stock-related corporate bonds defined in Article 68 (4); hereinafter the same shall apply) which are related to equity securities referred to in subparagraph 1 or depositary receipts referred to in subparagraph 2;
4. Derivatives-linked securities linked to changes in equity securities referred to in subparagraph 1, depositary receipts referred to in subparagraph 2, or an index based on the aforesaid securities or receipts: Provided, That excluded herefrom are derivatives-linked securities prescribed and publicly notified by the Financial Services Commission, which are less likely to cause unfair business practices or conflicts of interest with investors;
5. Exchange-traded derivatives;
6. Over-the-counter derivatives linked to changes in equity securities referred to in subparagraph 1, depositary receipts referred to in subparagraph 2, or an index based on the aforesaid securities or receipts.
(3) "Circumstances prescribed by Presidential Decree" in the proviso to Article 63 (1) 2 of the Act means any of the following circumstances:
1. Where it is permitted to conduct trading through two or more companies: Any of the following cases:
(a) Where the investment broker through whom an executive officer and/or employee of a financial investment business entity trades does not deal with the financial investment instruments that the executive officer and/or employee of the financial investment business entity intends to trade;
(b) Where securities issued or traded by public offering or sale are subscribed;
(c) Other cases prescribed and publicly notified by the Financial Services Commission;
2. Where it is permitted to conduct trading through two or more accounts: Any of the following cases:
(a) Where two or more accounts are opened because the relevant investment trader is required to create accounts separately for each type of financial investment instrument;
(b) Where a separate account is opened to obtain the benefit of special taxation under the Restriction of Special Taxation Act;
(c) Other cases prescribed and publicly notified by the Financial Services Commission.
(4) Each executive officer and/or employee of a financial investment business entity who trades any of the financial investment instruments referred to in the subparagraphs of paragraph (2) on his/her own account, shall comply with the following method and procedure in accordance with Article 63 (1) 4 of the Act:
1. To open an account for trading financial investment instruments, he/she shall report it to the compliance officer (referring to an auditor or any other similar person, if no compliance officer is appointed; hereafter the same shall apply in this paragraph) of the financial investment business entity to which he/she belongs;
2. To respond properly to a demand made by the compliance officer of the financial investment business entity to which he/she belongs to explain a trade or any other transaction;
3. To observe matters prescribed by the internal control guidelines of the financial investment business entity to which he/she belongs;
4. To observe other methods and procedures prescribed and publicly notified by the Financial Services Commission.
 Article 64-2 (Measures to Protect Customer Service Personnel)
"Measures prescribed by Presidential Decree, such as legal measures" in Article 63-2 (1) 4 of the Act means the following measures:
1. Where the verbal abuse, sexual harassment, assault, etc. (hereinafter referred to as "verbal abuse, etc.") by a customer is deemed punishable under the criminal punishment provisions of a related Act and a request is made by an employee who suffers a damage resulting from such act: Filing an accusation with the competent investigation agency, etc.;
2. Where deemed necessary taking into account the degree of damage an employee suffers due to the verbal abuse, etc. of a customer and the possibility, etc. of causing damage to the employee or other employees in the future although such verbal abuse, etc. of a customer is severe enough to be punishable under the criminal punishment provisions of a related Act: Making a request with the competent investigation agency, etc. to take necessary measures;
3. Providing administrative and procedural support necessary for the relevant employee to take measures directly, such as filing a complaint or an accusation with the competent investigation agency, or claiming compensation, against the customer who has conducted verbal abuse, etc.;
4. Conducting education for employees on the course of action to be followed to prevent or cope with the verbal abuse, etc. of clients;
5. Other measures prescribed and publicly notified by the Financial Services Commission as necessary to protect employees from the verbal abuse, etc. of clients.
[This Article Newly Inserted by Presidential Decree No. 27291, Jun. 28, 2016]
 Article 65 (Operating Fund, etc. of Foreign Financial Investment Business Entity)
(1) "Operating fund prescribed by Presidential Decree" in Article 65 (1) of the Act means any of the following: <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
1. Funds in Korean won, provided by a foreign financial investment business entity to its branch office or any other business office to establish or operate such branch office or business office;
2. Funds transferred from a reserve of a branch office or any other business office of a foreign financial investment business entity (hereafter referred to as "local branch office, etc." in this Article);
3. Funds transferred by a foreign financial investment business entity from retained earnings carried forward of a branch office or any other business office already established in Korea to establish another branch office or any other business office.
(2) The assets of a local branch office, etc., which is located in Korea, shall be held in any of the following manner pursuant to Article 65 (2) of the Act: <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
1. Cash or deposits, installment deposits or installment savings in any domestic financial institution;
2. Securities held in a deposit account or kept in custody in Korea;
3. Loans or other credit granted to persons in Korea;
4. Fixed assets in Korea;
5. Other assets prescribed and publicly notified by the Financial Services Commission, against which it is possible to enforce compulsory execution pursuant to domestic law.
(3) Each local branch office, etc. shall comply with the following provisions: <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
1. It shall settle its accounts independently of its head office;
2. Where the total amount of assets held by a local branch office, etc. in Korea in the manners provided for in the subparagraphs of paragraph (2) is less than the aggregate of operating funds defined in Article 65 (1) of the Act and liabilities, it shall replenish the difference within 60 days from the date the settlement of accounts is finalized.
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 (Exception to Prohibition on Self-Contracting)
"Cases prescribed by Presidential Decree" in subparagraph 2 of Article 67 of the Act means any of the following cases: <Amended by Presidential Decree No. 27291, Jun. 28, 2016; Presidential Decree No. 28040, May 8, 2017>
1. Where an investment trader or investment broker purchases collective investment securities that he/she sells;
2. Where an investment trader or investment broker makes a trade effectuated via an alternative trading system;
3. Where a comprehensive financial investment business entity conducts the over-the-counter trading of a financial investment instrument pursuant Article 77-6 (1) 1;
4. Other cases prescribed and publicly notified by the Financial Services Commission, where the formation of fair prices, the stability and efficiency of trading and transactions, and the protection of investors are unlikely to be undermined.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 66-2 (Duty of Best Execution)
(1) "Trades prescribed by Presidential Decree'" in Article 68 (1) of the Act means any of the following:
1. Trading of securities unlisted on a securities market;
2. Trading of over-the-counter derivatives;
3. Trading of financial instruments prescribed by Ordinance of the Prime Minister taking into account the possibility of trading in multiple financial investment instruments markets and the necessity to protect investors among any of the following financial instruments:
(a) Securities listed on a securities market;
(b) Exchange-traded derivatives.
(2) Guidelines for best execution referred to in Article 68 (1) of the Act (hereinafter referred to as "guidelines for best execution") shall include the methods for execution of best trade terms, grounds therefor, etc. in consideration of the following matters: Provided, That where investors give any separate instructions on dealing with offers or orders, such offers or orders may be processed by the method different from the guidelines for best execution:
1. Prices of financial investment instruments;
2. Fees and other expenses to be borne by investors in connection with a trade contract;
3. Other matters, such as the scale of an offer or order and the possibility of a trade contract.
(3) Public announcement of the guidelines for best execution or the modification thereof under Article 68 (1) of the Act or the latter part of Article 68 (3) of the Act shall be made in such manner that includes all the following. In such cases, when any modification of the guidelines for best execution is publicly announced, a ground therefor shall be included therein:
1. Posting or keeping the public announcement for inspection at the head office, branch offices and other business offices of an investment trader or investment broker;
2. Posting public notification on the website of an investment trader or investment broker.
(4) Where an investor investment trader or investment broker executes an offer or order by an investor pursuant to Article 68 (2) of the Act and the investor subsequently requests a document, etc. verifying that such offer or order is processed in compliance with the guidelines for best execution, the investor investment trader or investment broker shall provide the document, etc. to that investor in accordance with the guidelines and methods prescribed and publicly notified by the Financial Services Commission.
(5) "Period prescribed by Presidential Decree" in the former part of Article 68 (3) of the Act means three months.
(6) "Means prescribed by Presidential Decree" in the main sentence of Article 68 (4) of the Act means facsimile.
(7) Except as specifically provided for in paragraphs (1) through (6), details of the guidelines for best execution; keeping the related materials; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 67 (Period for Disposition of One's Own Stocks)
"Period prescribed by Presidential Decree" in the latter part of Article 69 of the Act means three months from the acquisition date.
 Article 68 (Prohibition on Unsound Business Activities)
(1) “Cases prescribed by Presidential Decree" in the proviso to Article 71 of the Act means any of the following cases: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013>
1. Any of the following cases for the purposes of subparagraph 1 of Article 71 of the Act:
(a) Where it is proved that no information on any investor's offer or trading order has been used;
(b) Where the relevant case is arbitrage to benefit from a price difference between the securities market (including transactions via an alternative trading system) and the derivatives market or any similar transaction, and where it is objectively evident that information on an investor has not been intentionally used;
2. Any of the following cases for the purposes of subparagraph 2 of Article 71 of the Act:
(a) Where the details of research and analysis data have not induced, directly or indirectly, trading of a specific financial investment instrument;
(b) Where it is unlikely that a change of inducing trading or fluctuating has been used by disclosing research and analysis data;
(c) It is proved that the details of disclosed research and analysis data have not been used in trading;
(d) The research and analysis data in question do not contain any new content, compared with research and analysis data already disclosed to the public;
3. For the purposes of subparagraph 3 of Article 71 of the Act, where the research and analysis data in question have not been disclosed or furnished to investors, but they have been prepared for the purpose of internal use of the financial investment business entity in performing its business affairs.
4. For the purposes of subparagraph 5 of Article 71 of the Act, where encouraging any person other than an investment solicitor or investment advisor to make recommendations for investment in gold savings account, etc.
(2) "Corporate finance affairs prescribed by Presidential Decree" in subparagraph 3 of Article 71 of the Act means the following affairs: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 26600, Oct. 23, 2015>
1. Underwriting services;
2. Intermediary services of public offerings, private placements, or sales;
3. Brokerage, intermediary, or agent services for corporate acquisitions or mergers;
4. Advisory services on corporate acquisitions or mergers;
4-2. Advisory services for project financing that provides support, such as granting credit, making an investment, establishing a fund-raising structure (hereafter referred to as "project financing" in this paragraph), to a special-purpose vehicle (referring to a company or other entity established for the purpose of operating a specific project as its business to distribute profits from such project to shareholders, etc.) from the project development stage for an enterprise which is awarded a project that requires facility investment, social overhead capital investment, or development of resources, or others that require considerable period and funds;
4-3. Arranging project financing for financial institutions, etc., such as forming a temporary organization by recruiting financial institutions that intend to provide project financing and consult on the conditions of financial support;
4-4. Project financing accompanied by the advisory services referred to in subparagraph 4-2 or arrangement services referred to in subparagraph 4-3;
5. Management of property of a private equity fund.
(3) "Time prescribed by Presidential Decree" in subparagraph 4 of Article 71 of the Act means 40 days. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(4) "Stock-related corporate bonds prescribed by Presidential Decree" in subparagraph 4 (b) of Article 71 of the Act means convertible bonds, bonds with warrant, exchangeable bonds (limited to exchangeable bonds entailing rights to claim an exchange with stocks, convertible bonds or bonds with warrant) and convertible contingent capital securities prescribed in Article 176-12. <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 24697, Aug. 27, 2013>
(5) "Activities prescribed by Presidential Decree" in subparagraph 7 of Article 71 of the Act means the following: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 28040, May 8, 2017>
1. Rejecting a demand made by a professional investor (excluding those referred to in the subparagraphs of Article 10 (1)) to be treated as an ordinary investor as prescribed in the proviso to Article 9 (5) of the Act without good cause;
2. Soliciting an ordinary investor to make an investment too frequently, without considering the ordinary investor' objective of investment, status of property, experience in investment, etc.;
3. Providing economic benefits, directly or indirectly, to an investor (including executive officers and/or employees of a corporation or any other organization, if the investor is a corporation or any other organization) or the counterparty to a transaction (including executive officers and/or employees of a corporation or any other organization, if the counterparty to a transaction is a corporation or any other organization), or receiving economic benefits from such person, in connection with the business affairs, in violation of the criteria prescribed and publicly notified by the Financial Services Commission;
4. Any of the following activities in connection with underwriting of securities or intermediary services of public offering, private placement, or sale of securities:
(a) Failure to pay due attention for preventing an issuer from falsely stating or indicating a material fact in the registration statement filed under Article 119 (3) of the Act (including the corrective registration statement and accompanying documents defined in Article 122 (1) of the Act) and the investment prospectus defined in Article 123 (1) of the Act (including the preliminary prospectus defined in Article 124 (2) 2 of the Act and the short-form investment prospectus defined in Article 124 (2) 3 of the Act), or from omitting to state or indicate a material fact;
(b) Requesting or promising an issuer, a seller, or a related person, in advance, to purchase securities after public offering, private placement, or sale in consideration of underwriting of the securities;
(c) Receiving, directly or indirectly, economic benefits, generated from investment in certain securities, from a person to whom the securities are distributed, or requesting such person to purchase such securities additionally, in consideration of distribution of the securities underwritten (including intermediary services of public offerings, private placements, or sales; hereafter the same shall apply in this subparagraph);
(d) Discriminating against subscribers of underwritten securities, without good cause, in distributing such securities;
(e) Other activities prescribed and publicly notified by the Financial Services Commission as likely to undermine the protection of investors or sound trading practices;
5. Selling or purchasing certain financial investment instruments by recommending investors to sell or purchase the financial investment instruments without informing investors of the fact he/she is aware of, which significantly affect the value of such financial investment instruments;
6. Accepting entrustment by an investor of trading or any other transaction, knowing the fact that the investor intends to trade or conduct any other transaction, in violation of Article 174, 176, and 178 of the Act;
7. Using any unfair means to conceal an illegal transaction of an investor in connection with trading or any other transaction of financial investment instruments;
8. Accepting entrustment of trading or any other transaction, without good cause, even where it is obviously foreseeable that the payment will not be made in connection with the trading or any other transaction of financial investment instruments;
9. Recommending an investor to purchase or sell securities issued by an investment trader or broker;
10. Purchasing collective investment securities (excluding collective investment securities listed on the securities market) from an investor, or acting as a broker, an intermediary or an agent for such purchase: Provided, That purchasing such securities in accordance with the proviso to Article 235 (6) of the Act shall be excluded herefrom;
11. Using a transaction of an over-the-counter derivative, a trust contract, or a linked transaction to circumvent the prohibition or restriction prescribed in Article 55 and 71 of the Act;
12. Receiving a blank note or check to secure collateral for a creditor's rights;
13. Discriminating against customers without good cause by connecting the sales of collective investment securities with any business, other than the sales of collective investment securities;
13-2. Performing a short-term financing business under Article 77-6 (1) 2 by a general financial investment business entity, in violation of Article 77-6 (2);
13-3. Performing comprehensive investment account business under Article 77-6 (1) 3 by a general financial investment business entity, in violation of Article 77-6 (3);
14. Other activities prescribed and publicly notified by the Financial Services Commission as likely to undermine the protection of investors or sound trading practices.
 Article 69 (Credit Granting)
(1) An investment trader or investment broker may grant credit to investors in any of the following manners in accordance with Article 72 (1) of the Act:
1. Lending money to an investor who has an account for trading securities with that investment trader or investment broker for purchasing such securities, or lending such person securities that the investor intends to sell;
2. Lending money to a person who deposits his/her securities with that investment trader or investment broker, taking the securities as collateral.
(2) Notwithstanding paragraph (1), if an investment trader or investment broker provides prime brokerage services, the investment trader or investment broker may grant credit to any hedge fund, etc. provided with such prime brokerage services in any of the following manners: <Newly Inserted by Presidential Decree No. 23197, Sep. 30, 2011; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015>
1. Lending money for purchasing securities or lending securities that such hedge fund, etc. intend to sell;
2. Lending money taking the securities, which are the investors' property of the hedge fund, etc. kept in custody and managed as part of prime brokerage services, as collateral.
(3) Further specific guidelines for the credit granting under paragraphs (1) and (2), the ratio of collateral, the method of collection, etc. shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 23197, Sep. 30, 2011>
 Article 70 (Method for Giving Notice of Details of Trading)
(1) Every investment trader or broker shall comply with the following in giving notice under Article 73 of the Act:
1. It shall give notice stating the type of trading, issues, items, volume, price, all expenses including fees, and other details of transactions immediately after trading is closed, and shall give notice stating the details of trading and the statement of profit or loss on a monthly basis and the status of balance and unsettled agreements as of the end of each month by 20th day of the month following that in which the trading is closed;
2. It shall give notice by the means agreed in advance between an investor and the investment trader or broker among the following means (only item (a) shall apply to a transaction that is not managed by and recorded in the account register, etc.): Provided, That if the investor does not wish to receive the notice, such notice may be made available for inspection at the branch office or any other business office or on its website for occasional inquiry by accessing the website:
(a) Issuing written notice;
(b) Telephone, telegraph, or facsimile;
(c) Electronic mail or any other similar electronic means of communications;
(d) Other means prescribed and publicly notified by the Financial Services Commission.
(2) Further details necessary for giving notice under paragraph (1) shall be prescribed and publicly notified by the Financial Services Commission.
 Article 71 (Exception to Deposits of Financial Securities Companies)
"Investment trader or broker prescribed by Presidential Decree" in the former part of Article 74 (2) of the Act means the following persons:
1. Banks;
2. The Korea Development Bank established under the Korea Development Bank Act;
3. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;
4. Insurance companies.
 Article 72 (Exceptional Transfer, etc. of Investor's Deposit)
"Circumstances prescribed by Presidential Decree" in Article 74 (4) of the Act means any of the following:
1. Where a depositing financial investment business entity defined in Article 74 (4) of the Act (hereinafter referred to as "depositing financial investment business entity") is merged into another company or a new company is established as a consequence of a merger of such depositing financial investment business entity and another company, and thus such depositing financial investment business entity transfers the investor's deposit placed in a deposit or trust account with a depository institution to the company surviving the merger or the newly established company;
2. Where a depositing financial investment business entity transfers its financial investment business, entirely or partially, and thus transfers the investor's deposit placed in a deposit or trust account with a depository institution to the transferee company in accordance with the terms and conditions of the transfer agreement;
3. Where a depositing financial investment business entity offers the investor's deposit placed in a deposit or trust account with a deposit bank as collateral in connection with the money transfer referred to in subparagraph 4 of Article 40 of the Act in the manner prescribed and publicly notified by the Financial Services Commission within the limit prescribed and publicly notified by the Financial Services Commission;
4. Other circumstances prescribed and publicly notified by the Financial Services Commission in which the protection of investors is unlikely to be undermined.
 Article 73 (Time for Public Notice of Payment of Investor's Deposit)
"Period prescribed by Presidential Decree" in the latter part of Article 74 (5) of the Act means two months from the date an event under any subparagraph of the aforesaid paragraph occurs: Provided, That the period may be extended by one month or less, subject to the prior verification of the Financial Services Commission, if it is not possible to issue a public notice and make public disclosure within the period because of the occurrence of an event beyond control.
 Article 74 (Management of Investor's Deposit)
(1) "Financial institution prescribed by Presidential Decree" in Article 74 (7) 2 of the Act means any of the following institutions: <Amended by Presidential Decree No. 27205, May 31, 2016>
1. A bank;
2. The Korea Development Bank established under the Korea Development Bank Act;
3. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;
4. An insurance company;
5. An investment trader or investment broker;
6. A securities finance company;
7. A merchant bank;
8. The Korea Credit Guarantee Fund established under the Credit Guarantee Fund Act;
9. The Technology Guarantee Fund established under the Korea Technology Finance Corporation Act.
(2) "Method prescribed by Presidential Decree" in Article 74 (7) 3 of the Act means any of the following methods:
1. Providing a loan secured by securities or negotiable certificates of deposit denominated in KRW;
2. Depositing it in the Bank of Korea or a postal service agency established under the Postal Savings and Insurance Act;
3. Purchasing special purpose bonds;
4. Other methods prescribed and publicly notified by the Financial Services Commission by which the investor's deposit can be safely managed.
 Article 75 (Scope, etc. of Investor's Deposit)
(1) The scope of an investor's deposit that an investment trader or investment broker shall place in a deposit or trust account with a depository institution in accordance with Article 74 (1) or (2) of the Act shall be the amount calculated by subtracting the aggregate referred to in subparagraph 2 from the aggregate referred to in subparagraph 1: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 24697, Aug. 27, 2013>
1. The aggregate of the following amount:
(a) An amount deposited by the investor for trading of financial investment instruments or any other transaction;
(b) An amount paid by the investment trader or investment broker to the investor as the usage fee for the investor's deposit and other fees;
(c) An amount of profits generated from daily settlement of exchange-traded derivatives owned by the investor;
2. The aggregate of the following amount:
(a) An amount deposited by the investment trader or investment broker in an exchange (including an entity prescribed and publicly notified by the Financial Services Commission) and another investment trader or investment broker for the investor's trading and other transactions of financial investment instruments in the securities market (including transactions via alternative trading systems) or the derivatives market;
(b) An amount deposited by the investment trader or investment broker in a foreign securities market (including its settlement institution), foreign alternative trading system (referring to an entity that provides the services equivalent to an alternative trading system in a foreign country in accordance with the foreign statutes and including its settlement institution) or a foreign derivatives market (referring to a foreign derivatives market defined in Article 5 (2) 2 of the Act and including its settlement institution) and a foreign investment trader or a foreign investment broker for the investor's trading of financial investment instruments and other transactions abroad;
(c) All expenses incurred in relation to the investor's trading of financial investment instruments and other transactions, including the entrustment commission;
(d) Money referred to in Articles 3 (3) 1, 2, and 3 (excluding money paid to the investment trader or investment broker by the investor for acquiring collective investment securities pursuant to Article 76 (1) of the Act) and 3 (3) 4;
(e) All losses incurred from daily settlement of exchange-traded derivatives owned by the investor.
(2) Each investment trader or investment broker shall place not less than 100 percent of the amount calculated under paragraph (1) in a deposit or trust account with a depository institution.
(3) A depositing financial investment business entity may withdraw the investor's deposit placed in a deposit or trust account with a depository institution in accordance with the following guidelines:
1. If the investor's deposit already placed in a deposit or trust account exceeds the investor's deposit that must be placed in the deposit or trust account: The difference between the investor's deposit placed in the deposit or trust account and the investor's deposit that must be placed in the deposit or trust account;
2. If an event occurs that requires the preferential payment under any subparagraph of Article 74 (5) of the Act: The investor's deposit placed in the deposit or trust account;
3. If withdrawal of the investor's deposit is deemed necessary by the Financial Services Commission because investors make a mass simultaneous request for the payment of the investor's deposit or for any other reason: The amount deemed necessary.
(4) Every depository institution shall separate the investor's deposit placed in a deposit or trust account from its proprietary property and shall manage it in good faith.
(5) Further details necessary in relation to the scope of the investor's deposit referred to in paragraph (1), the timing, cycle, ratio, and method of placing it in a deposit or trust account, the withdrawal and management of the deposit, etc. shall be prescribed and publicly notified by the Financial Services Commission.
 Article 76 (Depositing of Securities Deposited by Investors)
(1) "Those prescribed by Presidential Decree" in the main sentence of Article 75 (1) of the Act means the following instruments: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Negotiable certificates of deposit denominated in KRW;
2. Other instruments designated and publicly notified by the Financial Services Commission.
(2) "Cases prescribed by Presidential Decree" in the proviso to Article 75 (1) of the Act means cases prescribed in each subparagraph of Article 63 (2). <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
(3) "Method prescribed by Presidential Decree" in Article 75 (2) of the Act means depositing in an account of the Securities Depository opened in a foreign depository institution prescribed and publicly notified by the Financial Services Commission through account transfer, etc. <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
 Article 77 (Special Cases concerning Sale, etc. of Collective Investment Securities)
(1) "Circumstances prescribed by Presidential Decree" in the proviso to Article 76 (1) of the Act means any of the following circumstances: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 27291, Jun. 28, 2016>
1. Where the investor pays money, etc. to the relevant investment trader or broker after the base point of time for determining the date for claiming purchase of collective investment securities as stipulated in the collective investment agreement;
2. Where the relevant investment trader or broker sells collective investment securities of a money market fund in any of the following cases:
(a) Where the investor has agreed, in advance, with the investment trader or broker that sells collective investment securities to purchase collective investment securities of a money market fund with the payment received for sale or redemption of financial investment instruments or others on the date of settlement;
(b) Where the investor has agreed, in advance, with the investment trader or broker that sells collective investment securities to purchase collective investment securities with the money that he/she receives on a regular basis, such as wages, on the date of receipt;
(c) Where surplus funds are managed comprehensively under Article 81 of the National Finance Act and collective investment securities of a money market fund, the collective investment agreement of which contains terms that such collective investment securities will be redeemed at the base price publicly announced on the date on which a request for redemption is claimed, are sold;
3. Where collective investment securities of a money market fund are sold to any of the following:
(a) The foreign exchange equalization fund established under Article 13 of the Foreign Exchange Transactions Act;
(b) The money market fund and collective securities investment scheme that comprehensively manage surplus funds pursuant to Article 81 of the National Finance Act;
4. Where the committee on assessment of collective investment property established under Article 261 recognizes that applying the base price referred to in the main sentence of Article 76 (1) of the Act is likely to undermine the interests of investors of the relevant collective investment scheme;
5. Where an investor redeems the collective investment securities to change the investment trader or broker who sold such collective investment securities of the collective investment scheme without changing such collective investment scheme and then purchase the relevant collective investment securities through another investment trader or broker.
(2) "Base price prescribed by Presidential Decree" in the proviso to Article 76 (1) of the Act means the price referred to in any of the following subparagraphs: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21898, Dec. 21, 2009>
1. Where paragraph (1) 1 applies: The base price publicly announced on the third business day counting from the date the money, etc. is paid;
2. Where paragraph (1) 2 or 3 applies: The base price publicly announced on the date the money, etc. is paid;
3. Where paragraph (1) 4 applies: The base price publicly announced on or after the third business day counting from the date the money, etc. is paid;
4. Where paragraph (1) 5 applies: The base price publicly announced on the date the change of the investment trader or broker prescribed in the collective investment agreement takes effective within 15 days after redemption of the collective investment securities.
(3) "Circumstances prescribed by Presidential Decree" in the proviso to Article 76 (3) of the Act means where sale of collective investment securities in a new form is planned in accordance with an amendment to a relevant statutes and thus the investors' interest is unlikely to be undermined even if the outlines of the collective investment scheme is advertised. In such cases, if the amendment to the relevant statutes is not finalized, the advertisement shall include a statement that the details may be subject to change according to a final amendment to the relevant statutes.
(4) Neither sales commission nor sales remuneration charged by an investment trader or investment broker pursuant to Article 76 (5) of the Act (referring to sales remuneration defined in Article 76 (4) of the Act; hereinafter referred to as "sales remuneration") shall exceed the following limits: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 22197, Jun. 11, 2010>
1. Sales commission: Two percent of the amount of payment or redemption;
2. Sales remuneration: One percent of the average annual value of the collective investment property: Provided, That where the ratio of sales remuneration decreases depending upon the investment period by an investor and the ratio of sales remuneration applicable as at the point of time in excess of the period prescribed and publicly notified by the Financial Services Commission is no less than one percent, sales remuneration may be determined within the scope between one percent and 1.5 percent up to the relevant point of time.
(5) Every investment trader or broker may charge sales commission or sales remuneration by any of the following means as stipulated in the terms and conditions of the collective investment agreement:
1. Sales commission: Collecting from an investor in lump sum at the time of sale or redemption or collecting from the investor in installments during the period of investment;
2. Sales remuneration: Collecting from the relevant collective investment scheme in proportion to the scale of the collective investment property on a daily basis.
(6) Sales commission may be charged in tiered rates, based on the method of sales, the investment trader or broker involved, the amount of sales, the investment period, and other factor, as stipulated in the terms and conditions of the collective investment agreement.
(7) The base point of time referred to in paragraph (1) 1 and matters concerning the change of the investment trader or broker under paragraph (1) 5, the guidelines for determining the specific limits on sales commission and sales remuneration charged under paragraphs (4) and (5), and other necessary details shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 21898, Dec. 21, 2009>
 Article 77-2 (Contracts Corresponding to Contracts for Deposit with Investment Risks)
"Contract corresponding thereto prescribed by Presidential Decree" in the main sentence of Article 77 (1) of the Act means a contract for issuance of gold savings account, etc.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 77-3 (Designation, etc. of Comprehensive Financial Investment Business Entities)
(1) "Amount prescribed by Presidential Decree" in Article 77-2 (1) 3 of the Act means the amount classified as follows: <Amended by Presidential Decree No. 28040, May 8, 2017>
1. A comprehensive financial investment business entity that intends to perform prime brokerage business, credit offering business for enterprises, and business prescribed in Article 77-6 (1) 1: Three trillion won;
2. A comprehensive financial investment business entity that intends to perform business prescribed in subparagraph 1 and the business prescribed in Article 77-6 (1) 2: Four trillion won;
3. A comprehensive financial investment business entity that intends to perform business prescribed in subparagraph 2 and the business prescribed in Article 77-6 (1) 3: Eight trillion won.
(2) "Criteria prescribed by Presidential Decree" in Article 77-2 (1) 4 of the Act means following criteria:
1. An investment trader or investment broker shall have human resources, the electronic computer system and the internal control system appropiate for risk management and internal control, etc. pertaining to the services of a comprehensive financial investment business entity;
2. An investment trader or investment broker shall meet each of the following requirements:
(a) To have appropriate internal control guidelines for identifying, assessing and managing the likelihood of conflicts of interests under Article 44 of the Act;
(b) To have an appropriate system to prevent the acts prescribed in subparagraphs of Article 45 (1) and (2) of the Act.
(3) An entity that intends to be designated as a comprehensive financial investment business entity under Article 77-2 (2) of the Act shall file an application for designation with the Financial Services Commission along with documents verifying that all the requirements prescribed in subparagraphs of Article 77-2 (1) of the Act are met.
(4) Upon receipt of an application for designation filed under paragraph (3), the Financial Services Commission shall examine the contents of the application; determine whether to designate the applicant as a comprehensive financial investment business entity within two months; and give written notice of its determination and the grounds therefor to the applicant without delay. In such cases, the Financial Services Commission may request that the applicant cure defects, if any, in his/her application for designation.
(5) The period prescribed by Ordinance of the Prime Minister, including the period for curing defects in the application for designation shall be disregarded for the purposes of computing the period of examination under paragraph (4).
(6) In determining whether to designate an applicant as a comprehensive financial investment business entity under paragraph (4), the Financial Services Commission shall grant a designation unless any of the following applies:
1. Where the applicant fails to meet any of the requirements for designation of a comprehensive financial investment business entity prescribed in Article 77-2 (1) of the Act;
2. Where the application for designation filed under paragraph (3) contains false information;
3. Where the applicant fails to cure defects in his/her application as requested under the latter part of paragraph (4).
(7) Upon having determined to designate an applicant as a comprehensive financial investment business entity under paragraph (4), the Financial Services Commission shall state necessary matters in the register of designation of comprehensive financial investment business entities and publish the details of determination for designation in the Official Gazette, website, etc.
(8) Where the Financial Services Commission revokes the designation of a comprehensive financial investment business entity, it shall record the details thereof, maintain and manage it, and publish such fact in the Official Gazette, website, etc.
(9) Except as specifically provided for in paragraphs (1) through (8), detailed criteria for requirements for the designation of comprehensive financial investment business entities; filing an application for designation; examination of the application; the form of the application; procedures for revocation of designation; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 77-4 (Contracts, etc. for Prime Brokerage Services)
(1) “Entity prescribed by Presidential Decree, taking into account the objects of investment, existence of any loan” in Article 77-3 (2) of the Act means a hedge fund, etc. <Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015>
(2) "Entity prescribed by Presidential Decree" in Article 77-3 (2) of the Act means an entity entrusted with the services referred to in Article 6 (9) 3 of the Act by a comprehensive financial investment business entity or a fund accounting and administration company entrusted with the services referred to in Article 184 (6) 2 of the Act by a hedge fund, etc. <Amended by Presidential Decree No. 26600, Oct. 23, 2015>
(3) "Means prescribed by Presidential Decree" in Article 77-3 (2) 2 of the Act means a repurchase agreement, and other means prescribed by Ordinance of the Prime Minister, in consideration of the efficient performance, etc. of prime brokerage services.
(4) "Matters prescribed by Presidential Decree" in Article 77-3 (2) 4 of the Act means the following matters:
1. Matters concerning the scope of, and guidelines, procedures, etc. for, prime brokerage services;
2. Matters concerning the fees, other expenses, etc. for providing prime brokerage services;
3. Matters concerning the causes of, and procedures for, termination of a contract, compensation for losses caused by default, etc.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 77-5 (Scope, etc. of Credit Offering)
(1) The scope of credit offering referred to in Article 77-3 (3) 1 of the Act is as follows:
1. Offering loans;
2. Deleted; <by Presidential Decree No. 27291, Jun. 28, 2016>
3. Discount and purchase of bills other than commercial paper.
(2) “Cases prescribed by Presidential Decree” in the proviso to Article 77-3 (4) of the Act means the following cases: <Amended by Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016>
1. Where credit is offered with money pooled from a third person using collateral received from a hedge fund, etc., in the manner prescribed and publicly notified by the Financial Services Commission;
2. Where a credit is offered within a period prescribed by Ordinance of the Prime Minister in relation to the affairs prescribed in the subparagraphs of Article 68 (2);
3. Where a credit is offered (limited to a portion where the repayment of principal and interest is guaranteed), for which the repayment of principal and interest is guaranteed by the State, a local government, a foreign government, any of the financial institutions referred to in subparagraphs of Article 362 (8) or a foreign financial institution corresponding thereto.
(3) "Entity that shares credit risk prescribed by Presidential Decree" in Article 77-3 (5) of the Act means a company that belongs to a conglomerate (referring to a conglomerate as defined in subparagraph 2 of Article 2 of the Monopoly Regulation and Fair Trade Act; hereafter the same shall apply in this Article).
(4) "Percent prescribed by Presidential Decree" in Article 77-3 (5) of the Act means 25 percent.
(5) "Overseas corporation prescribed by Presidential Decree" in Article 77-3 (7) of the Act means any foreign corporation with which a comprehensive financial investment business entity is in any relationship prescribed in any of subparagraph 1 (b) through (d) of Article 3 of the same Act, where the comprehensive financial investment business entity belongs to a conglomerate
(6) Except as specifically provided in paragraphs (2) through (5), detailed matters necessary in relation to the criteria for, and reporting on, the status of credit offering shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 77-6 (Services of Comprehensive Financial Investment Business Entities)
(1) "Services prescribed by Presidential Decree as appropriate to be permitted only for comprehensive financial investment business entities" in Article 77-3 (3) 2 of the Act means any of the following services: <Amended by Presidential Decree No. 28040, May 8, 2017>
1. Over-the-counter transactions of stock certificates listed on a securities market, stock certificates which are not listed on a securities market, and other financial investment instruments prescribed and publicly notified by the Financial Services Commission, which are performed simultaneously with multiple number of persons as counterparties to the trade or as each party to the trade, or the brokerage, intermediary or agent services for such over-the-counter transactions, which satisfy the following criteria:
(a) An order for trading of the relevant financial investment instrument shall exceed the criteria for the amount or quantity of trade prescribed and publicly notified by Financial Services Commission;
(b) In cases of stock certificates listed on a securities market, the trade price shall be determined on the basis of the trade price formed in the exchange where the relevant stock certificates are listed;
2. Short-term financing business prescribed in Article 360 of the Act;
3. Business affair related to a comprehensive investment account (referring to an account established by a comprehensive financial investment business entity for the purpose of consolidating and investing the funds deposited by its clients in the assets related to corporate finance prescribed and publicly notified by the Financial Services Commission, such as grant of corporate credit, (hereafter referred to as "assets related to corporate finance in this Article) and distributing the profits generated as a result thereof to its clients).
(2) In operating a short-term financing business under paragraph (1) 2, a comprehensive financial investment business entity shall comply with the following criteria: <Newly Inserted by Presidential Decree No. 28040, May 8, 2017>
1. The total amount of funds raised from clients through short-term financing business shall not exceed 200 percent of its equity capital. In such cases, detailed methods of calculating the ratio, criteria for satisfying the ratio, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission;
2. The assets operated with the funds referred to in subparagraph 1 shall be managed separately from its proprietary property, in the manner prescribed and publicly notified by the Financial Services Commission;
3. At least 50 percent of the funds referred to in subparagraph 1 shall be invested in assets related to corporate finance. In such cases, detailed methods of calculating the ratio, criteria for satisfying the ratio, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission;
4. No funds remaining after making investment in the manner prescribed in subparagraph 3 shall be operated by any of the following methods:
(a) Credit granting to individuals;
(b) Investment in derivatives unrelated to corporate financing business;
(c) Other methods of management prescribed and publicly notified by the Financial Services Commission as unrelated to corporate financing business or likely to undermine the soundness in business management of the comprehensive finance investment business entity;
5. It shall not make investment in the assets related to real estate prescribed and publicly notified by the Financial Services Commission, such as real estate and securities related to real estate, (hereafter referred to as "assets related to real estate" in this Article) in excess of the ratio prescribed and publicly notified by the Financial Services Commission within 30 percent of the funds referred to in subparagraph 1: Provided, That where the investment is made to provide assistance to a large-scale overseas projects of the comprehensive financial investment business entity, which is prescribed and publicly notified by the Financial Services Commission, the funds may be invested up to the ratio separately prescribed and publicly notified by the Financial Services Commission;
6. It shall comply with Articles 326 through 328. In such cases, "merchant bank" shall be construed as "comprehensive financial investment business entity";
7. It shall comply with other criteria prescribed and publicly notified by the Financial Services Commission taking into consideration the relevance to corporate financing business, maintenance of the soundness of the business management of the comprehensive finance investment business entities, etc.
(3) In operating comprehensive investment account business under paragraph (1) 3, a comprehensive financial investment business entity shall comply with the following criteria: <Newly Inserted by Presidential Decree No. 28040, May 8, 2017>
1. The assets operated with the money deposited in a comprehensive investment account shall be managed separately from its proprietary property, in the manner prescribed and publicly notified by the Financial Services Commission;
2. Where the assets operated with the money deposited in a comprehensive investment account is traded with proprietary property of the comprehensive financial investment business entity, or collective investment property, discretionary investment property or trust property operated by the comprehensive financial investment business entity, the trade will be based on a fair price. In such cases, detailed methods for trading at a fair price shall be prescribed and publicly notified by the Financial Services Commission;
3. At least 70 percent of the money deposited in a comprehensive investment account shall be invested in assets related to corporate finance. In such cases, detailed methods of calculating the ratio, criteria for satisfying the ratio, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission;
4. No money remaining after making investment in the manner prescribed in subparagraph 3 shall be operated by any of the following methods:
(a) Credit granting to individuals;
(b) Investment in derivatives unrelated to corporate financing business;
(c) Other methods of investment prescribed and publicly notified by the Financial Services Commission as those unrelated to corporate financing business or likely to undermine the interest of clients of the comprehensive investment account;
5. Each asset operated with money deposited in the comprehensive investment account shall be appraised at a market price by the methods prescribed and publicly notified by the Financial Services Commission at least quarterly; however, where there is no reliable market price as of the date of appraisal, it shall be appraised at a fair value prescribed and publicly notified by the Financial Services Commission: Provided, That in cases prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of clients, such as where there are frequent changes of clients, it may be appraised at a book price;
6. It shall not grant credit (including loans, discount of notes, payment guarantee, purchase of securities in the nature of financial support, and other direct and indirect transactions accompanying credit risks in financial transactions; hereafter the same shall apply in this Article) to the same company or a person who shares credit risk prescribed and publicly notified by the Financial Services Commission with such company, in excess of 25 percent of the money deposited in the comprehensive investment account; <<Enforcement Date: May 9, 2018>>
7. It shall explain the following matters to each client before concluding a contract on the comprehensive investment account, and shall obtain confirmation from the client that he/she has understood the explanations, in the manner prescribed in Article 47 (2) of the Act:
(a) Whether the insurance relations referred to in Article 29 (3) 1 of the Depositor Protection Act is created;
(b) Methods of calculating and paying profit;
(c) Matters concerning expenses, such as remuneration (including contingent remuneration) and fees;
(d) Matters concerning modification and termination of the contract;
(e) Other matters prescribed and publicly notified by the Financial Services Commission to protect clients;
8. It shall not make investment in the assets related to real estate in excess of the ratio prescribed and publicly notified by the Financial Services Commission within 30 percent of the money deposited in the comprehensive investment account: Provided, That where the investment is for providing assistance to a large-scale overseas projects of the comprehensive financial investment business entity, which is prescribed and publicly notified by the Financial Services Commission, the deposited money may be invested up to the ratio separately prescribed and publicly notified by the Financial Services Commission;
9. It shall comply with other criteria prescribed and publicly notified by the Financial Services Commission, taking into consideration the relevance to corporate financing business and protection of clients.
[This Article Newly Inserted by Presidential Decree No. 27291, Jun. 28, 2016]
 Article 78 (Guidelines, etc. for Services of Alternative Trading Systems)
(1) "Business guidelines prescribed by Presidential Decree" in Article 78 (1) of the Act means the following: <Amended by Presidential Decree No. 27414, Jul. 28, 2016>
1. No alternative trading system shall provide alternative trading services for any of the following instruments for trade contracts:
(a) Instruments for trade contracts that an exchange has designated as issues for administration or any other similar issues pursuant to the Listing Regulations of Securities established under Article 390 of the Act;
(b) Listed stocks with no voting rights;
(c) Other instruments for trade contracts prescribed and publicly notified by the Financial Services Commission, considering the protection of investors, characteristics of trade, etc., such as instruments for trade contracts that have a poor trading record;
2. Participants in trading (referring to persons who participate in trading via an alternative trading system under Article 78 (1) 1 of the Act) shall be investment traders or investment brokers of instruments for trade contracts;
3. Where an exchange suspends or revokes the suspension of the trade of instruments for trade contracts, the trade of the relevant instruments for trade contracts shall be suspended or the suspension thereof shall be revoked;
4. Guidelines for the disclosure of asking prices and quantity for the purchase or sale, the principle and method, etc. of trade contracts shall be established. In such cases, the limit of fluctuation of prices of instruments for trade contracts shall comply with the guidelines of an exchange where the instruments for trade contract are listed;
5. Matters concerning clearing, such as transaction verification, debt acquisition and reduction, and dealing with nonpayment, shall be specified as prescribed by the Securities Market Business Regulations (referring to the Securities Market Business Regulations established under Article 393 (1) of the Act) of an exchange designated as a clearing institution under Article 378 (1) of the Act. In such cases, the procedures and methods for providing the relevant details to the exchange for clearing of transactions shall be included therein;
6. Matters concerning the delivery of securities, payment of prices thereof shall be specified, as prescribed by the Rules on Settlement Business of the Securities Depository (referring to the Rules on Settlement Business established under Article 303 (1) of the Act);
7. Matters concerning the entrustment, including matters subject to the rejection of entrustment under the Securities Market Business Regulations of a designated exchange under Article 78 (3) of the Act (hereinafter referred to as "designated exchange"), shall be specified;
8. Daily prices and trade volumes of each item shall be publicly announced;
9. The period for which alternative trading services are suspended, the grounds therefor, and the date of termination of such suspension shall be specified;
10. Procedures, methods, etc. for providing the matters prescribed in subparagraphs of Article 78 (3) of the Act shall be established as prescribed by the Market Oversight Regulations (referring to the Market Oversight Regulations established under Article 403 of the Act) of the designated exchange;
11. Guidelines and methods for the provision of alternative trading services shall be established to ensure that the average trade volume of instruments for trade contracts meets the requirements prescribed in subparagraphs of Article 7-3 (2) where the competitive trading method defined in Article 8-2 (5) 1 of the Act is adopted;
12. Other matters prescribed and publicly notified by the Financial Services Commission to protect investor and to ensure fairness in providing alternative trading services shall be complied with.
(2) Each alternative trading system shall establish the business regulations that stipulate the matters referred to in subparagraphs of paragraph (1).
(3) When an alternative trading system establishes or amends the business regulations under paragraph (2), it shall promptly report thereon to the Financial Services Commission and disclose them to the public on its website, etc.
(4) Where necessary to form fair prices in the market, to protect investors, etc., the Financial Services Commission may request the relevant alternative trading system to amend its business regulations.
(5) "Conditions or factors prescribed by Presidential Decree" in Article 78 (3) 4 of the Act means information on trade contracts of an instrument for trade contracts, such as trading price, trade volume, and timing for transactions.
(6) In any of the following cases, stocks issued by an alternative trading system may be held in excess of 15 percent of outstanding voting stocks of the alternative trading system after obtaining approval from the Financial Services Commission, as prescribed in Article 78 (5) 3 of the Act:
1. Where a foreign alternative trading system (referring to an entity that performs the functions equivalent to an alternative trading system in a foreign country under the foreign statutes; hereinafter the same shall apply) holds the stocks for alliance with the alternative trading system;
2. Where a financial institution or institution related to financial investment business prescribed by Ordinance of the Prime Minister, or foreign alternative trading system holds not more than 30 percent of outstanding voting stocks of the alternative trading system where the fair operation of such alternative trading system is unlikely to be undermined;
3. Where stocks are held in excess of the ratio of stocks of an alternative trading system held by any of the following persons where financial institutions referred to in subparagraph 2 jointly hold the stocks:
(b) A non-finance company (referring to a company engaged in any business, other than the financial business prescribed and publicly notified by the Financial Services Commission).
(7) "Where trading volume of an instrument for trade contracts exceeds the criteria prescribed by Presidential Decree" in Article 78 (7) of the Act means where trading volume of the instrument for trade contracts falls under any of the following cases:
1. Where the average trade volume of the instrument for trade contracts of the relevant alternative trading system by type of securities classified in Article 4 (2) of the Act during the six-month period from the end of each month, exceeds 5 percent of the average trade volume of the instrument for trade contracts in the securities market during the same period;
2. Where the average trade volume of the instrument for trade contracts of the relevant alternative trading system by type of securities during the six-month period from the end of each month exceeds 10 percent of average trade volume of the instrument for trade contracts in the securities market during the same period.
(8) "Measures prescribed by Presidential Decree" in Article 78 (7) of the Act means the following measures:
1. A measure ensuring that the business plan, the system for preventing conflicts of interests, etc. of the alternative trading system is appropriate for protecting investors and securing fairness of the trade;
2. A measure requiring that the alternative trading system be equipped with the human resources, electronic computer system, and other physical facilities necessary for stably providing alternative trading services.
(9) Except as specifically provided in paragraphs (1) through (8), reporting on alternative trading services; methods and procedures for the provision of such services; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Wholly Amended by Presidential Decree No. 24697, Aug. 27, 2013]
Subsection 2 Rules on Business Conduct by Collective Investment Business Entities
 Article 79 (Methods, etc. of Giving Instructions on Asset Management)
(1) "Method prescribed by Presidential Decree" in the main sentence of Article 80 (1) of the Act and the former part of paragraph (5) of the same Article means the method by which the details of instructions can be managed objectively and precisely with the electronic computer system. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(2) "Cases prescribed by Presidential Decree" in the proviso to Article 80 (1) of the Act means where the investable assets are managed by adopting any of the following methods: <Amended by Presidential Decree No. 26600, Oct. 23, 2015>
1. Trading of any of the following securities:
(a) Equity securities or depositary receipts related to equity securities or beneficiary certificates, and derivatives-linked securities listed on a securities market or foreign securities market;
(b) Equity securities or depositary receipts related to equity securities or beneficiary certificates, and derivatives-linked securities issued by a corporation which filed an application for a preliminary examination for listing in accordance with the Listing Regulations referred to in Article 390 of the Act and has obtained confirmation from the exchange that the relevant securities conform to the Listing Regulations;
1-2. Trading of any of the following debt securities (including similar debt securities issued by a foreign country):
(a) State bonds;
(b) Local government bonds;
(c) Special purpose bonds;
(d) Corporate bonds (limited to those with credit ratings assessed by a credit rating company; in such cases, necessary matters concerning the credit assessment, etc. shall be prescribed and publicly notified by the Financial Services Commission);
(e) Commercial paper or short-term electronic bonds (referring to the short-term electronic bonds defined in subparagraph 1 of Article 2 of the Act on Issuance and Distribution of Short-Term Electronic Bonds, Etc.) that satisfy the requirements prescribed in subparagraphs of Article 183 (1);
2. Trading of exchange-traded derivatives;
3. Short-term loans provided under Article 83 (4) of the Act;
4. Loans provided under Article 251 (4) of the Act;
5. Trading of bills issued, discounted, traded, intermediated, underwritten, or guaranteed by any of the following financial institutions:
(a) A bank;
(b) The Korea Development Bank established under the Korea Development Bank Act;
(c) The Industrial Bank of Korea established under the Industrial Bank of Korea Act;
(d) The Korea Export-Import Bank established under the Korea Export-Import Bank Act;
(e) An investment trader or investment broker;
(f) A securities finance company;
(g) A merchant bank;
(h) A mutual savings bank established under the Mutual Savings Banks Act;
6. Trading of negotiable certificates of deposit;
7. Trading of means of foreign payment under the Foreign Exchange Transactions Act;
8. Trading of over-the-counter derivatives to hedge investment risks or executing contracts under Article 5 (1) 3 of the Act in accordance with the guidelines prescribed and publicly notified by the Financial Services Commission;
8-2. Repurchase agreements;
9. Other cases prescribed and publicly notified by the Financial Services Commission as inevitable to manage assets held by investment trusts efficiently.
(3) Where a collective investment business entity of any collective investment scheme other than an investment trust manages its collective investment property, paragraph (1) hereof and Article 80 (3) and (4) of the Act shall apply mutatis mutandis to the methods of acquisition, disposal, etc. of investable assets by collective investment property and the methods of giving instructions necessary to keep in custody and manage the assets which are acquired or disposed of to the trust business entity of the collective investment scheme. <Amended by Presidential Decree No. 26600, Oct. 23, 2015>
 Article 80 (Exceptions to Restrictions on Limits of Asset Management)
(1) "Circumstances prescribed by Presidential Decree" in the proviso to Article 81 (1) of the Act means where a collective investment business entity engages in any of the following acts: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26190, Apr. 7, 2015; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016; Presidential Decree No. 28040, May 8, 2017>
1. Investing up to 100 percent of the total value of assets of each collective investment scheme (limited to either a real estate fund, where items (d) through (g) are applicable, or a special asset fund, where items (h) through (l) are applicable and where the fund has stipulated the relevant matters in its collective investment agreement) in any of the following investable assets, when Article 81 (1) 1 (a) of the Act applies:
(a) State bonds;
(b) Monetary stabilization bonds of the Bank of Korea issued under Article 69 of the Bank of Korea Act;
(c) Bonds, the payment of the principal and interest of which is guaranteed by the State or a local government;
(d) Securities issued by a company established with a predetermined term of existence to develop specific real estate (hereinafter referred to as "real estate development company");
(e) Asset-backed securities issued using real estate or other real-estate-related assets prescribed and publicly notified by the Financial Services Commission as their underlying asset pursuant to subparagraph 4 of Article 2 of the Asset-Backed Securitization Act (hereinafter referred to as "asset-backed securities") where the total value of the underlying assets is not less than 70 percent of the total value of the securitization assets as defined in subparagraph 3 of Article 2 of the Asset-Backed Securitization Act (hereinafter referred to as "securitization assets");
(f) Residential mortgage-backed bonds or residential mortgage-backed securities (referring to residential mortgage-backed securities, the payment of which is guaranteed by a special-purpose company for mortgage-backed bonds established under the Act on Special-Purpose Companies for Mortgage-Backed Bonds, the Korea Housing Finance Corporation established under the Korea Housing Finance Corporation Act, or any of the financial institutions stipulated in Article 79 (2) 5 (a) through (g)) issued under the Act on Special-Purpose Companies for Mortgage-Backed Bonds or the Korea Housing Finance Corporation Act;
(g) Equity securities issued by a company that meets both of the following requirements (hereinafter referred to as "special-purpose company for investment in real estate"):
(i) It shall be established to invest in real estate (referring to the real estate defined in subparagraph 2 of Article 229 of the Act; hereafter the same shall apply in this item), investment securities issued by another special-purpose company for investment in real estate, or investable assets prescribed and publicly notified by the Financial Services Commission;
(ii) The total value of real estate shall not be less than 90 percent of the total amount of assets owned by the company and its subsidiaries (referring to a subsidiary as defined in Article 1-3 (1) of the Act on External Audit of Stock Companies; hereafter in this subparagraph the same shall apply);
(h) Stocks and bonds issued by a corporation established for performing an infrastructure project under the Act on Public-Private Partnerships in Infrastructure;
(i) Loans granted to a corporation established for performing an infrastructure project under the Act on Public-Private Partnerships in Infrastructure;
(j) Equity securities issued by a corporation (excluding companies specializing in investment in and funding the social infrastructure under the Act on Public-Private Partnerships in Infrastructure) with the objective of investing in a corporation established for performing a single infrastructure project in accordance with the aforesaid Act by acquiring stocks and bonds issued by the latter corporation or acquiring loan receivables granted to the latter corporation;
(k) A right to benefit from business;
(l) Equity securities issued by a company that meets both of the following requirements (hereinafter referred to as "company for investment in special assets"):
(i) It shall be established for the purpose of investing in special assets referred to in subparagraph 3 of Article 229 of the Act (hereinafter referred to as "special assets"), securities issued by other companies for investment in special assets, or other investable assets prescribed and publicly notified by the Financial Services Commission;
(ii) The amount related to special assets shall not be less than 90 percent of the total amount of assets owned by the company and its subsidiaries;
2. Investing up to 30 percent of the total value of the assets of each collective investment scheme in any of the following investable assets, when Article 81 (1) 1 (a) of the Act applies:
(a) Local government bonds;
(b) Special purpose bonds (excluding those referred to in subparagraph 1 (b) and (c)) and bills issued by a corporation established by direct operation of an Act (limited to the commercial papers and the bills discounted, traded, intermediated, or underwritten by the financial institutions referred to in the items of Article 79 (2) 5);
(c) Derivatives-linked securities;
(d) Bills or negotiable certificates of deposit issued by the financial institutions referred to in Article 79 (2) 5 (a) through (g) and bonds issued by the financial institutions referred to in items (a) and (e) through (g) of the aforesaid subparagraph;
(e) Bonds (limited only to bonds issued through public offering) or bills, the payment of which is guaranteed by any financial institution referred to in Article 79 (2) 5 (a) through (g);
(f) Bonds issued by a member state of the Organization for Economic Cooperation and Development or a country prescribed by Ordinance of the Prime Minister, in consideration of the protection of investors, etc.;
(g) Subordinated corporate bonds among corporate bonds issued under Article 31 of the Asset-Backed Securitization Act or subordinated beneficiary certificates among the beneficiary certificates issued under Article 32 of the aforesaid Act (limited to any collective investment scheme that contains a provision in its collective investment agreement to invest in subordinated corporate bonds or subordinated beneficiary certificates at not less than the ratio prescribed and publicly notified by the Financial Services Commission);
(h) Residential mortgage-backed bonds or residential mortgage-backed securities (referring to residential mortgage-backed securities, payment of which is guaranteed by a special-purpose company for mortgage-backed bonds established under the Act on Special-Purpose Companies for Mortgage-Backed Bonds, the Korea Housing Finance Corporation established under the Korea Housing Finance Corporation Act, or any of the financial institutions stipulated in Article 79 (2) 5 (a) through (g)) issued under the Act on Special-Purpose Companies for Mortgage-Backed Bonds or the Korea Housing Finance Corporation Act;
(i) Securities acquired by lending money to, or depositing money at, any of the financial institutions referred to in Article 79 (2) 5 (a) through (g);
3. Investing up to the total market-value-weighting equity securities issued by the same corporation, etc. (including the depositary receipts related to equity securities issued by such corporation; hereafter the same shall apply in this paragraph), where the total market-value weighting of such equity securities exceeds 10 percent, when Article 81 (1) 1 (a) of the Act applies. In such cases, the total market-value-weighting shall be calculated separately for the securities market established by an exchange, or a foreign securities market, and necessary matters concerning the calculation method, the base date of such calculation, the applicable period, and other matters shall be prescribed and publicly notified by the Financial Services Commission;
3-2. In applying Article 81 (1) 1 (a), investing up to 25 percent of the total value of assets of each collective investment scheme in securities issued by the same corporation, etc. (including the depositary receipt related to stock certificates issued by such corporation, etc.; hereafter the same shall apply in this subparagraph), meeting both of the following requirements:
(a) No investment shall be made in the securities issued by corporations, etc. prescribed and publicly notified by the Financial Services Commission, in consideration of the necessity to protect investors and the stable management of the collective investment property;
(b) Not less than 50 percent of the total value of assets of the relevant collective investment scheme shall be separately invested in securities issued by another same corporation, etc. respectively in the amount not exceeding 5 percent of the total value of assets of the relevant collective investment scheme;
3-3. Investing up to 30 percent of the total value of assets of each collective investment scheme which meets the requirements set forth in Article 234 (1) 1 of the Act in the same type of securities, when Article 81 (1) 1 (a) applies;
4. Investing the total assets of all real estate funds or total assets of a real estate fund, which is managed by a collective investment business entity, in any of the following equity securities up to 100 percent of the total number of outstanding equity securities, when Article 81 (1) 1 (b) or (c) of the Act applies:
(a) Equity securities issued by a real estate development company;
(b) Equity securities issued by a special-purpose company for investment in real estate;
5. Investing the total assets of all special asset funds or total assets of a special asset fund, which is managed by a collective investment business entity, in any of the following equity securities up to 100 percent of the total number of outstanding equity securities, when Article 81 (1) 1 (b) or (c) of the Act applies:
(a) Stocks issued by a corporation established for performing an infrastructure project under the Act on Public-Private Partnerships in Infrastructure;
(b) Equity securities issued by a corporation (excluding companies specializing in investment in and funding social infrastructure under the Act on Public-Private Partnerships in Infrastructure) with the objective of investing in a corporation established for performing a single infrastructure project in accordance with the aforesaid Act by acquiring stocks and bonds issued by the latter corporation or acquiring loan receivables granted to the latter corporation;
(c) Equity securities issued by a company for investment in special assets that invests in special assets related to any of the following:
(i) An infrastructure project prescribed in the Act on Public-Private Partnerships in Infrastructure;
(ii) Special assets prescribed and publicly notified by the Financial Services Commission, such as vessels, aircraft, or other similar assets;
5-2. An investment made by a collective investment scheme that satisfies all of the following requirements (hereinafter referred to as "private equity fund of funds") in the collective investment securities of the collective investment scheme (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act as a collective investment scheme similar thereto) operated by the same collective investment business entity (including any foreign collective investment business entity), by up to 100 percent of the total assets of each collective investment scheme, when Article 81 (1) 3 (a) of the Act applies:
(a) It shall invest more than 50 percent of its total assets in the collective investment securities issued by a hedge fund (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act as a collective investment scheme similar thereto);
(b) It shall issue collective investment securities only to the individuals, corporations, or other organizations (including funds under the Acts prescribed in attached Table 2 of the State Finance Act and collective investment schemes) that invest at least the amount prescribed and publicly notified by the Financial Services Commission which is at least five million won;
5-3. An investment made by a collective investment scheme whose total amount of investment in collective investment securities of any of the following collective investment schemes (hereinafter referred to as "real estate or special asset fund of funds") exceeds 80 percent of the total assets, in the collective investment securities of the collective investment scheme operated by the same collective investment business entity by up to 100 percent of the total assets of each collective investment scheme, when Article 81 (1) 3 (a) of the Act applies:
(a) A real estate fund;
(b) A special asset fund that invests in special assets falling under subparagraph 5 (c) (i) or (ii);
(c) A hedge fund that invests in real estate or special assets referred to in item (b) in excess of 50 percent of its total assets;
5-4. An investment made by a collective investment scheme that satisfies all of the following requirements in collective investment securities of the collective investment scheme (including any foreign collective investment scheme) operated and managed by the same collective investment business entity (including any foreign collective investment business entity), by up to 100 percent of the total assets of each collective investment scheme, when Article 81 (1) 3 (a) of the Act applies:
(a) It shall invest collective investment property in at least two collective investment schemes (including foreign collective investment schemes), whose main investable assets, and policies and strategies of investment are different from one another;
(b) It shall use a strategy of investment that flexibly adjusts the ratio of collective investment securities in which the collective investment scheme has invested;
(c) Where a collective investment business entity makes an investment in collective investment securities of a collective investment scheme that it manages in excess of 50 percent of collective investment property of each collective investment scheme, it shall establish a management remuneration system advantageous to investors in comparison to the general terms and conditions of transactions;
6. Investing up to 100 percent of the total assets of a collective investment scheme (limited to collective investment schemes permitted to invest more than 40 percent of the total assets; but in cases falling under item (b), including collective investment schemes permitted to invest more than 60 percent of the total assets in debt securities) in any of the following collective investment securities, when Article 81 (1) 3 (a) or (b) of the Act applies:
(a) Collective investment securities of a collective investment scheme (in cases of foreign collective investment schemes, limited to those registered under Article 279 (1) of the Act; hereafter the same shall apply in this item and item (c)) managed by a collective investment business entity (including foreign collective investment business entities; hereafter the same shall apply in this paragraph), if it invests more than 70 percent of its collective investment property in foreign currency assets;
(b) Collective investment securities (in cases of foreign collective investment securities, limited to collective investment securities of a collective investment scheme registered under Article 279 (1) of the Act) of an exchange-traded fund prescribed and publicly notified by the Financial Services Commission (including foreign exchange-traded funds similar to an exchange-traded fund; hereafter the same shall apply in this paragraph);
(c) Collective investment securities of a collective investment scheme whose collective investment property of the collective investment scheme managed by a single collective investment business entity is entrusted to at least two different collective investment business entities for management (limited to where not less than 90 percent of the total value of the assets of the collective investment scheme managed by the same collective investment business entity is invested in foreign currency assets);
6-2. Investing up to 100 percent of the total value of the assets of each collective investment scheme in collective investment securities of a collective investment scheme (including foreign collective investment scheme referred to in Article 279 (1) of the Act; hereafter the same shall apply in this subparagraph) whose collective investment property managed by the same collective investment business entity is entrusted to at least two different collective investment business entities for management (limited to where not less than 90 percent of the total assets of the collective investment scheme managed by the same collective investment business entity is invested in foreign currency assets), when Article 81 (1) 3 (a) of the Act applies;
7. Investing up to 30 percent of the total assets of each collective investment scheme in collective investment securities of an exchange-traded fund (limited to an exchange-traded fund prescribed and publicly notified by the Financial Services Commission taking into consideration the protection of investors, etc.) or collective investment securities of a collective investment scheme (including a foreign collective investment scheme; hereafter the same shall apply in this subparagraph) whose collective investment property managed by the same collective investment business entity is entrusted to at least two different collective investment business entities for management (limited to where not less than 90 percent of the total assets of the collective investment scheme managed by the same collective investment business entity is invested in foreign currency assets), when Article 81 (1) 3 (a) of the Act applies;
7-2. Investing, by the real estate or special asset fund of funds, up to 50 percent of the total assets of each collective investment scheme in collective investment securities of the same collective investment scheme, when Article 81 (1) 3 (b) applies;
8. Investing up to 100 percent of the total assets of an investment trust created by an insurance company in accordance with Article 251 (1) of the Act in a single collective investment scheme (including foreign collective investment schemes), when Article 81 (1) 3 (a) or (b) of the Act applies: Provided, That no collective investment business entity shall invest in a collective investment scheme managed by an affiliated company of the insurance company in excess of 50 percent of the total assets of the investment trust created by the insurance company;
8-2. Investing property of a collective investment scheme that satisfies all of the requirements prescribed in items of subparagraph 5-4 in the collective investment securities of any of the following collective investment schemes, when Article 81 (1) 3 (c) of the Act applies:
(a) A collective investment scheme (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act) that invests more than 40 percent of its collective investment property in collective investment securities of a real estate fund (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act as a collective investment scheme similar thereto);
(b) A collective investment scheme (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act) that invests more than 40 percent of its collective investment property in collective investment securities of a special asset fund (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act as a collective investment scheme similar thereto);
(c) A collective investment scheme (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act) that invests more than 40 percent of its collective investment property in stocks issued by a real estate investment company under the Real Estate Investment Company Act (including stocks listed on a foreign securities market as those similar thereto);
8-3. Investing, by a private equity fund of funds, up to 100 percent of the total assets of each collective investment scheme in the collective investment securities of a hedge fund (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act as a collective investment similar thereto), when Article 81 (1) 3 (d) of the Act applies;
8-4. Investing, by a real estate or special asset fund of funds, up to 100 percent of the total assets of each collective investment scheme in the collective investment securities of a hedge fund, when Article 81 (1) 3 (d) of the Act applies;
9. Investing assets held by an investment trust created by an insurance company in accordance with Article 251 (1) of the Act up to 100 percent of the total number of collective investment securities of a single collective investment scheme (including foreign collective investment schemes), when Article 81 (1) 3 (e) of the Act applies;
9-2. Investing the collective investment property of each collective investment scheme by up to 50 percent of the total number of collective investment securities of an exchange-traded fund referred to in Article 234 of the Act, when Article 81 (1) 3 (e) of the Act applies;
9-3. Investing up to 50 percent of the total number of collective investment securities of the same collective investment scheme (including any foreign collective investment scheme registered pursuant to Article 279 (1) of the Act) with the collective investment property of each private equity fund of funds, when Article 81 (1) 3 (e) of the Act applies;
9-4. Investing up to 50 percent of the total number of collective investment securities of the same collective investment scheme with the collective investment property of each real estate or special asset fund of funds, when Article 81 (1) 3 (e) of the Act applies;
10. Investing assets held by an investment trust created by an insurance company in accordance with Article 251 (1) of the Act, in excess of the limit set under Article 81 (1) 3 (f) of the Act, when Article 81 (1) 3 (f) of the Act applies;
11. Investing money in excess of the limit set under Article 81 (1) 3 of the Act when the same subparagraph applies, where surplus funds referred to in Article 81 of the State Finance Act are comprehensively managed;
12. Other acts prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors or the stable management of collective investment property.
(2) "Securities prescribed by Presidential Decree" in Article 81 (1) 1 of the Act means the foreign collective investment securities defined in Article 279 (1) of the Act.
(3) "Investable assets prescribed by Presidential Decree" in Article 81 (1) 1 of the Act means the following investable assets: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Negotiable certificates of deposit denominated in KRW;
2. Bills, except commercial paper;
3. Loan receivables, deposits, and other receivables prescribed and publicly notified by the Financial Services Commission, except those referred to in subparagraphs 1 and 2;
4. A right to benefit from business.
(4) "Ratio prescribed by Presidential Decree" in the former part of Article 81 (1) 1 (a) of the Act means 10 percent.
(5) "Qualification requirements prescribed by Presidential Decree" in Article 81 (1) 1 (d) of the Act means that any of the persons referred to in the subparagraphs of Article 10 (1) meets any of the following requirements: <Amended by Presidential Decree No. 22197, Jun. 11, 2010>
1. Where the person receives at least investment-grade ratings from a credit rating company (including entities that provides services business equivalent to credit rating services in a foreign country in accordance with foreign statutes; hereafter the same shall apply in subparagraph 2);
2. Where the person has a guarantor who has received at least investment-grade ratings from a credit rating company;
3. Where the person provides collateral.
(6) "Ratio prescribed by Presidential Decree" in Article 81 (1) 1 (e) of the Act means 100 percent of the value calculated by subtracting total liabilities from total assets of each collective investment scheme: Provided, That 200 percent shall apply to an exchange-traded fund that satisfies the criteria prescribed and publicly notified by the Financial Services Commission, which has no high risk of price fluctuation; <Amended by Presidential Decree No. 23197, Sep. 30, 2011; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016>
(7) "Period prescribed by Presidential Decree" in the main sentence of Article 81 (1) 2 (a) of the Act means any of the following: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 25843, Dec. 9, 2014; Presidential Decree No. 27444, Aug. 11, 2016>
1. For housing as defined in subparagraph 1 of Article 2 of the Housing Act, which is the real estate in Korea: One year: Provided, That where a collective investment scheme acquires unsold housing units (referring to housing units which are provided by a business entity prescribed in Article 54 of the Housing Act in accordance with the same Article and which are provided on a first-come, first-served basis, as no agreement for the sale in units is concluded in a housing complex for which a tenant contract date has already passed according to the public announcement for the recruitment of tenants), the period stipulated by the relevant collective investment agreement;
1-2. For real estate in Korea other than housing as defined in subparagraph 1 of Article 2 of the Housing Act: One year;
2. For real estate in a foreign country: The period stipulated by the relevant collective investment agreement.
(8) "Cases prescribed by Presidential Decree" in the proviso to Article 81 (1) 2 (a) of the Act means where a collective investment scheme is merged, terminated, or dissolved.
(9) "Cases prescribed by Presidential Decree" in the proviso to Article 81 (1) 2 (b) of the Act means where it is inevitable to dispose of real estate acquired for a real estate development project, because the feasibility of the real estate development project has significantly declined due to the enactment, amendment, or repeal of relevant statutes after the real estate was acquired and it is objectively proved impracticable to implement such real estate development project.
(10) "Ratio prescribed by Presidential Decree" in Article 81 (1) 3 (d) of the Act means five percent. <Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015>
(11) "Limits prescribed by Presidential Decree" in Article 81 (1) 3 (f) of the Act means limits prescribed in Article 77 (4).
 Article 81 (Grounds, etc. for Exceeding Limits of Restrictions on Asset Management in Exceptional Circumstances)
(1) "Act prescribed by Presidential Decree" in Article 81 (1) 4 of the Act means any of the following acts:
1. Concluding a sale and repurchase agreement (referring to selling securities under an agreement to repurchase upon the lapse of a certain period; hereinafter the same shall apply) in excess of the ratio prescribed and publicly notified by the Financial Services Commission within the limit of the total value of the securities that belong to each collective investment scheme;
2. Lending securities in excess of the ratio prescribed and publicly notified by the Financial Services Commission within the limit of the securities that belong to each collective investment scheme;
3. Borrowing securities in excess of the ratio prescribed and publicly notified by the Financial Services Commission within the limit of the total assets of each collective investment scheme.
(2) "Cause or event prescribed by Presidential Decree" in Article 81 (3) of the Act means any of the following causes and events: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Price fluctuation in any investable asset, which belongs to the collective investment property;
2. Partial termination of an investment trust or partial retirement of collective investment securities of an investment company, investment limited company, investment limited partnership company, investment limited liability company, investment limited partnership, or undisclosed investment association;
3. Exercise of a right, including the exercise of a security right;
4. A merger or merger after a split-off of a corporation that has issued securities that belong to the collective investment property;
5. Other cases where an investment exceeds any of the limits set under Article 81 (1) of the Act without acquiring additional investable assets.
(3) "Period prescribed by Presidential Decree" in Article 81 (3) of the Act means three months (or until the time when it is possible to dispose of an investable asset, where it is impracticable to dispose of the investable asset due to the bankruptcy, etc. or without causing a significant loss to the collective investment property). <Amended by Presidential Decree No. 28040, May 8, 2017>
(4) "Period prescribed by Presidential Decree" in Article 81 (4) of the Act means the period classified as follows: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 27291, Jun. 28, 2016>
1. Real estate funds: One year;
2. Special asset funds: Six months;
3. Other collective investment schemes: One month.
 Article 82 (Disposition of One's Own Collective Investment Securities)
Each collective investment business entity of an investment trust or an undisclosed investment association shall dispose of the collective investment securities acquired in accordance with the former part of subparagraph 1 of Article 82 of the Act within one month from the acquisition date by any of the following methods:
1. Retirement;
2. Sale through an investment trader or broker.
 Article 83 (Restrictions on Borrowing Money, etc.)
(1) A collective investment business entity may borrow money from any of the following institutions, where it borrows money on account of a collective investment scheme in accordance with the proviso to Article 83 (1) of the Act:
1. A financial institution under any item of Article 79 (2) 5;
2. An insurance company;
3. A foreign financial institution similar to the one under subparagraph 1 or 2.
(2) Where a collective investment business entity borrows money in accordance with paragraph (1), it shall not purchase (excluding resale and buy-back of derivatives) additional assets for investment until it has fully repaid the money borrowed.
(3) "Financial institution prescribed by Presidential Decree" in Article 83 (4) of the Act means a financial institution falling under any subparagraph of Article 345 (1).
 Article 84 (Scope of Interested Parties)
"Interested party prescribed by Presidential Decree" in the main sentence of Article 84 (1) of the Act means any of the following persons: <Amended by Presidential Decree No. 21611, Jul. 1, 2009>
1. An executive officer and/or employee of the relevant collective investment business entity and his/her spouse;
2. A major shareholder of the relevant collective investment business entity and his/her spouse;
3. An affiliated company of the relevant collective investment business entity, an executive officer and/or employee of such affiliated company, and his/ her spouse;
4. An investment trader or broker who has sold directly, or on commission (hereafter referred to as "related investment trader or broker" in this Sub-Section), not less than 30 percent of collective investment securities of all collective investment schemes managed by the relevant collective investment business entity;
5. A trust business entity that keeps in custody and manages not less than 30 percent of the collective investment property (excluding the collective investment property of a collective investment scheme which comprehensively manages the surplus funds under Article 81 of the National Finance Act) of all collective investment schemes managed by the relevant collective investment business entity;
6. A supervisory director of an investment company in which the relevant collective investment business entity holds office as the corporate director.
 Article 85 (Exceptions to Restrictions on Trading with Interested Parties)
"Transactions prescribed by Presidential Decree" in Article 84 (1) 4 of the Act means the following transactions: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 23197, Sep. 30, 2011; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015>
1. A transaction of an investable asset, conducted with any person, other than an interested party, through the interested party acting as a broker, an intermediary or an agent, in the manner prescribed and publicly notified by the Financial Services Commission;
2. A transaction of any of the following investable assets, conducted with an interested party through the interested party acting as a broker for the transaction (referring to brokerage in the form of trading prescribed and publicly notified by the Financial Services Commission):
(a) Debt securities;
(b) Negotiable certificates of deposit denominated in KRW;
(c) Bills (excluding commercial paper);
3. A transaction through which the collective investment property is managed with an interested party (excluding a major shareholder or an affiliated company of the relevant collective investment business entity) within 10 percent of the total assets of each collective investment scheme in any of the following manners:
(a) Granting a short-term loan under Article 83 (4) of the Act;
(b) Executing a purchase and resale agreement (referring to where securities are purchased under an agreement to resell upon the lapse of a certain period; hereinafter the same shall apply);
4. Depositing in a financial institution (limited to any of the financial institutions referred to in Article 83 (1) 1 and an equivalent foreign financial institution; hereafter the same shall apply in this subparagraph), which is an interested party. In such cases, the amount deposited in a financial institution, which is an interested party, out of all collective investment property managed by the relevant collective investment business entity shall not exceed 10 percent of the amount deposited in all financial institutions;
5. Any of the following transactions with a trust business entity, which is an interested party:
(a) Trading any foreign currency (including forward exchange transactions to hedge exchange risks) under the Foreign Exchange Transactions Act;
(b) Executing a contract referred to in Article 5 (1) 3 of the Act (limited to where the underlying asset of which is a foreign currency) for trading over-the-counter derivatives to hedge exchange risks;
5-2. A transaction conducted with an interested party (only applicable to interested parties referred to in subparagraph 4 and 5 of Article 84 that provide prime brokerage services) as part of prime brokerage services;
5-3 A transaction through which an interested party (limited to persons who create the supply of or demand for repurchase agreements for any of the persons referred to in the items of Article 7 (4) 3 as the counterparty or as an independent party to the transaction; hereafter the same shall apply in this subparagraph) executes a repurchase agreement, or a transaction through which an interested party acts as a broker, an intermediary or an agent for a repurchase agreement;
6. Other transactions confirmed by the Financial Services Commission as unlikely to cause conflicts of interest with the relevant collective investment scheme, in consideration of the forms, conditions, methods, and other aspects of transactions.
 Article 86 (Restrictions, etc. on Acquisition of Securities of Affiliated Companies)
(1) "Limit prescribed by Presidential Decree" in Article 84 (4) of the Act means any of the following limits: <Amended by Presidential Decree No. 26600, Oct. 23, 2015>
1. Where a collective investment business entity acquires equity securities (including depositary receipts related to such equity securities; hereafter the same shall apply in this Article) issued by an affiliated company with the collective investment property of all collective investment schemes managed by the entity, the amount of equity securities acquired out of all outstanding equity securities issued by the affiliated company, shall be five percent of the amount available for the investment in equity securities out of the total assets of all collective investment schemes managed by the collective investment business entity and 25 percent of the total assets of each collective investment scheme managed by the collective investment business entity: Provided, That any of the following cases are excluded herefrom:
(a) Where the aggregate of total market-value-weighting (referring to the total market-value-weighting calculated in accordance with the latter part of Article 80 (1) 3; hereafter the same shall apply in this subparagraph) of all equity securities issued by an affiliated company exceeds five percent of the amount available for the investment in the equity securities out of the total assets of all collective investment schemes managed by the collective investment business entity and the collective investment business entity acquires all equity securities issued by the affiliated company up to the total market-value-weighting of the equity securities;
(b) Where the aggregate of total market-value-weighting of all equity securities issued by an affiliated company exceeds 25 percent and each collective investment scheme managed by the collective investment business entity acquires all equity securities issued by the affiliated company up to the total market-value-weighting of the equity securities;
(c) Where the collective investment business entity acquires all equity securities issued by an affiliated company with the collective investment property of a collective investment scheme operated with the purpose of managing assets in response to changes in the index prescribed and publicly notified by the Financial Services Commission among the indexes indicating the level of prices of a multiple number of issues up to the weighting of the relevant index;
2. Where the collective investment business entity invests the collective investment property of all collective investment schemes managed by each collective investment business entity in securities (referring to the securities referred to in Article 84 (4) of the Act, except equity securities) issued by an affiliated company (excluding a corporation established by direct operation of an Act; hereafter the same shall apply in this subparagraph), an amount equivalent to the ratio of the investment in the relevant collective investment business entity by all of its affiliated companies. In such cases, the amount equivalent to the ratio of the investment in the collective investment business entity by all affiliated companies shall be equal to the amount calculated by dividing the number of voting stocks issued by the collective investment business entity and held by all affiliated companies by the total number of outstanding voting stocks issued by the collective investment business entity and multiplying the rate so computed by the equity capital (or the capital, if the equity capital is not more than the capital) of the collective investment business entity.
(2) "Securities prescribed by Presidential Decree" in Article 84 (4) of the Act means the following securities:
1. Collective investment securities (excluding beneficiary certificates of an investment trust) and foreign collective investment securities provided for in Article 279 (1) of the Act;
2. Derivatives-linked securities;
3. Beneficiary certificates provided for in Article 110 of the Act.
(3) "Investable assets prescribed by Presidential Decree" in Article 84 (4) of the Act means the following investable assets:
1. Negotiable certificates of deposit denominated in KRW;
2. Bills or notes, except for commercial paper;
3. Loan receivables, deposits, and other receivables prescribed and publicly notified by the Financial Services Commission, except those referred to in subparagraphs 1 and 2.
(4) A collective investment business entity who acquires the stocks of an affiliated company in excess of five percent of the total assets of each collective investment scheme in accordance with any item of paragraph (1) 1 shall exercise voting rights, in accordance with Article 87 (2) of the Act, for the stocks of the affiliated company, held in excess of the weighting of the stocks of each affiliated company in the collective investment property, based on five percent of the total assets of a collective investment scheme. <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015>
(5) If securities held by a collective investment business entity exceed any of the limits set under the subparagraphs of paragraph (1) due to a cause or an event prescribed and publicly notified by the Financial Services Commission, although the collective investment business entity has not acquired additional securities under Article 84 (4) of the Act, the collective investment business entity shall manage such securities to meet the limits set under the subparagraphs of paragraph (1) within three months from the date such cause or event occurred.
 Article 87 (Prohibition on Unsound Business Activities)
(1) "Cases prescribed by Presidential Decree" in the proviso to Article 85 of the Act means any of the following cases: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 24841, Nov. 13, 2013; Presidential Decree No. 26600, Oct. 23, 2015>
1. In any of the following cases, when subparagraph 1 of Article 85 of the Act applies:
(a) Where a collective investment business entity proves that it has not used information related to the management of the collective investment property;
(b) Where it is objectively evident that the case in question is arbitrage for benefiting from the price difference between the securities market (including transactions via an alternative trading system) and the derivatives market or any equivalent transaction and that information relevant to the management of the collective investment property has not been used intentionally;
2. Where the collective investment business entity purchases the underwritten securities after three months from the underwriting date, when subparagraph 2 of Article 85 of the Act applies;
2-2. Where the securities underwritten are the state bonds, local government bonds, the Bank of Korea currency stabilization bonds issued under Article 69 of the Bank of Korea Act, special purpose bonds, or corporate bonds referred to in Article 4 (3) of the Act (excluding stock-related corporate bonds and bail-in contingent capital securities provided for in Article 176-13 (1); hereafter the same shall apply in this subparagraph), when subparagraph 2 of Article 85 of the Act applies: Provided, That the corporate bonds shall be limited to those meeting the criteria prescribed and publicly notified by the Financial Services Commission to protect investors and to ensure sound trading practices, including the terms and conditions of issuance and trading procedures;
2-3. Where the securities underwritten are stocks listed on a securities market and the stocks are purchased from the securities market, when subparagraph 2 of Article 85 of the Act applies;
3. Where two collective investment schemes managed by the relevant collective investment business entity engage in a transaction through which one selling an asset (including accounts payable under Article 224 (4)) and the other purchasing the asset at the same time in any of the following cases, when subparagraph 5 of Article 85 of the Act applies. In such cases, the collective investment business entity shall comply with the criteria prescribed and publicly notified by the Financial Services Commission, including the trading price and trading procedures and method, to protect investors:
(a) Where it is necessary to observe the investment limits set under the Act, this Decree, and the collective investment agreement of the collective investment scheme;
(b) Where it is necessary to accept a claim to buy-back collective investment securities;
(c) Where it is necessary to settle the termination money upon termination or dissolution of the relevant collective investment scheme;
(d) Where the Financial Services Commission deems that investors’ interests are unlikely to be undermined;
4. Where a specific collective investment property is traded with any of the investable assets referred to the items of subparagraph 2 of Article 85 through trading brokerage under the same paragraph with the collective investment business entity's proprietary property, when subparagraph 5 of Article 85 of the Act applies.
(2) "Related underwriter prescribed by Presidential Decree" in subparagraph 2 of Article 85 of the Act means any of the following underwriters:
1. An underwriter who belongs to a conglomerate (referring to a conglomerate as defined in subparagraph 2 of Article 2 of the Monopoly Regulation and Fair Trade Act; hereinafter the same shall apply) to which the collective investment business entity also belongs;
2. An underwriter whose sales of collective investment securities of all collective investment schemes managed by the relevant collective investment business are not less than the ratio prescribed and publicly notified by the Financial Services Commission.
(3) "Underwriting affairs prescribed by Presidential Decree" in subparagraph 3 of Article 85 of the Act means receiving a request to underwrite securities directly from an issuer or a seller and determining the terms and conditions of underwriting.
(4) "Activities prescribed by Presidential Decree" in subparagraph 8 of Article 85 of the Act means any of the following:
1. Managing the collective investment property, in violation of the collective investment agreement or the investment prospectus;
2. Trading the collective investment property for financial investment instruments too frequently, disregarding the collective investment scheme's management policy or strategy;
3. Providing an economic benefit, directly or indirectly, to an investment trader or broker (including its executive officers and/or employees, and investment solicitors) that sells collective investment securities of a collective investment scheme managed by the collective investment business entity, in the course of conducting its business, in violation of the criteria prescribed and publicly notified by the Financial Services Commission;
4. Accepting an economic benefit, directly or indirectly, from an investment trader or broker (including its executive officers and/or employees) in the course of conducting business, in violation of the criteria prescribed and publicly notified by the Financial Services Commission;
5. Managing the collective investment property according to an order, an instruction, or a request made routinely by an investor pursuant to a side agreement, etc. concluded with the investor;
6. Managing the collective investment property according to an order, an instruction, or a request made by an investment trader or broker that sells collective investment securities of a collective investment scheme managed by the collective investment business entity, pursuant to a side agreement, etc. concluded with the investment trader or broker;
7. An act committed with intent to circumvent the prohibitions or restrictions prescribed in Article 55, 81, 84, and 85 of the Act by using an over-the-counter transaction, a trust contract, a linked transaction, etc.;
8. Receiving a blank check or a blank note to secure the right of a creditor;
9. Other activities prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors and sound trading practices.
 Article 88 (Restriction on Contingent Remuneration)
(1) "Circumstances prescribed by Presidential Decree" in Article 86 (1) 2 of the Act means where all of the following conditions are met. In such cases, necessary matters concerning the method for the computation of the contingent remuneration, the timing for payment, and other matters shall be prescribed and publicly notified by the Financial Services Commission: <Amended by Presidential Decree No. 28040, May 8, 2017>
1. The contingent remuneration shall be calculated on the basis of the objective index or figures that cannot be modified at the discretion of a collective investment business entity (hereafter referred to as "reference index, etc." in this Article);
2. A remuneration system shall be established to pay remuneration for management smaller than the remuneration payable if the contingent remuneration system has not been adopted, where the results of management of a collective investment scheme shows poorer performance than the reference index, etc.;
3. It shall be stipulated that the contingent remuneration shall not be paid, if the results of management of a collective investment scheme exceed the performance of the reference index, etc. but show a negative return on investment or a certain aspect of the results fails to meet the guidelines prescribed and publicly notified by the Financial Services Commission;
4. Deleted; <by Presidential Decree No. 28040, May 8, 2017>
5. It shall satisfy the requirements by type of collective investment schemes classified as follows:
(a) In cases of a closed-end fund prescribed in Article 230 of the Act (hereinafter referred to as "closed-end fund"): It shall be created or established with its minimum term of existence stipulated for at least one year;
(b) In cases of a collective investment scheme not falling under item (a): It shall be created or established without stipulating its term of existence;
6. The upper limit of the contingency remuneration shall be stipulated.
(2) "Matters prescribed by Presidential Decree" in Article 86 (2) of the Act means following matters: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 28040, May 8, 2017>
1. A statement that contingent remuneration shall be paid and the upper limit of the remuneration;
2. The fact that it might be exposed to higher investment risks than any collective investment scheme that does not pay contingent remuneration;
3. Matters concerning all kinds of remuneration, including contingent remuneration;
4. The upper limit of contingency remuneration, such as reference index (limited to the cases falling under Article 86 (1) 2 of the Act);
5. The timing for the payment of contingent remuneration;
6. Matters concerning cases in which no contingent remuneration is paid;
7. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
 Article 89 (Restrictions, etc. on Exercise of Voting Rights)
(1) "Person who has an interest therein as prescribed by Presidential Decree" in Article 87 (2) 1 (a) of the Act means a specially related person or joint holder under Article 141 (2). <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
(2) "Person prescribed by Presidential Decree" in Article 87 (2) 1 (b) of the Act means any of the following persons: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. A related investment trader, related investment broker, or its affiliated company;
2. A major shareholder (including a shareholder who is a specially related person of the largest shareholder) of a collective investment business entity (referring to a collective investment business entity under Article 87 (1) of the Act).
(3) "Relationship prescribed by Presidential Decree" in Article 87 (2) 2 (b) of the Act means a relationship under which a person falls under any subparagraph of paragraph (2). <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
 Article 90 (Maintaining Records of Exercise of Voting Rights)
(1) "Ratio or amount prescribed by Presidential Decree" in Article 87 (7) of the Act means five percent of the total assets of each collective investment scheme or ten billion won.
(2) "Manner prescribed by Presidential Decree" in Article 87 (7) of the Act means keeping records as to whether and how the voting rights over a corporation required to disclose its voting rights to the public under Article 87 (7) of the Act have been exercised (or the reasons voting rights have not been exercised, if such is the case) in the business report prepared under Article 90 of the Act. <Amended by Presidential Decree No. 21898, Dec. 21, 2009>
 Article 91 (Public Disclosure, etc. of Exercise of Voting Rights)
(1) "Stocks prescribed by Presidential Decree" in the former part of Article 87 (8) of the Act means stocks issued by a stock-listed corporation defined in Article 9 (15) 3 (a) of the Act which is required to disclose its voting rights to the public under Article 87 (7) of the Act. <Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 26600, Oct. 23, 2015>
(2) A collective investment business entity shall disclose the details of voting rights it has exercised, etc. for the one-year period from April 1 of the immediately preceding year to the public through the securities market pursuant to the latter part of Article 87 (8) of the Act, by April 30 each year. <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 26600, Oct. 23, 2015>
(3) Deleted. <by Presidential Decree No. 23924, Jun. 29, 2012>
(4) "Data prescribed by Presidential Decree" in Article 87 (9) of the Act means the following data: <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
1. The collective investment business entity's internal guidelines relevant to the exercise of voting rights;
2. The number of stocks and the number of depositary receipts held by each collective investment scheme of the collective investment business entity in relation to the exercise of voting rights;
3. Whether the relationship between the collective investment business entity and the corporation for which it is entitled to exercise a voting right falls under the relationship provided for in Article 89 (1) or (2).
 Article 92 (Asset Management Reports)
(1) "Cases prescribed by Presidential Decree" in the proviso to Article 88 (1) of the Act means the following cases: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 24697, Aug. 27, 2013>
1. Where an investor expresses his/her intent not to receive an asset management report prepared under Article 88 of the Act (hereinafter referred to as "asset management report") in writing, by telephone, telegraph, facsimile, electronic mail, or by any other similar means of electronic communications;
2. Where the collective investment business entity manages a money market fund it has created or established and discloses an asset management report to the public at least once a month in the manner prescribed and publicly notified by the Financial Services Commission;
3. Where the collective investment business entity manages a closed-end fund it has created or established (limited to where the collective investment securities are listed in accordance with Article 230 (3) of the Act) and discloses an asset management report to the public at least once every three months in the manner prescribed and publicly notified by the Financial Services Commission;
4. Where the collective investment agreement stipulates that no asset management report will be delivered to an investor, if the assessed value of the collective investment securities held by the investor is not more than 100 thousand won.
(2) "Turnover rate prescribed by Presidential Decree" in Article 88 (2) 4 of the Act means the ratio calculated by dividing the total value of stocks sold during the pertinent management period (referring to the pertinent management period defined in Article 88 (2) 2 of the Act) by the average value of stocks held during the pertinent management period.
(3) "Matters prescribed by Presidential Decree" in Article 88 (2) 5 of the Act means the following matters: Provided, That matters referred to in subparagraphs 2 and 7 need not be included in any asset management report upon expiration of three-month, six-month, or nine-month period from the commencement date of the fiscal term, as its base date (referring to the base date prescribed in Article 88 (2) 1 of the Act; hereafter the same shall apply in this Article): <Amended by Presidential Decree No. 21898, Dec. 21, 2009>
1. Details of investable assets that belong to the collective investment property as of the base date;
2. Matters concerning fund managers of the collective investment scheme;
3. The investment environment and management plans of the collective investment scheme;
4. Details of investment by type of business or country;
5. Details of dividends in the settlement of accounts of the collective investment scheme (limited to the first asset management report to be prepared after the settlement of accounts);
6. Top ten items within the scope for investment of the collective investment scheme;
7. Structure of the collective investment scheme;
8. Where the collective investment scheme trades derivatives to hedge exchange risks, the details of such trade;
9. Other matters prescribed and publicly notified by the Financial Services Commission, as necessary for protecting investors.
(4) In delivering an asset management report to investors, each collective investment business entity shall deliver it to the investors in person or by electronic mail within two months from the base date via the investment trader or broker who sold collective investment securities or via the Securities Depository: Provided, That where the amount of investment made by an investor in the relevant collective investment scheme does not exceed one million won or where the investor does not have an e-mail address, the asset management report can be disclosed as prescribed in Article 89 (2) 1 of the Act in lieu of such delivery; and where the investor wants to receive it by mail, it shall do so, as requested by the investor. <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 26600, Oct. 23, 2015>
(5) Expenses incurred in preparing and delivering an asset management report shall be borne by the relevant collective investment business entity. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(6) The form and method of preparing an asset management report, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 93 (Means, etc. of Ad Hoc Public Disclosure)
(1) A fund manager's fund management career that shall be disclosed to the public by a collective investment business entity of an investment trust or an undisclosed investment association pursuant to Article 89 (1) 1 of the Act means a management career for the most recent three years from the date such fund manager is replaced. <Newly Inserted by Presidential Decree No. 23285, Nov. 4, 2011>
(2) "Non-performing assets prescribed by Presidential Decree" in Article 89 (1) 3 of the Act means assets prescribed and publicly notified as non-performing assets by the Financial Services Commission upon an issuer's bankruptcy or an application for the commencement of the rehabilitation proceedings under the Debtor Rehabilitation and Bankruptcy Act. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
(3) "Matters prescribed by Presidential Decree" in Article 89 (1) 5 of the Act means any of the following matters: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 28040, May 8, 2017>
1. Revisions of an investment prospectus: Provided, That any of the following cases shall be excluded herefrom:
(a) Where the investment prospectus is revised in accordance with an amendment to the Act or this Decree or an order issued by the Financial Services Commission;
(b) Where the investment prospectus is revised in accordance with an amendment to the collective investment agreement;
(c) Where an insignificant matter is modified, including simple modification of words and phrases in the investment prospectus;
(d) Where a fund manager is replaced and the investment prospectus is revised, as prescribed in Article 123 (3) 2 of the Act;
2. A merger, split-off, merger after a split-off, or transfer of business of the collective investment business entity;
3. Details of a change in the base price (limited to disclosing or posting it under the latter part of Article 262 (1)), where the collective investment business entity or the fund accounting and administration company changes the base price due to an error it made in calculating the base price;
4. Where the amount of principal does not exceed five billion won on the first anniversary of the creation and establishment of a collective investment scheme (limited to a collective investment scheme that is able to make additional offers for investment during its term of existence; hereafter the same shall apply in this paragraph), other than a privately placed fund, the fact thereof and the fact that the relevant collective investment scheme may be terminated pursuant to the proviso to Article 192 (1) of the Act;
5. Where the amount of principal does not exceed five billion won continuously for one month after one year has passed since the creation and establishment of a collective investment scheme, other than a privately placed fund, the fact thereof and the fact that the collective investment scheme may be terminated pursuant to the proviso to Article 192 (1) of the Act;
6. In cases of a real estate fund or special asset fund (including any real estate or special asset fund of funds), any of the following matters:
(a) Acquisition or disposal of non-marketable assets referred to in the proviso to Article 242 (2);
(b) Acquisition or disposal of collective investment securities of a real estate fund or special asset fund: Provided, That such cases are excluded herefrom where any collective investment securities which are the same as those already acquired are additionally acquired or partially disposed of;
(c) Occurrence of or changes in the rights related to real estate, such as superficies and servitude, and important rights related to special assets, such as right to business profits and right to the management and operation of facilities;
(d) Borrowing or lending of money;
7. Other matters prescribed and publicly notified by the Financial Services Commission as significantly affecting investors' investment decisions.
(4) Detailed standards concerning forms, how to fill such forms, matters to be stated therein, etc. in connection with the public disclosure provided for in paragraphs (1) through (3) shall be prescribed and publicly notified by the Financial Services Commission. <Newly Inserted by Presidential Decree No. 23285, Nov. 4, 2011>
 Article 94 (Reporting on, and Public Disclosure of, Collective Investment Property)
(1) Pursuant to Article 90 (1) of the Act, each collective investment business entity (referring to the collective investment business entity provided in Article 90 (1) of the Act; hereafter the same shall apply in this Article) shall prepare a business report on the collective investment property (limited to the assets held by an investment trust or undisclosed investment association; hereafter the same shall apply in this Article), which shall contain the following separate forms and documents, in accordance with the guidelines prescribed and publicly notified by the Financial Services Commission: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. The status of investment trusts created or the status of changes in the contributions of the undisclosed investment association;
2. The status of management of the collective investment property and a table of the base prices of collective investment securities (limited to beneficiary certificates of the investment trust and equity securities of the undisclosed investment association);
3. A document stating the details of voting rights exercised as prescribed in Article 87 (8) 1 and 2 of the Act and grounds therefor;
4. Turnover rate (referring to the turnover rate under Article 88 (2) 4 of the Act) of stocks among assets that belong to the collective investment property, the amount of transactions with each investment broker for commission sales of assets, the fees for such transactions, and the weighing of such transactions and fees.
(2) The Association shall compare and disclose the following items separately in accordance with the guidelines prescribed and publicly notified by the Financial Services Commission in disclosing comparative performances of management of collective investment property to the public pursuant to Article 90 (4) of the Act: <Amended by Presidential Decree No. 22197, Jun. 11, 2010>
1. Collective investment business entities;
2. Investment traders or brokers;
3. Types of collective investment schemes;
4. Major investable assets prescribed and publicly notified by the Financial Services Commission (hereinafter referred to as "major investable assets");
5. Remuneration for management;
6. Sales commission and sales remuneration;
7. Rate of return. In such cases, the rate of return on investment of collective investment schemes (limited to collective investment schemes that are able to make additional offers for investment during their terms of existence; hereafter the same shall apply in this paragraph) with principal not exceeding five billion won and those with principal exceeding five billion won as a collective investment scheme, other than privately placed funds, shall be separately compared and disclosed to the public;
8. Other matters prescribed and publicly notified by the Financial Services Commission.
(3) The Association may request that a collective investment business entity of an investment trust or an undisclosed investment association or an investment company, etc. provided in Article 182 (1) of the Act (hereinafter referred to as "investment company, etc.") submit the collective investment agreement, investment prospectus, and data concerning the base prices and other items of each collective investment scheme within the extent necessary for the comparative disclosure of the performance of management of collective investment schemes.
 Article 95 (Inspection, Public Disclosure, etc. of Account Books and Documents)
(1) "Justifiable ground prescribed by Presidential Decree" in the latter part of Article 91 (1) of the Act means any of the following grounds. In such cases, the collective investment business entity (referring to the collective investment business entity provided in Article 91 (1) of the Act) shall deliver to investors a written statement describing that the inspection or delivery of the account books and documents requested is impracticable and the reasons therefor:
1. Where a person provided with an account book or a document containing details of trading orders of the collective investment property is likely to use any information therein for a transaction or business or furnish a third person with such information;
2. Where providing an account book or a document containing details of trading orders of the collective investment property to a person is likely to incur losses on other investors;
3. Where an account book or document relates to a collective investment scheme already terminated or dissolved, and thus, making it impracticable to accept any request from an investor for inspection or delivery because the preservation period set under Article 62 (1) has elapsed or due to any other reason.
(2) The account books and documents that an investor is entitled to demanding to make them available for inspection or deliver a certified copy or an abstract thereof in accordance with Article 91 (1) of the Act are as follows:
1. A list of the collective investment property;
2. A ledger of the base prices of collective investment securities;
3. Financial statements and supplementary schedules;
4. A full statement on the management of the collective investment property.
 Article 96 (Special Cases concerning Management of Derivatives)
(1) "Guidelines prescribed by Presidential Decree" in the former part of Article 93 (1) of the Act means 10 percent of the total assets of a collective investment scheme.
(2) "Indexes related to risks, as prescribed by Presidential Decree" in the former part of Article 93 (1) of the Act means the following indexes: Provided, That subparagraph 2 shall not apply where it is impracticable to calculate the indexes because the data for calculating the risk-related indexes are insufficient or where the derivatives prescribed and publicly notified by the Financial Services Commission are involved:
1. Structure of profit or loss from trading derivatives at maturity;
2. Changes in the structure of profits and losses of the collective investment property according to changes in the market situation or the estimated amount of maximum losses that may be incurred from transactions of derivatives where the market prices fluctuate unfavorably against the collective investment scheme;
3. Other risk-related indexes prescribed and publicly notified by the Financial Services Commission, serving as important references in investors' investment decisions.
(3) The specific formula for calculating risk-related indexes referred to in paragraph (2) and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
(4) "Guidelines prescribed by Presidential Decree" in Article 93 (2) of the Act means 10 percent of the total assets of a collective investment scheme.
 Article 97 (Special Cases concerning Management of Real Property)
(1) "Manner prescribed by Presidential Decree" in Article 94 (1) of the Act means that a collective investment business entity borrows money by offering real estate as collateral to any of the following financial institutions, etc. or in the manner prescribed and publicly notified by the Financial Services Commission: Provided, That if a general meeting of collective investors has otherwise passed a resolution, money may be borrowed according to the resolution:
1. Any of the financial institutions referred to in the items of Article 79 (2) 5;
2. An insurance company;
3. The Funds established under the State Finance Act;
4. Another real estate fund;
5. A foreign financial institution similar to those referred to in subparagraphs 1 through 4.
(2) "Persons specified further by Presidential Decree" in Article 94 (2) of the Act means real estate investment companies established under the Real Estate Investment Company Act or other collective investment schemes.
(3) "Manner prescribed by Presidential Decree" in Article 94 (2) of the Act means the manner that meets both of the following requirements:
1. The collective investment agreement shall stipulate matters concerning the lending of money;
2. The collective investment business entity shall secure a means appropriate for collecting loans, such as creating a security right to real estate or ensuring a guarantee for payment by a contractor and others.
(4) Where a collective investment business entity lends money in accordance with Article 94 (2) of the Act, the limit on such loans shall be 100 percent of the amount calculated by subtracting total liabilities from total assets of that collective investment scheme.
(5) "Matters prescribed by Presidential Decree" in Article 94 (3) of the Act means the following matters:
1. Expenses incurred in relation to the trading of real estate;
2. Financial data related to real estate;
3. Elements affecting the earnings from real estate;
4. Other matters prescribed and publicly notified by the Financial Services Commission as necessary in determining whether to trade real estate.
(6) "Matters prescribed by Presidential Decree" in Article 94 (4) of the Act means the following matters:
1. Matters concerning the business plan, including the construction plan;
2. Matters concerning the procurement, investment, and collection of the funds;
3. Matters concerning estimated profits or losses;
4. Matters concerning risks in the project;
5. Matters concerning outsourcing services, including performance of construction works;
6. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(7) The limits on borrowings where a collective investment business entity borrows money in accordance with Article 94 (1) of the Act are as follows:
1. Where money is borrowed on a real restate fund's account: 200 percent of the amount calculated by subtracting total liabilities from total assets of the real estate fund: Provided, That if a general meeting of collective investors has otherwise passed a resolution, money can be borrowed up to the limit otherwise determined;
2. Where money is borrowed on an account of any collective investment scheme other than the real estate fund: The rate prescribed and publicly notified by the Financial Services Commission within 100 percent of the value of real estate that belongs to the collective investment scheme. In such cases, the value of the real estate shall be assessed by the assessment committee established under Article 238 (2) of the Act (hereinafter referred to as "committee on assessment of collective investment property") in accordance with the standards for the assessment of collective investment property under paragraph (3) of the aforesaid Article.
(8) No collective investment business entity shall manage money borrowed under Article 94 (1) of the Act in any manner other than by investing it in real estate: Provided, That such money may be managed in any manner other than by investing it in real estate, in circumstances prescribed and publicly notified by the Financial Services Commission, in consideration of the type of collective investment scheme and others.
(9) Deleted. <by Presidential Decree No. 26600, Oct. 23, 2015>
Subsection 3 Rules on Business Conduct by Investment Advisory Business Entities and Discretionary Investment Business Entities
 Article 98 (Execution of Contracts)
(1) "Matters prescribed by Presidential Decree" in Article 97 (1) 8 of the Act means the following matters: <Amended by Presidential Decree No. 26961, Feb. 5, 2016>
1. Matters concerning executive officers and major shareholders;
2. The form of discretionary investment property that investors will own at the beginning of the contract period and the form of discretionary investment property that investors will own at the end of the contract period, where a discretionary investment contract is executed;
3. Matters concerning the investment method applied to the management of the discretionary investment property;
4. The term applicable to the preparation of the discretionary investment report under Article 99 (1) of the Act (hereinafter referred to as "discretionary investment report");
4-2. Matters concerning the difference between the details of the methods of management proposed to the investor under the former part of paragraph (2) 2 and the details of the two or more methods of management prepared under the latter part of the same subparagraph, where a contract for asset portfolio-type individual savings account is executed;
5. Other matters prescribed and publicly notified by the Financial Services Commission, serving as important guidelines for investors in determining whether to execute a contract.
(2) A contract for asset portfolio-type individual savings account referred to in paragraph (1) shall be a discretionary investment contract for an individual savings account provided for in Article 91-18 (1) of the Restriction of Special Taxation Act (excluding any account named “individual savings account” which is opened by entering into a contract for a specified money trust with a trust business entity under paragraph (3) 2 of the same Article), which satisfies all of the following requirements: <Newly Inserted by Presidential Decree No. 26961, Feb. 5, 2016>
1. The financial investment business entity that enters into the discretionary investment contract shall be a discretionary investment business entity authorized as an investment broker for securities (hereafter referred to as "discretionary security investment broker" in this paragraph) ;
2. A discretionary security investment broker shall propose the methods of management including the types, weight, degree of risk, etc. of investable assets to an investor before entering into a discretionary investment contract. In such cases, the discretionary security investment broker shall prepare and propose at least two methods of management, in consideration of the purpose of investment, property status, investment experience, capacity to bear risks, etc. of the investor;
3. The discretionary security investment broker shall enter into a discretionary investment contract with an investor, stipulating the following matters:
(a) The broker does not have a discretionary power authorized by the investor to make all decisions on investment in investable assets;
(b) Details of the methods of management selected by the investor among those proposed to the investor under the former part of subparagraph 2;
(c) The broker shall manage the discretionary investment property by the methods of management referred to in item (b);
(d) Matters prescribed in subparagraphs 4 through 7;
4. The discretionary security investment broker shall comply with a request made by the relevant investor to change the methods of management stipulated in the discretionary investment contract under subparagraph 3 (b);
5. The discretionary security investment broker shall give written notice stating the item and quantity of an investable asset, methods of the acquisition or disposal, etc. to the relevant investor before acquiring or disposing of the investable asset in the course of managing the discretionary investment property by the methods of management stipulated in the discretionary investment contract under subparagraph 3 (b);
6. The discretionary security investment broker shall comply with a request made by the relevant investor in receipt of the written notice given under subparagraph 5, not to acquire or dispose of the investable asset or to change the item and quantity of the investable asset, the methods of acquisition or disposal, etc.;
7. Although no request is made by the investor under subparagraph 4, the discretionary security investment broker shall evaluate the following matters at least once per quarter; examine whether to change the methods of management stipulated in the discretionary investment contract under subparagraph 3 (b); and change the methods of management if deemed necessary:
(a) Safety and profitability of discretionary investment property as a consequence of the acquisition or disposal of investable assets by the methods of management stipulated in the discretionary investment contract under subparagraph 3 (b);
(b) Whether the items, quantities, etc. of investable assets managed with the discretionary investment property are appropriate, in consideration of the purpose of investment, property status, investment experience, capacity to bear risks, etc. of the relevant investor;
(c) Matters prescribed and publicly notified by the Financial Services Commission, as necessary to protect investors and to maintain sound trading practices.
 Article 99 (Prohibition on Unsound Business Activities)
(1) "Circumstances prescribed by Presidential Decree" in the proviso to Article 98 (1) of the Act means the following cases: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 28040, May 8, 2017>
1. Where an investment advisory business entity or a discretionary investment business entity runs another financial investment business or any other financial business concurrently and the statutes relevant to the concurrently-run business do not prohibit the activities provided for in Article 98 (1) 1 and 2 of the Act, when Article 98 (1) 1 and 2 of the Act applies;
1-2. Where investment advisory business or discretionary investment business is performed for general investors, using automated computerized data-processing system that satisfies all of the following requirements (hereinafter referred to as "electronic system giving investment advice"), when Article 98 (1) 3 of the Act applies:
(a) Investor's investment tastes shall be analyzed through the electronic system giving investment advice, taking into consideration his/her purpose of investment, status of property, investment experience, etc.;
(b) It shall be equipped with a system for preventing the occurrence of an intrusion defined in subparagraph 7 of Article 2 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, Etc. (hereinafter referred to as "intrusion") and disasters, etc., and a system for preventing the expansion and reoccurrence of damage, and for rapid recovery when any intrusion or disaster occurs;
(c) It shall satisfy requirements prescribed and publicly notified by the Financial Services Commission to protect investors and to maintain sound trading practices;
2. Any of the following cases, when Article 98 (1) 5 of the Act applies:
(a) Where an investment advisory business entity or a discretionary investment business entity proves that it has not used the information related to investment advisory services or management of discretionary investment property;
(b) Where it is objectively evident that an investment advisory business entity or a discretionary investment business entity has not intentionally used the information related to investment advisory services or management of discretionary investment property, such as conducting arbitrage.
(2) "Circumstances prescribed by Presidential Decree" in the proviso to Article 98 (2) of the Act means the following cases: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24841, Nov. 13, 2013; Presidential Decree No. 26600, Oct. 23, 2015>
1. Deleted; <by Presidential Decree No. 24697, Aug. 27, 2013>
2. Where the underwritten securities are purchased after three months from the date of underwriting, when Article 98 (2) 2 of the Act applies;
2-2. Where the securities underwritten are any of the state bonds, local government bonds, the Bank of Korea currency stabilization bonds issued under Article 69 of the Bank of Korea Act, special purpose bonds, or corporate bonds referred to in Article 4 (3) of the Act (excluding stock-related corporate bonds and bail-in contingent capital securities provided in Article 176-13 (1); hereafter the same shall apply in this subparagraph), when Article 98 (2) 2 of the Act applies: Provided, That the corporate bonds shall be limited to those meeting the criteria prescribed and publicly notified by the Financial Services Commission to protect investors and to maintain sound trading practices, including the terms and conditions of issuance and trading procedures;
2-3. Where the securities underwritten are stocks listed on a securities market and the stocks are purchased from the securities market, when subparagraph 2 of Article 98 of the Act applies;
3. Any of the following cases, when Article 98 (2) 6 of the Act applies:
(a) Where the trading is conducted under a contact executed six months earlier than the person becomes an interested party;
(b) Where the trading is conducted through an open market in which many unspecified people participate, such as the securities market;
(c) Where the trading is favorable to the discretionary investment property in light of ordinary terms and conditions of the trading;
(d) Repurchase agreements;
(e) Trading the discretionary investment property with any person, other than a discretionary investment business entity or an interested party, through an discretionary investment business entity or an interested party acting as a broker, an intermediary or an agent in the manner prescribed and publicly notified by the Financial Services Commission;
(f) Where an interested party trades debt securities, negotiable certificates of deposit denominated in KRW, bills, or notes (excluding commercial paper) with his/her interested party through trading brokerage (referring to brokerage in the form of trading prescribed and publicly notified by the Financial Services Commission);
(g) Where the relevant trading is to sell collective investment securities of an exchange-traded fund, which are borrowed with the discretionary investment property, to avoid risks ensuing from investment;
(h) Where the Financial Services Commission deems that investors' interests are unlikely to be undermined;
3-2. Where a discretionary investment business entity which is an investment trader or broker of securities conducts trading of its proprietary property with the discretionary investment property (limited to discretionary investment property which is securities; hereafter the same shall apply in this subparagraph) with the consent of an investor or is delegated by the investor to withdraw the discretionary investment property to conduct borrowing and lending of securities or to act as a broker, an intermediary, or an agent for such trading under Article 182 (2), when Article 98 (2) 6 of the Act or Article 98 (2) 9 (b) applies. In such cases, it shall obtain verification on the following matters from the compliance officer before it conducts such trading:
(a) Whether the relevant discretionary investment property is used only for intermediating the borrowing and lending conducted under Article 182 (2);
(b) Whether there is no possibility of undermining the protection of investors and sound trading practices because the relevant discretionary investment property and proprietary property are commingled by intermediating the borrowing and lending;
(c) Other matters prescribed and publicly notified by the Financial Services Commission;
4. Where orders for trading investable assets are consolidated and disposed of simultaneously to manage individual discretionary investment property efficiently and the proceeds from such disposal are distributed fairly in accordance with pre-agreed asset distribution list for each item of discretionary investment property, when Article 98 (2) 8 of the Act applies;
5. Any of the following cases, when Article 98 (2) 9 (c) of the Act applies:
(a) Exercising an appraisal right;
(b) Accepting a tender offer;
(c) Subscribing for new stocks issued for capital increase for value;
(d) Exercising the conversion right by a holder of convertible bonds;
(e) Exercising the preemptive right to a new issue of stocks by a holder of a bond with warrant;
(f) Claiming to exchange an exchangeable corporate bond;
(g) Exercising rights by a holder of a derivatives-linked security;
(h) Exercising the right provided for in Article 5 (1) 2 of the Act.
(3) "Underwriting affairs prescribed by Presidential Decree" in Article 98 (2) 3 of the Act means receiving requests for underwriting of securities directly from an issuer or seller and determining terms and conditions of underwriting.
(4) "Activities prescribed by Presidential Decree" in Article 98 (2) 10 of the Act means the following activities: <Amended by Presidential Decree No. 26961, Feb. 5, 2016>
1. Rejecting a demand from a professional investor (excluding persons referred to in the subparagraphs of Article 10 (1)) to treat him/her as equal to an ordinary investor in accordance with the proviso to Article 9 (5) of the Act, without good cause;
2. Managing the discretionary investment property, in violation of a discretionary investment contract;
2-2. Failing to meet any of the requirements prescribed in the subparagraphs of Article 98 (2) in cases of a discretionary investment business entity that has entered into an agreement for an asset portfolio-type individual savings account under Article 98 (2);
3. Trading financial investment instruments with the discretionary investment property too frequently, disregarding the extent of the discretion in investment, the objective of investment, and other relevant factors;
4. Providing or accepting an economic benefit, directly or indirectly, in connection with the business to or from an investor (including its executive officers and/or employees, if the investor is a corporation or any other organization) or the counterparty to a transaction (including its executive officers and/or employees, if the counterparty to a transaction is a corporation or any other organization), in violation of the criteria prescribed and publicly notified by the Financial Services Commission;
5. Using the trading of an over-the-counter derivative, a trust contract, or a linked transaction with intent to circumvent the prohibition or restriction prescribed in Article 55 or 98 of the Act;
6. Receiving a blank check or a blank bill or note to secure its rights as a creditor;
7. Other activities prescribed and publicly notified by the Financial Services Commission as likely to undermine the protection of investors and sound trading practices.
 Article 99-2 (Restrictions etc. on Contingent Remuneration)
(1) "As prescribed by Presidential Decree" in the proviso to Article 98-2 (1) of the Act" means any of the following cases:
1. Where an investor is a professional investor;
2. Where all of the following requirements are met, if an investor is an ordinary investor:
(a) The contingent remuneration shall be calculated contingent upon the base index that fulfills the requirements prescribed and publicly notified by the Financial Services Commission or the hurdle rate determined by an agreement with investors (hereafter referred to as "base index, etc." in this Article);
(b) An investment advisory business entity or discretionary investment business entity shall establish a remuneration system under which the remuneration of management to be received when the management performance (referring to the investment results related to investment advisory, or management performance of discretionary investment property; hereafter the same shall apply in this paragraph) falls below the outcomes of base index, etc., is less than the remuneration of management when no contingent remuneration is applied.
(c) Even where management performance exceeds the outcomes of base index, etc., it shall be ensured that no remuneration of management shall be received, if the management performance shows a negative yield rate or falls below the criteria prescribed and publicly notified by the Financial Services Commission;
(d) Other requirements prescribed and publicly notified by the Financial Services Commission concerning the methods of calculating contingent remuneration, timing for payment thereof, etc. shall be satisfied.
(2) "Matters prescribed by Presidential Decree" in Article 98-2 (2) of the Act means any of the following matters:
1. The purport to pay contingent remuneration and the limit of the remuneration;
2. The fact that investors may be exposed to a higher risk than where no contingent remuneration is paid.
3. Matters concerning the whole remuneration including contingent remuneration;
4. Basic index, etc.;
5. Timing for payment of contingent remuneration;
6. Matters concerning cases where no contingent remuneration is to be paid;
7. Other necessary matters prescribed and publicly notified by the financial Services Commission as necessary for the protection of investors.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 100 (Delivery, etc. of Discretionary Investment Report)
(1) Each discretionary investment report referred to in Article 99 (1) of the Act shall state the following matters for the period to which the discretionary investment report pertains:
1. The summarized history of management and the status of profits or losses;
2. The status of management, including dates of trading the discretionary investment property, trading prices, entrustment fees, and taxes;
3. The status of the balances, acquisition values, market values, and assessed profits or losses of respective assets that belong to the discretionary investment property by type;
4. The time to charge the discretionary investment fee and the amount of such fee;
5. Matters prescribed and publicly notified by the Financial Services Commission, as necessary for protecting investors.
(2) To deliver a discretionary investment report to investors, each discretionary investment business entity shall deliver it in person or by mail or by any other means within two months after the end of the period to which the preparation of a discretionary investment report pertains: Provided, That it may be delivered to an ordinary investor by electronic mail, if the ordinary investor has expressed his/her intent to receive the discretionary investment report by electronic mail or if the discretionary investment business is performed by using an electronic system giving investment advice referred to in Article 99 (1) 1-2. <Amended by Presidential Decree No. 28040, May 8, 2017>
(3) The form, methods of preparation and delivery of the discretionary investment report, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 101 (Special Cases concerning Offshore Investment Advisory Business Entities, etc.)
(1) An offshore investment advisory business entity prescribed in Article 100 (1) of the Act (hereafter referred to as "offshore investment advisory business entity" in this Article) or an offshore discretionary investment business entity prescribed in the aforesaid paragraph (hereafter referred to as "offshore discretionary investment business entity" in this Article) shall prepare a business report for the periods of three months, six months, nine months, and twelve months, respectively, from the beginning of each business year in compliance with Article 100 (5) of the Act in accordance with the guidelines prescribed and publicly notified by the Financial Services Commission, and submit it to the Financial Services Commission within one month after each term stated above ends.
(2) "Those prescribed by Presidential Decree" in Article 100 (6) of the Act means any of the following entities:
1. The State;
2. The Bank of Korea;
3. Any of the entities referred to in Article 10 (2) 1 through 17;
4. Any of the entities referred to in Article 10 (3) 1 through 14.
(3) "Foreign depository institution prescribed by Presidential Decree" in Article 100 (7) of the Act means a foreign depository institution referred to in Article 63 (3). <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
(4) Every offshore discretionary investment business entity shall deliver a discretionary investment report prepared in accordance with guidelines prescribed and publicly notified by the Financial Services Commission to investors in person or by mail or any other means at least once a month: Provided, That it may be delivered to an investor by electronic mail, if the investor has manifested his/her intent to receive it by electronic mail.
(5) Except as expressly provided for in paragraphs (1) through (4), necessary matters in relation to methods and procedures for conducting the business of offshore investment advisory business entities or offshore discretionary investment business entities shall be prescribed and publicly notified by the Financial Services Commission.
 Article 102 (Reporting on Quasi-Investment Advisory Businesses)
"As prescribed further by Presidential Decree" in Article 101 (1) of the Act means advice that any person, other than investment advisory business entities, provides on investment in consideration of the payment of a certain amount through a periodical, a publication, a communication medium, or a broadcasting medium, which is published or transmitted to a number of unspecified people and which a number of unspecified people can purchase or receive from time to time.
Subsection 4 Rules on Business Conduct by Trust Business Entities
 Article 103 (Classification of Trusts)
Money trusts shall be classified into the following categories pursuant to Article 103 (3) of the Act:
1. Money trusts for which the trustor designates the management method of the trust property, which is money (hereinafter referred to as "specified money trusts");
2. Money trusts for which the trustor does not designate the management method of the trust property, which is money (hereinafter referred to as "unspecified money trusts").
 Article 104 (Methods of Conducting Trust Business)
(1) No trust business entity shall guarantee to indemnify for any loss or assure profits for the property accepted in its trust: Provided, That it may guarantee to indemnify for losses or assure profits for a trust for the payment of pension or retirement benefits, where the Financial Services Commission prescribes and publicly notifies to do so.
(2) Where the outcome of management of any trust property for which it is guaranteed to indemnify for losses or assure profits in accordance with the proviso to paragraph (1), fails to meet those stipulated in the trust contract, the trust business entity shall allocate the special reserve (referring to the sum reserved for indemnifying for losses or assuring profits for the trust to which a condition to indemnify for losses or assure profits is attached), the remuneration for trust, and the proprietary property in the order of priority stated to such purposes.
(3) Except where a guarantee is made for indemnifying for losses or an assurance of profits in accordance with the proviso to paragraph (1), a trust business entity shall return the trust property according to the outcome of management of the trust property at the end of the trust contract term.
(4) When a trustor terminates a trust contract before the expiration of the trust contract term, the trust business entity shall deduct the early-termination fee as stipulated in the trust contract from the outcome of management of the trust property under paragraph (3), in returning the trust property: Provided, That such fee shall not be deducted where grounds prescribed and publicly notified by the Financial Services Commission exist.
(5) Every trust business entity is entitled to remuneration for trust as stipulated in its trust contract.
(6) When concluding (including renewal; hereafter the same shall apply in this paragraph) a contract for a specified money trust or altering the management method of the money designated under subparagraph 1, a trust business entity shall comply with the matters classified as follows: Provided, That the same does not apply to any specified money trusts prescribed and publicly notified by the Financial Services Commission in consideration of the characteristics, etc. of contracts, where the protection of beneficiaries and sound trading practices are unlikely to be undermined: <Newly Inserted by Presidential Decree No. 25553, Aug. 12, 2014>
1. When concluding a contract: The trustor shall be made to state in his/her own handwriting in the written contract, the kind, the weight, and degree of risk of the subject-matter of management and other details designated by the trustor, as the management method of the trust property, which is money;
2. When altering the management method of the money designated under subparagraph 1: The trustor shall be made to state the details of alteration in his/her own handwriting in the written contract or to verify them as follows: Provided, That where intending to alter the degree of risk of the subject-matter of management, he/she shall be made to state the details of alteration in his/her own handwriting in the written contract:
(a) Signature (including digital signature as defined in subparagraph 2 of Article 2 of the Digital Signature Act);
(b) Affixing his/her signature and seal;
(c) Tape-recording.
(7) "Project cost prescribed by Presidential Decree" in Article 103 (4) of the Act means the expenses incurred in relation to a real estate development project, including construction costs, advertisement expenses, and sales expenses, but excluding the acquisition price of the real estate itself, registration expenses, and other incidental expenses related to the acquisition of the real estate.
 Article 105 (Acquisition of Trust Property with Proprietary Property)
"Circumstances prescribed by Presidential Decree" in Article 104 (2) 2 of the Act means where the Financial Services Commission deems that all of the following requirements are met:
1. The remaining period until the expiration of the trust contract term shall be three months or less;
2. It is impracticable to dispose of the trust property, unless the trust property is acquired with proprietary property;
3. The acquisition price shall be fair.
 Article 106 (Methods of Managing Trust Property)
(1) "Securities prescribed by Presidential Decree" in Article 105 (1) 1 of the Act means the following securities:
1. Debt securities;
2. Equity securities;
3. Beneficiary certificates;
4. Deleted; <by Presidential Decree No. 24697, Aug. 27, 2013>
5. Derivatives-linked securities;
6. Depositary receipts.
(2) "Financial institution prescribed by Presidential Decree" in Article 105 (1) 3 of the Act means any of the following financial institutions: <Amended by Presidential Decree No. 27291, Jun. 28, 2016>
1. A bank;
2. The Korea Development Bank established under the Korea Development Bank Act;
3. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;
4. A securities finance company;
5. A merchant bank;
6. A mutual savings bank established under the Mutual Savings Banks Act;
7. An agricultural cooperative established under the Agricultural Cooperatives Act;
8. A fisheries cooperatives established under the Fisheries Cooperatives Act;
9-2. A forestry cooperative established under the Forestry Cooperatives Act;
9. A credit union established under the Credit Unions Act;
10. A postal service agency established under the Postal Savings and Insurance Act;
11. A foreign financial institution equivalent to those referred to in subparagraphs 1 through 10.
(3) "Methods prescribed by Presidential Decree" in Article 105 (1) 10 of the Act means the following methods: <Amended by Presidential Decree No. 23924, Jun. 29, 2012>
1. Purchasing negotiable certificates of deposit denominated in KRW;
2. Investing in surface rights, rights to lease on a deposit basis, rights to lease, rights to claim transfer of the ownership of real estate, or any other related right in real estate;
3. Executing a purchase and resale agreement;
4. Lending or borrowing securities;
5. Investing in a right to claim insurance money under an insurance contract under Article 17 (1) 1 (b) of the Enforcement Decree of the Act on the Guarantee of Workers' Retirement Benefits, where the trust property is invested in a reserve for retirement pension under the trust contract under Article 16 (2) of the Act on the Guarantee of Workers' Retirement Benefits;
6. Other method prescribed and publicly notified by the Financial Services Commission, in consideration of the stability, profitability, and other factors of the trust property.
(4) "Ground prescribed otherwise by Presidential Decree" in Article 105 (2) of the Act means any of the following: <Amended by Presidential Decree No. 25553, Aug. 12, 2014>
1. Where a trust contract is executed for real estate development projects in accordance with Article 103 (4) of the Act and money is accepted in the trust within 15 percent of the project cost (referring to a project cost prescribed in Article 104 (7)) for each real estate project under the trust contract;
2. Where the Financial Services Commission deems that both of the following requirements are met:
(a) It is impracticable to dispose of the trust property by dividing it into parts, when a claim is made to terminate part of the trust contract;
(b) The interest rates for the loan are fair.
(5) Each trust business entity shall comply with the following guidelines in managing money that belongs to the trust property: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24655, Jul. 5, 2013>
1. In the case of a specified money trust (limited to acquisition and disposition of treasury stocks issued by a stock-listed corporation pursuant to Article 165-3 (3) of the Act with the trust property):
(a) Stocks shall be acquired by the method provided in Article 165-3 (1) 1 of the Act;
(b) It shall neither dispose of the treasury stocks acquired within one month after acquisition nor acquire the treasury stocks within one month after disposition;
(c) No funds remaining after acquiring the treasury stocks shall be managed in any manner other than those prescribed and publicly notified by the Financial Services Commission;
(d) It shall neither acquire nor dispose of treasury stocks during the period stipulated in any of Article 176-2 (2) 1 through 5;
2. In the case of an unspecified money trust:
(a) Where trust property is invested in privately issued bonds (excluding privately issued bonds, the payment of the principal of, and interest on which is guaranteed by a person prescribed and publicly notified by the Financial Services Commission, and secured bonds), such investment shall not exceed 3 percent of each item of trust property;
(b) Where trust property is invested in equity securities (including depositary receipts related to the equity securities) and exchange-traded derivatives, such investment shall not exceed 50 percent of each item of trust property. In such cases, if the trust property is invested in exchange-traded derivatives, such investment shall be calculated based on the amount of assessed risks ensuing from such trading (referring to the amount of assessed risks under Article 81 (2) of the Act; hereafter the same shall apply in this Article);
(c) Where trust property is invested in over-the-counter derivatives, the amount of assessed risks ensuing from such trading shall not exceed 10 percent of each item of trust property;
(d) Where trust property is invested in equity securities issued by a single corporation (including depositary receipts related to such equity securities), such investment shall not exceed 15 percent of the total number of the outstanding equity securities;
(e) The trust property shall be managed in accordance with the management method of trust property additionally prescribed and publicly notified by the Financial Services Commission;
3. The trust business entity of any trust, other than those referred to in subparagraphs 1 and 2, shall comply with the guidelines prescribed and publicly notified by the Financial Services Commission to protect beneficiaries or to maintain sound trading practices.
 Article 107 (Management of Surplus Funds)
(1) "Financial institution prescribed by Presidential Decree" in subparagraphs 1 and 3 of Article 106 of the Act means a financial institution under any subparagraph of Article 106 (2), respectively.
(2) "Methods prescribed by Presidential Decree" in subparagraph 4 of Article 106 of the Act means methods falling under any of the following subparagraphs:
1. Short-term loans under Article 83 (4) of the Act;
2. Purchasing bonds issued by a financial institution under any subparagraph of Article 106 (2) (excluding special bonds);
3. Other methods prescribed and publicly notified by the Financial Services Commission as those that do not undermine the stability and profitability of trust property.
 Article 108 Deleted. <by Presidential Decree No. 21291, Feb. 3, 2009>
 Article 109 (Prohibition on Unsound Business Activities)
(1) "Cases prescribed by Presidential Decree" in the proviso to Article 108 of the Act means the following cases: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 24841, Nov. 13, 2013; Presidential Decree No. 25843, Dec. 9, 2014; Presidential Decree No. 26600, Oct. 23, 2015>
1. Any of the following cases, when subparagraph 1 of Article 108 of the Act applies:
(a) Where the trust business entity proves that it has not used the information related to the management of trust property;
(b) Where it is objectively evident that the trust business entity has not intentionally used the information related to the management of trust property, such as conducting arbitrage for benefiting from price differences between the securities market (including transactions via an alternative trading system) and the derivatives market or any similar transaction;
2. Where the trust business entity purchases underwritten securities after three months from the date of underwriting, when subparagraph 2 of Article 108 of the Act applies;
2-2. Where the securities underwritten are any of the state bonds, local government bonds, the Bank of Korea currency stabilization bonds issued under Article 69 of the Bank of Korea Act, special purpose bonds, or corporate bonds referred to in Article 4 (3) of the Act (excluding stock-related corporate bonds and bail-in contingent capital securities provided in Article 176-13 (1); hereafter the same shall apply in this subparagraph), when subparagraph 2 of Article 108 of the Act applies: Provided, That corporate bonds shall be limited to those meeting the criteria prescribed and publicly notified by the Financial Services Commission to protect investors and to ensure sound trading practices, including the terms and conditions of issuance and trading procedures;
2-3. Where the securities underwritten are stocks listed on a securities market and the stocks are purchased from the securities market, when subparagraph 2 of Article 108 of the Act applies;
3. Where two items of trust property managed by a single collective investment business entity engage in any of the following transactions, one selling assets and the other purchasing the assets simultaneously, when subparagraph 5 of Article 108 of the Act applies. In such cases, the trading price, the procedures and methods for such trading, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission:
(a) Where it is inevitable to pay the termination fees upon termination (including partial termination) of a trust contract;
(b) Where the Financial Services Commission deems it unlikely to undermine the protection of investors on any other ground;
4. In any of the following cases, when subparagraph 6 of Article 108 of the Act applies: Provided, That in cases of specified money trusts established under the Act on the Guarantee of Workers' Retirement Benefits, the transactions with proprietary property, which guarantee the principal and interest paid by the trust business entity with trust property, among any of the following cases (excluding item (d)), shall be excluded herefrom:
(a) A transaction made under a contract concluded six months earlier than the person becomes an interested party;
(b) A transaction through an open market in which many unspecified persons participate, such as the securities market;
(c) A transaction favorable to the trust property in light of ordinary terms and conditions of transactions;
(d) A repurchase agreement;
(e) Trading an investable asset with any person, other than a trust business entity or an interested party, through the trust business entity or an interested party acting as a broker, an intermediary or an agent in the manner prescribed and publicly notified by the Financial Services Commission;
(f) Trading debt securities, negotiable certificates of deposit denominated in KRW, bills, or notes (excluding commercial paper) with a trust business entity or an interested party through trading brokerage (referring to the brokerage in the form of trading prescribed and publicly notified by the Financial Services Commission) of the trust business entity or the interested party;
(g) Trading prescribed in Article 104 (2) or 105 (2) of the Act;
(h) A deposit transaction (referring to a specified money trust with not less than 300 million won, or the management of surplus funds according to an asset-backed securitization plan established under Article 3 of the Asset-Backed Securitization Act);
(i) Providing a temporary loan, because managing funds in any other way is impracticable due to the amount or time constraints (limited to loans provided to a trust business entity that manages the trust property);
(j) Other transactions prescribed and publicly notified by the Financial Services Commission unlikely to cause conflicts of interest with the trust property, considering the forms, conditions, methods, and other factors of the transactions;
5. Where orders for trading investment assets are consolidated and disposed of simultaneously, in order to manage individual trust property efficiently, and the proceeds from such disposition are distributed fairly in accordance with the pre-agreed asset distribution list for each item of trust property, when paragraph (3) 5 applies.
(2) "Underwriting affairs prescribed by Presidential Decree" in subparagraph 3 of Article 108 of the Act means receiving a request to underwrite securities directly from an issuer or a seller and determining terms and conditions of underwriting.
(3) "Activities prescribed by Presidential Decree" in subparagraph 9 of Article 108 of the Act means the following: <Amended by Presidential Decree No. 26135, Mar. 3, 2015>
1. Rejecting a demand made by a professional investor (excluding the persons referred to in the subparagraphs of Article 10 (1)) to be treated as equal to ordinary investors in accordance with the proviso to Article 9 (5) of the Act, without good cause;
2. Managing the trust property, in violation of the trust contract;
3. Trading financial investment instruments with the trust property too frequently, disregarding the extent of the management policy or strategy under the trust contract;
4. Providing or accepting an economic benefit, directly or indirectly, in connection with the business to or from a beneficiary (including its executive officers and/or employees, if the beneficiary is a corporation or any other organization) or the counterparty to a transaction (including its executive officers and/or employees, if the counterparty to a transaction is a corporation or any other organization), in violation of criteria prescribed and publicly notified by the Financial Services Commission;
5. Commingling and managing items of trust property under several trust contracts, together instead of managing each item of trust property separately in accordance with each such trust contract: Provided, That such act may be permitted in any of the following:
(a) In cases falling under Article 6 (4) 2;
(b) Where a trust business entity which fulfills the requirements prescribed and publicly notified by the Financial Services Commission (limited to the trust property created within three years from the date such requirements are fulfilled), such as a merger with another investment trading business entity or investment broker, manages trust property for which a guarantee to indemnify for losses or assure profits is provided under the proviso to Article 104 (1);
6. Soliciting investment to execute a trust contract or making an advertisement soliciting investment by representing that several items of trust property are commingled in management;
7. Investing the trust property in a specific asset by mutually cross-trading them through an agreement or in collusion with a third party;
8. Using a transaction of over-the-counter derivatives, a trust contract, or a linked transaction with intent to circumvent the prohibition or restriction provided in Article 55, 105, 106, or 108 of the Act or Article 104 (1) of this Decree;
9. Receiving a blank check or a blank bill or note to secure its rights as a creditor;
10. Other activities prescribed and publicly notified by the Financial Services Commission as likely to undermine the protection of beneficiaries and sound trading practices.
 Article 110 (Trust Contracts)
"Matters prescribed by Presidential Decree" in subparagraph 10 of Article 109 of the Act means the following matters:
1. Scope of and qualifications for eligible beneficiaries, and other matters necessary for finally identifying the beneficiary, where no beneficiary has been finally identified;
2. Details of a provision that a beneficiary shall express his/her own wish to acquire an interest in the trust, if required by the trust contract;
3. Matters concerning the registration under Article 3 (1) of the Trust Act or indications and descriptions of the trust property under paragraph (2) of the aforesaid Article;
4. The type of trust property that will be delivered to the beneficiary, the method of delivery and timing for delivery thereof;
5. Matters concerning public charges, repairing cost, and other expenses incurred in relation to the management of trust property;
6. Matters concerning final settlement upon termination of the trust contract;
7. Other matters prescribed and publicly notified by the Financial Services Commission, as necessary for maintaining sound trading practices.
 Article 111 (Reporting on Issuance of Beneficiary Certificates)
(1) "Documents prescribed by Presidential Decree" in Article 110 (2) of the Act means the following documents:
1. A plan for issuing the beneficiary certificate;
2. A fund management plan;
3. Terms and conditions of the trust or the trust contract.
(2) "Matters prescribed by Presidential Decree" in Article 110 (5) 9 of the Act means the following matters:
1. The issue date of the beneficiary certificate;
2. The identification code and number of the beneficiary certificate.
 Article 112 (Purchase of Beneficiary Certificates)
Every trust business entity shall, when it purchases beneficiary certificates with its proprietary property in accordance with Article 111 of the Act, purchase them at the price calculated in accordance with Article 104 (2) of the Act.
 Article 113 (Restriction on Exercise of Voting Rights)
(1) "Person who has a special relationship, as prescribed by Presidential Decree" in Article 112 (2) 1 (a) of the Act means a specially related person or a joint holder under Article 141 (2).
(2) "Person as prescribed by Presidential Decree" in Article 112 (2) 1 (b) of the Act means a major shareholder of the trust business entity (including a shareholder specially related to the largest shareholder; hereafter the same shall apply in this Article).
(3) "Relationship, as prescribed further by Presidential Decree" in Article 112 (2) 2 (b) of the Act means becoming a major shareholder of the trust business entity.
 Article 114 (Public Disclosure of Exercise of Voting Rights)
Public disclosure of the exercise of voting rights under Article 112 (7) of the Act shall be made as follows:
1. Where the corporation that has issued the stocks subject to the exercise of voting rights is a stock-listed corporation: The details of the exercised voting rights shall be disclosed to the public through the securities market within five days from the date of the general meeting of shareholders;
2. Where the corporation that has issued the stocks subject to the exercise of voting rights is not a stock-listed corporation: The disclosure shall be made in the manner prescribed in Article 89 (2) 1 of the Act to enable the general public to inspect them.
[This Article Wholly Amended by Presidential Decree No. 23924, Jun. 29, 2012]
 Article 115 (Inspection, Public Disclosure, etc. of Account Books and Documents)
(1) "Justifiable ground exists, as prescribed by Presidential Decree" in the latter part of Article 113 (1) of the Act means any of the following cases. In such cases, the trust business entity shall deliver to beneficiaries a written statement describing that the inspection or delivery of the account books and documents requested is impracticable and the reasons therefor:
1. Where a person provided with an account book or document containing details of management of the trust property is likely to use any information therein for a transaction or business or furnish a third person with such information;
2. Where providing an account book or document containing details of management of the trust property to a person is likely to incur losses on other beneficiaries;
3. Where an account book or document relates to a trust contract already terminated and thus it is impracticable to accept a request from a beneficiary for inspection or delivery because the preservation period set under Article 62 (1) has elapsed or due to other reasons.
(2) The account books and documents that a beneficiary is entitled to request for inspection or for a certified transcript or an abstract thereof in accordance with Article 113 (1) of the Act are as follows:
1. A list of the trust property;
2. Financial statements and supplementary schedules;
3. A full statement on the management of the trust property.
 Article 116 (Entrusted Establishment of Accounting Principles)
"Corporation or organization as prescribed by Presidential Decree" in the former part of Article 114 (2) of the Act means the Korea Accounting Institute, which is the incorporated association under Article 7-2 (1) of the Enforcement Decree of the Act on External Audit of Stock Companies (hereinafter referred to as the "Korea Accounting Institute").
 Article 117 (Exemption from Audit)
"Circumstances prescribed by Presidential Decree" in the proviso to Article 114 (3) of the Act means any of the following cases:
1. Where any of the following money trusts is involved:
(a) A specified money trust;
(b) A money trust that assures profits (excluding a money trust that compensates only for losses);
(c) A money trust with entrusted principal of less than 30 billion won as of the base date of the audit;
2. Where any of the property referred to in Article 103 (1) 2 through 7 of the Act is placed in a trust.
 Article 118 (Appointment, etc. of Auditors)
(1) Each trust business entity shall obtain consent from an auditor (or a resolution of the audit committee, if an audit committee has been established) whenever it desires to appoint or replace the auditor.
(2) Audit guidelines for the trust property shall be prescribed and publicly notified by the Financial Services Commission, subject to deliberation by the Securities and Futures Commission.
(3) Each auditor shall have the power as provided for by the Act and the Act on External Audit of Stock Companies with respect to the audit of the trust property.
(4) Upon completion of the audit of the trust property, each auditor shall prepare an audit report containing the following matters and submit it to the trust business entity:
1. A balance sheet on the trust property;
2. A statement of profit or loss of the trust property;
3. A statement of return on investment of the trust property;
4. Details of transactions between the trust business entity and its related persons.
(5) Upon receipt of an audit report from an auditor, each trust business entity shall submit it to the Financial Services Commission without delay.
(6) Each trust business entity shall make an audit report available to the relevant beneficiaries for inspection as prescribed and publicly notified by the Financial Services Commission.
(7) Expenses incurred in taking audits shall be borne by the trust property subject to the audit.
 Article 118-2 (Auditor's or Others' Liabilities for Damage)
An auditor shall be jointly liable for damage with a director and an auditor of the trust business entity as prescribed in Article 115 (3) of the Act only where the aggregate amount treated as income of the person filing a claim for the damage during the 12-month period immediately preceding the month in which the claim is made does not exceed 150 million won.
[This Article Newly Inserted by Presidential Decree No. 26135, Mar. 3, 2015]
 Article 118-3 (Special Cases concerning Managerial Trusts)
(1) Where a trust business entity has been entrusted with any monetary claims under Article 117-2 (1) of the Act, the money that is the yields of the monetary claims shall be managed as follows:
1. Depositing in any of the financial institutions referred to in the subparagraphs of Article 106 (2);
2. Purchasing state bonds, local government bonds, or special purpose bonds;
3. Purchasing securities, the payment of which is guaranteed by the State or any of the financial institutions referred to in the subparagraphs of Article 106 (2);
4. Other methods prescribed by Ordinance of the Prime Minister, in consideration of the stability, profitability, etc. of the trust property.
(2) Detailed matters concerning the methods of management under paragraph (1), and other matters necessary for the restriction of trust property shall be prescribed and publicly notified by Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
CHAPTER V SPECIAL CASES CONCERNING CROWDFUNDING BROKERS, ETC.
 Article 118-4 (Requirements for Registration)
(1) "Amount prescribed by Presidential Decree" in Article 117-4 (2) 2 of the Act means 500 million won.
(2) The business plan referred to in Article 117-4 (2) 3 of the Act shall:
1. Have an adequate internal control system for risk management, prevention of financial incidents, etc.;
2. Have methods of conducting business suitable for the protection of investors;
3. Not be in contravention of any statutes and have no risk of undermining sound practices in financial transactions.
(3) The human resources, electronic computer systems, and other physical facilities referred to in Article 117-4 (2) 4 of the Act shall meet the following requirements:
1. The entity shall be adequately equipped with necessary human resources, including human resources with expertise and soundness in crowdfunding brokerage business and computing personnel, etc. for conducting the related affairs;
2. The entity shall be equipped with the following physical facilities, including electronic computer systems:
(a) Electronic computer systems and means of communications required to perform the intended crowdfunding brokerage business;
(b) Adequate business space, such as an office, and office equipment;
(c) Security equipment to protect physical facilities, such as the electronic computer systems;
(d) Supplementary facilities necessary to maintain continuity of business in the event of power failure, fire, etc.
(4) Its major shareholders (referring to the major shareholders defined in Article 12 (2) 6 (a) of the Act; hereafter the same shall apply in this Chapter (excluding Articles 118-16 (1) 2 (d) and 118-18 (3) 1 and 2)) shall meet the requirements specified in attached Table 2. In such cases, "date of filing an application for authorization" shall be construed as "date of filing an application for registration," and "that intends to obtain authorization" as "that intends to obtain registration": Provided, That the Financial Services may publicly notify the relaxed requirements in any of the following cases: <Amended by Presidential Decree No. 27414, Jul. 28, 2016>
1. Where a person granted authorization for financial investment business under Article 12 of the Act intends to be registered as a crowdfunding broker;
2. Where any of the entities referred to in the subparagraphs of Article 8 (9) of the Act intends to be registered as a crowdfunding broker;
3. Where a crowdfunding broker is merged with another company, splits off, or is merged after a split-off.
(5) "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" in Article 117-4 (2) 7 of the Act means the matters prescribed in Article 16 (8).
(6) The system for preventing conflicts of interest referred to in Article 117-4 (2) 8 of the Act (hereafter referred to as "system for preventing conflicts of interest" in this Chapter) shall meet the following requirements:
1. An appropriate internal control guidelines shall be prepared for identifying, assessing and managing the likelihood of conflicts of interest in accordance with Article 44 of the Act;
2. An appropriate system shall be established for preventing acts prescribed in the subparagraphs of Article 45 (1) and (2) of the Act.
(7) Detailed criteria necessary in connection with the requirements for registration provided in paragraphs (2) through (6) shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-5 (Method, Procedures, etc. for Registration)
(1) Each application for registration to be filed with the Financial Services Commission under Article 117-4 (3) of the Act shall contain the following:
1. Trade name;
2. Location of the head office;
3. Matters concerning executive officers;
4. Business plans;
5. Matters concerning financial standing, including equity capital;
6. Matters concerning human resources and physical facilities, including electronic computer systems;
7. Matters concerning major shareholders or a foreign crowdfunding broker;
8. Matters concerning the system for preventing conflicts of interest;
9. Other matters prescribed and publicly notified by the Financial Services Commission, as necessary for examining registration.
(2) A person who intends to be registered under Article 117-4 (1) of the Act shall file an application for registration, which shall be accompanied by the following:
1. Articles of incorporation (including an equivalent document);
2. A document stating the location and name of the head office;
3. Resumes and certificates of work experience of executive officers;
4. Documents stating the work process;
5. Financial statements and supplementary schedules for the most recent three business years (a corporation in the process of incorporation is exempted from providing these statements; and a corporation shall submit financial statements and supplementary schedules for the business years since the date of incorporation, if three business years have not passed since its incorporation);
6. Documents substantiating the status of human resources, physical facilities, etc.;
7. Documents stating the names or trade names of major shareholders as of the date of filing of the application for registration (or as of the end of the most recent business year, if the application for registration is filed by a financial investment business entity or concurrently-run financial investment entity) and the number of stocks held by each of such shareholders;
8. Documents substantiating that major shareholders or the foreign crowdfunding broker meets the requirements prescribed in Article 117-4 (2) 6 of the Act;
9. Documents substantiating that the system for preventing conflicts of interest has been prepared;
10. Other documents prescribed and publicly notified by the Financial Services Commission, as necessary for examining registration.
(3) Upon receipt of an application for registration filed under paragraph (2), the Financial Services Commission shall verify the corporation registration certificate by sharing administrative information under Article 36 (1) of the Electronic Government Act.
(4) Upon receipt of an application for registration filed under paragraph (2), the Financial Services Commission shall ascertain that the contents of the application for registration of a crowdfunding broker are true, and examine whether the contents of the application meet the requirements for authorization prescribed in Article 117-4 (2) of the Act.
(5) Except as specifically provided in paragraphs (1) through (4), filing an application for registration of a crowdfunding broker; examination of the application; the form of the application for registration; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-6 (Relaxed Requirements for Maintenance of Registration)
"Relaxed requirements prescribed by Presidential Decree" in Article 117-4 (8) of the Act means the requirements classified as follows: <Amended by Presidential Decree No. 28040, May 8, 2017>
1. For the purposes of Article 117-4 (2) 2 of the Act: Every registrant shall maintain at least 70 percent of the minimum equity capital referred to in Article 118-4 (1). In such cases, the requirement for maintaining the registration shall apply as of the end of each fiscal year; and a crowdfunding broker that fails to meet the requirements for maintaining the registration as of the end of a specific fiscal year shall be deemed to meet such requirements for maintaining the registration until the end of the following fiscal year;
2. For the purposes of Article 117-4 (2) 6 of the Act: Every registrant shall continue to meet the requirement classified as follows:
(a) If the major shareholder is any of the entities referred to subparagraphs 1 through 3 or 5 (excluding item (d)) of attached Table 2, the registrant shall continue to meet only the requirements provided for in subparagraph 1 (e) (i) and (iii) of the aforesaid Table. In such cases, "for the most recent five years" in subparagraph 1 (e) (i) of the aforesaid Table shall be construed as "for the most recent five years for the largest shareholder," and "fine" as "fine of 500 million won";
(b) If the major shareholder is any of the entities referred to subparagraph 4 or 5 (d) of attached Table 2, the registrant shall continue to meet only the requirements provided for in subparagraphs 1 (e) (i) and (iii) and 4 (d) of the aforesaid Table. In such cases, "for the most recent five years" in subparagraph 1 (e) (i) of the aforesaid Table shall be construed as "for the most recent five years for the largest shareholder," "fine" as "fine of 500 million won," "for the most recent three years" in subparagraph 4 (d) in the aforesaid Table as "for the most recent three years for the largest shareholder," and "fact that it has ever been subject to criminal punishment equivalent to or heavier than a sentence of fine" as "fact that it has ever been subject to criminal punishment equivalent to or heavier than a fine of 500 million won";
(c) If the registrant is the foreign crowdfunding broker referred to in Article 117-4 (2) 6 of the Act, it shall continue to meet only the requirement provided for in item (b) of this subparagraph. In such cases, "largest shareholder" shall be construed as "foreign crowdfunding broker."
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-7 (Restriction on Names)
"Words prescribed by Presidential Decree" in Article 117-5 (1) of the Act means "financial investment" (including corresponding Korean words) or any other foreign words (including corresponding Korean words) which has a similar meaning.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-8 (Internal Control Guidelines)
(1) The internal control guidelines referred to in Article 117-6 (2) of the Act (hereinafter referred to as "internal control guidelines") shall contain the following matters:
1. Matters concerning the separation of duties and organizational structure;
2. Matters concerning guidelines for the management of risks occurring in the course of managing proprietary property (referring to the management of proprietary property under Article 50 (1));
3. Matters concerning the procedures that executive officers and/or employees must observe in performing their duties;
4. Matters concerning the establishment of a system through which information necessary for making management decisions can be circulated efficiently;
5. Matters concerning procedures and methods for verifying whether executives officers and/or employees comply with the internal control guidelines and taking measures against executive officers and/or employees who violate the internal control guidelines;
6. Matters concerning procedures or guidelines to prevent unfair practices prescribed in the Act, such as reporting on trading of financial investment instruments by executive officers and/or employees;
7. Matters concerning procedures for the establishment or amendments of the internal control guidelines;
8. Matters concerning the identification, assessment, and management of conflicts of interest;
9. Other matters prescribed and publicly notified by the Financial Services Commission as necessary in relation to the internal control guidelines.
(2) Each crowdfunding broker (excluding branches or other business places of a foreign crowdfunding broker) shall require its board of directors to pass a resolution on internal control guidelines to establish or amend such guidelines.
(3) The Financial Services Commission may recommend a foreign crowdfunding broker found to have violated any statute as a result of an inspection conducted by the Governor of the Financial Supervisory Service, to modify its internal control guidelines to prevent recurrence of the same violation.
(4) Detailed standards for internal control guidelines shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-9 (Subscription for Securities)
(1) “Method prescribed by Presidential Decree, such as the investor's signature” in Article 117-7 (4) of the Act means any of the following methods:
1. Obtaining the investor's signature (including digital signature under subparagraph 2 of Article 2 of the Digital Signature Act);
2. By electronic mail or any other similar means of electronic communications;
3. By any other method prescribed and publicly notified by the Financial Services Commission.
(2) The subscription for securities under Article 117-7 (6) of the Act shall be conducted to acquire newly issued securities.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-10 (Other Matters concerning Regulation, etc. of Business Activities)
(1) "Where good cause prescribed by Presidential Decree exists, such as where an investor indicates his/her intent to subscribe in advance" in the proviso to Article 117-7 (7) of the Act means any of the following cases:
1. Where an investor expresses his/her intent to subscribe for securities without receiving any recommendation to acquire the securities;
2. Where a request is made by an issuer of online small-value securities as prescribed in Article 117-7 (5) of the Act;
3. Other cases prescribed and publicly notified by the Financial Services Commission as unlikely to undermine sound trading practices or protection of investors.
(2) The details of subscription for, and issuance of, securities under Article 117-7 (8) of the Act are as follows:
1. Following matters in relation to the subscription for acquisition of securities;
(a) Amount and quantity of subscriptions made by all investors;
(b) Total amount of subscription deposits received from all investors (referring to subscription deposits prescribed in Article 118-11 (1); hereinafter referred to as "subscription deposits");
(c) Other details of the subscription for acquisition of securities;
2. Following matters in relation to the issuance of securities;
(a) Whether the amount of subscription made by all investors is not less than the amount calculated by multiplying the amount scheduled for public offering by the ratio referred to in Article 117-10 (3) of the Act;
(b) Price of securities to be actually paid by all investors to the issuer of online small-value securities;
(c) Other details about the issuance of securities;
3. Following matters in relation to the distribution of securities and the payment of price of securities:
(a) The value and quantity of securities distributed to each investor who has made an offer to acquire them;
(b) Deadline for payment of the price of securities;
(c) Other matters concerning the distribution of securities and the payment of price of securities;
4. Where a crowdfunding broker has to return subscription deposits to investors, matters concerning the amount thereof and the return schedule, etc.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-11 (Managing Institutions, etc. of Subscription Deposits)
(1) Subscription deposits referred to in Article 117-8 (2) of the Act means the money received from an investor in relation to subscription when the investor subscribes for the acquisition of newly issued securities.
(2) "Bank ---<Omitted>--- prescribed by Presidential Decree" in Article 117-8 (2) of the Act means any of the entities referred to in the subparagraphs of Article 4.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-12 (Grounds for Exceptional Transfer, etc. of Subscription Deposits)
"Circumstances prescribed by Presidential Decree" in Article 117-8 (4) of the Act means any of the following:
1. Where a crowdfunding broker is merged into another company or a new company is established as a consequence of a merger of such crowdfunding broker and another company, and thus such crowdfunding broker transfers the subscription deposits placed in a deposit or trust account with a management institution of subscription deposits (referring to a bank or securities finance company prescribed in Article 117-8 (2) of the Act; hereinafter the same shall apply) to the company surviving the merger or the newly established company;
2. Where a crowdfunding broker transfers its crowdfunding brokerage business, entirely or partially, and thus transfers the subscription deposits placed in a deposit or trust account with a managing institution of subscription deposits to the transferee company in accordance with the terms and conditions of the transfer agreement;
3. Other cases prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-13 (Preferential Payment of Subscription Deposits)
(1) "Event prescribed by Presidential Decree, such as cancellation of registration or resolution of dissolution" in Article 117-8 (5) of the Act means any of the following:
1. Where the registration of a crowdfunding broker is revoked;
2. Where a crowdfunding broker adopts a resolution for dissolution;
3. Where a crowdfunding broker is declared bankrupt by the court;
4. Where the closure of the crowdfunding brokerage business is approved;
5. Where an order to suspend the crowdfunding brokerage business is issued;
6. Where any event similar to those prescribed in subparagraphs 1 through 5 occurs.
(2) Upon the occurrence of any of the events prescribed in the subparagraphs of paragraph (1), a crowdfunding broker shall publicly disclose the grounds for preferential payment of subscription deposits; timing for, and method of, payment; and other matters related to the preferential payment of subscription deposits without delay on the websites of the crowdfunding broker, the Central Recording Keeping Agency (referring to the Central Recording Keeping Agency prescribed in Article 117-13 of the Act) and the managing institution of subscription deposits or by any other means.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-14 (Management, etc. of Subscription Deposits Placed in Deposit or Trust Account)
(1) A managing institution of subscription deposits shall separate the investors' subscription deposits placed in a deposit or trust account from its own property and manage them in good faith pursuant to Article 117-8 (6) of the Act.
(2) Where the issuance of securities is not cancelled under Article 117-10 (3) of the Act after the expiration of the subscription period, a crowdfunding broker shall notify the managing institution of subscription deposits of the price of securities to be actually paid to the issuer of online small-value securities referred to in Article 118-10 (2) 2 (b) out of the subscription deposits referred to in paragraph (1). In such cases, the managing institution of subscription deposits shall pay the relevant price of securities to the issuer of online small-value securities without delay.
(3) In any of the following cases, a crowdfunding broker shall notify the managing institution of subscription deposits of the amount of money to be returned to investors out of the subscription deposits referred to in paragraph (1). In such cases, the managing institution of subscription deposits shall return the relevant amount to investors without delay:
1. Where the issuance is canceled under Article 117-10 (3) of the Act;
2. Where any investor withdraws his/her intention for subscription under the former part of Article 117-10 (8) of the Act;
3. Where the amount of subscription deposits referred to in paragraph (1) after the expiration of the subscription period, exceeds the actual price of securities to be paid to the issuer of online small-value securities under Article 118-10 (2) 2 (b);
4. Other cases prescribed and publicly notified by the Financial Services Commission to protect investors and to maintain sound trading practices.
(4) In any of the following cases, a managing institution of subscription deposits may request related materials from the Central Recording Keeping Agency if necessary for the payment and return of the subscription deposits:
1. Where it pays the price of securities to the issuer of online small-value securities pursuant to the latter part of paragraph (2);
2. Where it returns the amount referred to in paragraph (3) to investors pursuant to the latter part of the same paragraph;
3. Where it preferentially pays subscription deposits to investors pursuant to Article 117-8 (5) of the Act.
(5) Except as expressly provided for in paragraphs (1) through (4), the management, payment and return of subscription deposits placed in a deposit or trust account, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-15 (Limit on Securities Issued by Public Offering through Crowdfunding Brokerage)
(1) "Public offering of securities not exceeding the amount prescribed by Presidential Decree" in Article 117-10 (1) of the Act means public offering meeting both of the following conditions:
1. Where the aggregate value of securities to be publicly offered through crowding brokerage and the aggregate value of securities publicly offered for the one-year period before the date of the intended public offering does not exceed 700 million won, respectively;
2. Where the number of persons shall be aggregated in accordance with Article 11 (1), the aggregate value of securities for which subscription has been solicited, does not exceed 700 million won.
(2) Where any of the persons referred to in the subparagraphs of Article 118-17 (2) enters into a contract stipulating the following with the Securities Depository when acquiring securities from an issuer of online small-value securities, the amount paid by him/her shall be disregarded for the purposes of calculating the amount referred to in subparagraphs of paragraph (1):
1. He/she will deposit or lock up the securities in the Securities Depository without delay after the acquisition thereof;
2. He/she will not withdraw the relevant securities or sell them to any third person for one year from the date of the deposit or lock up under subparagraph 1.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-16 (Measures, etc. to be Taken by Issuers of Online Small-Value Securities)
(1) An issuer of online small-value securities who places securities for public offering through crowdfunding brokerage under Article 117-10 (2) of the Act shall post the following matters on the website of a crowdfunding broker before the commencement of the public offering:
1. Following matters concerning the terms and conditions for the issuance of securities:
(a) General matters concerning the public offering;
(b) Details of the rights in the securities placed for public offering;
(c) Investment risks contingent upon the acquisition of securities placed for public offering;
(d) The use of the fund;
2. Following matters concerning the financial standing, business plan, etc. of the issuer of online small-value securities: Provided, That if the issuer of online small-value securities is a corporation in the process of incorporation, matters prescribed and publicly notified by the Financial Services Commission shall be posted:
(a) An overview of the company;
(b) Details of business and other matters concerning its business plan;
(c) Documents stating the financial standing of the issuer of online small-value securities. In such cases, the fact that such documents contain a proper statement of materials facts in relation to the amount prescribed and publicly notified by the Financial Services Commission within the limit of the amount referred to in Article 117-10 (1) of the Act shall be confirmed or commented as follows:
(i) Confirmation by the representative director of the issuer of online small-value securities;
(ii) Confirmation and comment by a certified public accountant;
(iii) An audit report prepared by an auditor;
(d) Matters concerning the organizational structure, major shareholders (referring to the major shareholders prescribed in Article 23 (1) of the Act; hereafter the same shall apply in Article 118-18 (3) 1 and 2), executive officers, etc. of the company;
3. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(2) Where posting should be made under paragraph (1), if the posting contains the same details as the one already posted on the website of the relevant crowdfunding broker, a posting indicating such details and a reference thereto may be substituted for the posting to be made under paragraph (1).
(3) "Other measures prescribed by Presidential Decree" in Article 117-10 (2) of the Act means the following:
1. To post the result of public offering on the website of the crowdfunding broker without delay after the completion of public offering of securities;
2. To post the documents referred to in the items of Article 137 (1) 5 on the website of the crowdfunding broker (where the issuer of online small-value securities has issued securities by placing them for public offering through two or more crowdfunding brokers, including the websites of the two or more crowdfunding brokers) within 90 days after the end of each business year: Provided, That the same does not apply to corporations subject to business reporting under Article 159 (1) of the Act and corporations which has completed redemption or amortization of securities offered to the public;
3. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(4) Forms to be used for posting the matters on the website of a crowdfunding broker under paragraphs (1) through (3); instruction to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
(5) "Ratio prescribed by Presidential Decree" in Article 117-10 (3) of the Act means 80 percent.
(6) In any of the following cases, an issuer of small-value securities shall correct matters posted on the website of the crowdfunding broker and post a notice that such correction has been made on the same website under the proviso to Article 117-10 (4) of the Act:
1. Where any of the matters referred to in Article 130 (1) 1 (a) through (c) is altered;
2. Where the financial statements of the most recent business year are finalized;
3. Where any of events or cause referred to in Article 130 (2) 3 (b) through (h) occurs;
4. Other matters prescribed and publicly notified by the Financial Services Commission as likely to affect investors' investment decisions.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-17 (Protection of investors, Restriction on their Activities, etc., Including Investment Limits)
(1) "Period prescribed by Presidential Decree" in Article 117-10 (5) of the Act means one year.
(2) "Persons prescribed by Presidential Decree, such as professional investors" in Article 117-10 (6) of the Act means any of the following persons (including equivalent foreigners):
1. Any of the persons referred to in Article 11 (2) 1 through 4;
2. A person who has ever made an investment in a startup company or venture business and the investment shall not be less than the amount prescribed and publicly notified by the Financial Services Commission;
3. Other persons prescribed and publicly notified by the Financial Services Commission in consideration of their expertise in investment in startup companies, venture businesses, etc.
(3) "Person who meets the requirements prescribed by Presidential Decree, such as income" in Article 117-10 (6) 1 of the Act means a person classified as follows: <Amended by Presidential Decree No. 27861, Feb. 13, 2017>
1. If the investor is an individual: Any of the following persons:
(a) A person in whose case the aggregate of interest income and dividend income referred to in subparagraph 1 (a) and (b) of Article 4 of the Income Tax Act, exceeds the standard amount of global taxation on interest income, etc. referred to in Article 14 (3) 6 of the same Act;
(b) A person in whose case the aggregate of business income (referring to the amount of business income prescribed in Article 19 (2) of the Income Tax Act) and wage and salary income (referring to the amount of wage and salary income prescribed in Article 20 (2) of the same Act) in the immediately preceding taxable year, exceeds 100 million won;
(c) Any other person prescribed and publicly notified by the Financial Services Commission in consideration of their expertise in investment in startup companies, venture businesses, etc.;
2. If the investor is a corporation: A corporation whose equity capital as of the end of the most recent business year exceeds one billion won.
(4) "Amount prescribed by Presidential Decree" in the items of Article 117-10 (6) 1 and 2 of the Act means each amount classified as follows:
1. For the purposes of Article 117-10 (6) 1 (a) of the Act: Ten million won;
2. For the purposes of Article 117-10 (6) 1 (b) of the Act: 20 million won;
3. For the purposes of Article 117-10 (6) 2 (a) of the Act: Two million won;
4. For the purposes of Article 117-10 (6) 2 (b) of the Act: Five million won.
(5) "Person prescribed by Presidential Decree" in Article 117-10 (7) 2 of the Act means any of the following persons:
1. Any of the persons referred to in the subparagraphs of paragraph (2): Provided, That professional investors shall be excluded herefrom;
2. A major shareholder of the issuer of the relevant online small-value securities: Provided, That the persons referred to in the subparagraphs of paragraph (2) shall be excluded herefrom;
3. The issuer of the relevant online small-value securities (limited to where the relevant securities are stock certificates);
4. A person who intends to purchase the relevant securities if they are traded in any of the following markets:
(a) A securities market;
(b) A market established and operated by the Association for the over-the-counter transaction of securities unlisted on the securities market, as the business affair of the Association prescribed in Article 286 (1) 5 of the Act;
5. Other persons prescribed and publicly notified by the Financial Services Commission, from among the investors who purchase the relevant securities when they are aware of the fact that the possibility of distribution is not high and there is a possibility of loss as a consequence of the investment, etc.
(6) No person who purchases securities from another investor under the proviso to Article 117-10 (7) of the Act (excluding persons referred to in paragraph (5) 4) shall sell or otherwise transfer the relevant securities (including securities acquired by exercising the rights vested in the securities; hereafter the same shall apply in this paragraph) by any other means for one year from the date of the deposit or lock-up of the securities in the Securities Depository: Provided, That the relevant securities may be sold to any of the persons referred to in the subparagraphs of Article 117-10 (7) of the Act.
(7) Where an investor who has subscribed for the acquisition of securities issued through crowdfunding brokerage intends to withdraw his/her intention for subscription by not later than the end of the subscription period of the securities under Article 117-10 (8) of the Act, he/she shall manifest the intent to withdraw to the crowdfunding broker on the website of the crowdfunding broker by means of an electronic document (referring to an electronic document as defined in the Framework Act on Electronic Documents and Transactions). In such cases, the crowdfunding broker shall prepare measures on his/her website for the relevant investor to withdraw his/her intention for subscription.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-18 (Ascertaining Facts of Posted Matters)
(1) "Items prescribed by Presidential Decree" in Article 117-11 (1) 2 of the Act means the following:
1. The purpose and the details of the business conducted by the issuer of online small-value securities;
2. Other matters prescribed and publicly notified by the Financial Services Commission.
(2) "Items prescribed by Presidential Decree" in Article 117-11 (1) 4 of the Act means the following:
1. Detailed purposes for which the amount to be publicly offered will be used, and whether such purpose conform to the business plan referred to in Article 118-16 (1) 2 (b);
2. Where the amount of subscription falls short of the amount to be publicly offered under Article 117-10 (3) of the Act, whether there is a detailed plan to fill up the deficiency;
3. Other matters prescribed and publicly notified by the Financial Services Commission.
(3) "Matters prescribed by Presidential Decree" in Article 117-11 (1) 5 of the Act means the following: <Amended by Presidential Decree No. 27205, May 31, 2016>
1. Matters prescribed and publicly notified by the Financial Services Commission concerning the criminal records of an issuer of online small-value securities and his/her major shareholder and executive officers;
2. Where an issuer of online small-value securities or any of his/her major shareholders and executive officers becomes a party to a lawsuit related to the public offering of securities before placing them for public offering, matters related thereto;
3. Matters stated in the following documents in relation to the matters to be posted on the website of a crowdfunding broker under Article 117-10 (2) of the Act:
(a) Articles of incorporation or other equivalent documents which stipulate the operation of organization and the rights and obligations of investors;
(b) A copy of the minutes of a general meeting of shareholders (in the case of a corporation in the process of incorporation, referring to a general meeting of promoters), board of directors, etc. that has adopted a resolution to issue securities, and other documents substantiating a resolution to issue securities;
(c) A corporation registration certificate (or an equivalent document substantiating the incorporation of the corporation, where the incorporation is unverifiable by a corporation registration certificate);
(d) Where permission, authorization, approval, etc. of the administrative authorities is required for the issuance of securities, a document substantiating that such permission, authorization, approval, etc. has been granted;
(e) Other documents prescribed and publicly notified by the Financial Services Commission as necessary to protect investors;
4. Where an issuer of online small-value securities has posted the following matters, etc. on the issuer on the website of a crowdfunding broker, the following matters:
(a) Awards the issuer has won or patent applications;
(b) Technology evaluations conducted under Article 28 (1) 6 of the Korea Technology Finance Corporation Act;
5. Where an issuer of online small-value securities has posted news contents, etc. of press media on the website of a crowdfunding broker, whether the news contents, etc. are true;
6. Other matters prescribed and publicly notified by the Financial Services Commission, with which the credibility of an issuer of online small-value securities is ascertainable.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-19 (Persons Liable for Damage)
"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)" in Article 117-12 (1) 4 of the Act means a certified public accountant, appraiser, credit rating specialist, attorney-at-law, patent attorney, tax accountant, or any other person with recognized qualifications (including an organization with which he/she is affiliated).
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-20 (Central Record Keeping Agency)
(1) "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" in Article 117-13 (1) of the Act means the data on the following information (hereinafter referred to as "information on crowdfunding brokerage"):
1. Following information on the issuer of online small-value securities:
(a) Trade name and title;
(b) Corporate registration number, business registration number, or identification number;
(c) Category of business, the date of commencement of business, and other data concerning the issuer of online small-value securities;
2. Information on the request for crowdfunding brokerage made by the issuer of online small-value securities, including the value of securities intended for public offering, the subscription period, the deadline for payment of the price therefor, and other data concerning the request for crowdfunding brokerage;
3. Information on subscription made by the investors, including the amount and quantity of subscription, the date of subscription, and other data concerning the subscription;
4. The following information on the investor:
(a) Name of the investor (if the investor is a corporation, referring to the trade name and the title);
(b) Resident registration number, passport number, license driver's license number, alien registration number, or domestic residence report number (if the investor is a corporation, referring to the corporate registration number, business registration number, or identification number) referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act;
(c) Information on whether the relevant investor is any of the persons referred to in the subparagraphs of Article 118-17 (2) or is a person classified in the subparagraphs of paragraph (3) of the same Article;
(d) Other data on the investor;
5. Where the subscription period of securities has expired under Article 117-7 (8) of the Act, data on the matters referred to in Article 118-10 (2);
6. Information posted on the website of the crowdfunding broker as to the following:
(a) Matters posted by the issuer of online small-value securities under Article 117-10 (2) of the Act;
(b) Opinions exchanged between the issuer of online small-value securities and the investors and among investors on the matters referred to in item (a);
(c) Matters posted by the issuer of online small-value securities under Article 118-16 (3);
7. Data incidental to the data referred to in subparagraphs 1 through 6;
8. Data on any alteration to the data referred to in subparagraphs 1 through 7;
9. Other data prescribed and publicly notified by the Financial Services Commission.
(2) The Central Recording Keeping Agency shall perform the following business affairs under Article 117-13 (1) of the Act:
1. Concentrated management of information on crowdfunding brokerage;
2. Management of the limits on securities issued through crowdfunding brokerage and the limits on investment by investors;
3. Provision of information about crowdfunding brokerage to crowdfunding brokers, issuers of small-value securities, etc.;
4. Business affairs incidental to those referred to in subparagraphs 1 through 3.
(3) The Central Recording Keeping Agency shall fulfill the following requirements to perform its business affairs prescribed in subparagraphs of paragraph (2):
1. To have sufficient human resources, computer facilities, and other physical facilities to perform such business affairs;
2. Its articles of incorporation and business regulations shall comply with the statutes and shall be sufficient to perform the business affairs;
3. To have appropriate internal control guidelines and business methods to perform its business affairs accurately and stably.
(4) Except as specifically provided in paragraphs (2) and (3), detailed matters concerning the procedures, methods, etc. of performing the business affairs of the Central Recording Keeping Agency shall be prescribed and publicly notified by the Financial Services Commission.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-21 (Central Recording Keeping Agency’s Affairs Managing Limit of Issuance, etc.)
(1) The Central Recording Keeping Agency may engage in the following activities to manage the limits on securities issued through crowdfunding brokerage and investor's investment limits under Article 117-13 (2) of the Act efficiently. In such cases, it may request materials necessary for such affairs from the Association, etc.:
1. Requesting, collecting and analyzing information necessary for ascertaining the limit on securities issued by each issuer of online small-value securities and the investment limit by each investor;
2. Replying to inquiries, if any, from issuers of online small-value securities or investors into issuance of their own securities or status of investment in connection with the limit on securities issued or the investment limit;
3. Safekeeping and managing information or materials produced in the course of engage in the activities prescribed in subparagraphs 1 and 2.
(2) The Central Recording Keeping Agency shall keep in custody and manage information on crowdfunding brokerage in accordance with the following guidelines under Article 117-13 (3) of the Act:
1. To ensure that the information about crowdfunding brokerage it has received, fulfills all of the requirements prescribed in the subparagraphs of Article 5 (1) of the Framework Act on Electronic Documents and Transactions;
2. To keep in custody the information on crowdfunding brokerage it has received, in discs, magnetic types, or using other electronic data processing devices for ten years from the date of receipt.
(3) "Other cases prescribed by Presidential Decree" in the proviso to Article 117-13 (4) of the Act means the following cases:
1. Where related data is provided at the request of a managing institution of subscription deposits pursuant to Article 118-14 (4);
2. Where the data is provided pursuant to the proviso to Article 4 (1) of the Act on Real Name Financial Transactions and Confidentiality;
3. Other cases prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors or the rights and interests of the subjects of personal information.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-22 (Exception to Prohibition on Provision of Information)
"Other cases prescribed by Presidential Decree" in the proviso to Article 117-14 (3) of the Act means where information is provided pursuant to the proviso to Article 4 (1) of the Act on Real Name Financial Transactions and Confidentiality.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
 Article 118-23 (Measures to be Taken by Providers of Electronic Message Board Services)
"Other matters prescribed by Presidential Decree" in Article 117-15 (1) 3 of the Act means the following:
1. To disclose the matters to be complied with under Article 117-15 (1) of the Act (including details of a corrective order issued or an administrative fine imposed by the Korea Communications Commission at the request of the Financial Services Commission under paragraph (2) of the same Article) to users of information and communications services in accordance with the procedures and methods prescribed by the terms and conditions of the relevant provider of electronic message board services;
2. To cooperate in the process of investigation into a crowdfunding broker or an issuer of online small-value securities conducted under Article 426 (1) of the Act if a report has been filed with the Financial Services Commission under Article 117-145 (1) 2 of the Act;
3. Other matters prescribed and publicly notified by the Financial Services Commission to protect investors and to maintain sound trading practices.
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
PART III ISSUANCE AND CIRCULATION OF SECURITIES
CHAPTER I REGISTRATION STATEMENT
 Article 119 (Securities Exempt from Application of Chapter I of Part III of Act)
(1) "Act prescribed by Presidential Decree" in Article 118 of the Act means the following Acts: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21518, May 29, 2009; Presidential Decree No. 21565, Jun. 26, 2009; Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 21744, Sep. 21, 2009; Presidential Decree No. 21835, Nov. 20, 2009; Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 21904, Dec. 24, 2009; Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 23496, Jan. 6, 2012; Presidential Decree No. 25279, Mar. 24, 2014; Presidential Decree No. 27556, Oct. 25, 2016>
5. The Agricultural Cooperatives Act (limited to the National Agricultural Cooperative Federation and NongHyup Bank);
6. The Fisheries Cooperatives Act (limited to the National Federation of Fisheries Cooperatives and Suhyup Bank);
10. Korea Expressway Corporation Act;
12. Deleted; <by Presidential Decree No. 21744, Sep. 21, 2009>
19. The Korea Agro-Fisheries Trade Corporation Act;
21. The Incheon International Airport Corporation Act;
23. Deleted; <by Presidential Decree No. 23073, Aug. 11, 2011>
24. Korea Tourism Organization Act;
28. Deleted; <by Presidential Decree No. 21904, Dec. 24, 2009>
31. The Special Act on the Establishment of Jeju Special Self-Governing Province and the Development of Free International City;
32. Deleted; <by Presidential Decree No. 25945, Dec. 30, 2014>
(2) "Securities prescribed by Presidential Decree" in Article 118 of the Act means the following securities: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24497, Apr. 5, 2013>
1. Debt securities for which the State or a local government guarantees the payment of principal and interest;
2. Securities held by the State or a local government and disposed of through public sale following a prior consultation with the Financial Services Commission;
3. Bonds issued by a local public corporation established for the purpose of constructing and managing urban railroads or housing projects among bonds issued pursuant to Article 68 (1) through (6) of the Local Public Enterprises Act;
4. Securities issued by an international financial institution under Article 2 (1) of the Act on the Measures for the Admission to International Financial Institutions with approval from the Minister of Strategy and Finance following a prior consultation with the Financial Services Commission;
5. Residential mortgage-backed securities issued by the Korea Housing Finance Corporation established under the Korea Housing Finance Corporation Act according to a mortgage-backed bonds securitization plan, for which the payment of principal and interest is guaranteed and student loan backed securities;
6. Securities, such as short-term electronic bonds, etc. (hereinafter referred to as "short-term electronic bonds, etc.") under subparagraph 2 of Article 2 of the Act on Issuance and Distribution of Short-Term Electronic Bonds, etc., the maturity of which is not more than three months.
 Article 120 (Cases subject to Reporting on Public Offering or Sale)
(1) Pursuant to Article 119 (1) of the Act, cases subject to the submission of a registration statement for public offering or sale of securities shall be as follows: <Amended by Presidential Decree No. 23924, Jun. 29, 2012>
1. Where the aggregate value of securities that the person intends to publicly offer or sell and the aggregate value of securities already publicly provided or sold without filing a registration statement during the latest one year before the date of the intended public offering or sale (the value of securities sold by small investors (excluding the issuer and underwriter of such securities) through over-the-counter trading under Article 178 shall be excluded from the value of securities sold) reaches or exceeds one billion won, respectively;
2. Where it is required to add up the number of persons in accordance with Article 11 (1) and where the aggregate value of securities, for which subscription has been solicited, reaches or exceeds one billion won.
(2) "Small investor" in paragraph (1) 1 means a person who holds equity securities amounting to less than the smaller of the value for one percent of the total number of outstanding equity shares issued by the relevant corporation or 300 million won (in cases of a corporation subject to submission of a business report under the main sentence of Article 159 (1) of the Act, referring to a person who holds less than ten percent of the total number of equity securities): Provided, That the largest shareholder of the corporation and his/her specially related persons shall not be deemed small investors. <Amended by Presidential Decree No. 28040, May 8, 2017>
 Article 121 (Universal Shelf Registration Statements)
(1) A universal shelf registration statement prescribed in Article 119 (2) of the Act (hereinafter referred to as "universal shelf registration statement") can be filed for the following securities: Provided, That contingent capital securities prescribed in Article 165-11 of the Act are excluded herefrom: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016>
1. Stock certificates;
2. Corporate bonds related to stock certificates and participating bonds;
3. Corporate bonds, other than corporate bonds referred to in subparagraph 2;
4. Derivatives-linked securities;
5. Any of the following collective investment securities (hereafter referred to as "open-end collective investment securities" in this Chapter):
(a) Collective investment securities issued by any collective investment scheme, other than closed-end funds;
(b) Foreign collective investment securities prescribed in Article 279 (1) of the Act, equivalent to those referred to in item (a).
(2) The scheduled issue period in a universal shelf registration statement shall be not less than two months and not more than one year from the effective date of the universal shelf registration statement: Provided, That the scheduled issue period of open-end collective investment securities, gold savings accounts, etc. shall be the period of existence set by that collective investment agreement or issuance agreement (or an indefinite period, if the period of existence is not set by the collective investment agreement or issuance agreement). <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
(3) A person who has filed a universal shelf registration statement shall issue securities at least three times during the scheduled issue period.
(4) A person who desires to file a universal shelf registration statement of the securities referred to in paragraph (1) 3 or 4 (excluding gold savings accounts, etc.) shall meet all of the following requirements: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24697, Aug. 27, 2013>
1. Any of the following persons who have publicly offered or sold securities of the same kind, which are referred to in paragraph (1) 3 or 4, during the most recent one year:
(a) A person who has submitted a business report and a half-yearly report under Article 160 of the Act (hereinafter referred to as "half-yearly report") during the most recent one year;
(b) A financial investment business entity that has submitted quarterly business reports and monthly business reports during the most recent one year;
2. An auditor's opinion on the audited financial statements for the most recent business year shall be qualified;
3. The Financial Services Commission has not taken any measure restricting the issuance of securities against the person for the most recent one year.
(5) A corporation newly established by a split-off or merger after a split-off, or a corporation surviving a split-off or merger after a split-off may file a universal shelf registration statement, if it meets all of the following requirements, notwithstanding paragraph (4): <Amended by Presidential Decree No. 21611, Jul. 1, 2009>
1. The corporation existing before the split-off or the merger after the split-off shall meet the requirements provided for in paragraph (4);
2. An auditor's opinion on the audited financial statements of the corporation newly established by the split-off or the merger after the split-off for the most recent business year, shall be qualified.
(6) Any entity that meets all of the following requirements may file a universal shelf registration statement of securities referred to in paragraph (1) 1 through 3. In such cases, notwithstanding paragraph (2), the scheduled period for issuance shall be within two years, and paragraph (3) shall not apply: <Newly Inserted by Presidential Decree No. 21611, Jul. 1, 2009>
1. It shall be a stock-listed corporation and five years have passed after its stock certificates were listed;
2. The aggregate market value of listed stocks on the last trading day in the most recent business year shall not be less than 500 billion won. In such cases, the aggregate market value of listed stocks means an amount computed by multiplying the total number of outstanding shares by the price of a stock certificate of the relevant stock-listed corporation (referring to the closing price set in the securities market);
3. It shall have submitted its business reports, half-yearly reports, and quarterly reports of the most recent three years by the deadline;
4. It shall have not been subject to any sanction prescribed and publicly notified by the Financial Services Commission, imposed by the Financial Services Commission or an exchange due to any violation of disclosure regulations in the most recent three years;
5. An auditor's opinion on the audited financial statements for the most recent business year shall be qualified;
6. It shall have not been sentenced to a fine or heavier punishment under the Act during the most recent three years or sentenced to a fine or heavier punishment under the Act on External Audit of Stock Companies for its violation of accounting standards established under Article 13 of the same Act.
(7) Where a corporation which has filed a universal shelf registration statement of securities under paragraph (6) is incorporated as a new corporation due to a merger, etc. during the scheduled issue period stated in the universal shelf registration statement, the universal shelf registration statement of securities already filed may be used if every corporation which becomes the party to the merger, etc. meets all requirements provided for in paragraph (6): Provided, That even if the corporation which is a party to the merger, etc. fails to meet some of the requirements provided for in paragraph (6), but meets the conditions prescribed and publicly notified by the Financial Services Commission, the universal shelf registration statement of securities already filed may be used. <Newly Inserted by Presidential Decree No. 22197, Jun. 11, 2010>
(8) If a person intends to make a public offering or sale of securities according to a universal shelf registration statement filed under paragraphs (6) and (7), the person shall meet all requirements provided for in the subparagraphs of the same paragraph during the scheduled issue period stated in the universal shelf registration statement. <Newly Inserted by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 22197, Jun. 11, 2010>
 Article 122 (Supplements to Universal Shelf Registration Statements, etc.)
(1) "Securities prescribed by Presidential Decree" in the latter part of Article 119 (2) of the Act means open-end collective investment securities, gold savings accounts, etc. <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
(2) The supplements to the universal shelf registration statement prescribed in the latter part of Article 119 (2) of the Act (hereinafter referred to as "supplements to the universal shelf registration statement") shall contain the following:
1. Signatures of the representative director and the director responsible for filing the registration statements under Article 119 (5) of the Act on matters referred to in the subparagraphs of Article 124: Provided, That such signatures may be omitted in circumstances prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors;
2. Outlines of public offering or sale;
3. The scheduled period for issuance and the amount to be issued that are stated in the universal shelf registration statement;
4. Results of public offering or sale already completed during the scheduled period for issuance;
5. The underwriter's opinion on securities publicly offered or sold (limited to where there is an underwriter);
6. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(3) No supplements to the universal shelf registration statement shall contain any description modifying or altering any description in the universal shelf registration statement (including a corrective registration statement filed under Article 122 (1) of the Act).
(4) Except as specifically provided in paragraphs (1) through (3), the forms of supplements to the universal shelf registration statement; instructions to fill out the forms; accompanying documents; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 21291, Feb. 3, 2009>
 Article 123 (Scope of Forward-Looking Statements)
"Matters prescribed by Presidential Decree" in Article 119 (3) 4 of the Act means an assessment made by a person in receipt of a request for assessing the precision of a forward-looking statement referred to in Article 119 (3) 1 through 3 of the Act.
 Article 124 (Verification and Examination of Registration Statement by Representative Director)
"Matters prescribed by Presidential Decree" in Article 119 (5) of the Act means the following matters:
1. The fact that no description or indication is false or has been omitted with respect to material facts in the descriptions of a registration statement under Article 119 (3) of the Act (hereinafter referred to as "registration statement");
2. The fact that no description or indication is seriously misleading any person who uses the descriptions or indications in the registration statement;
3. The fact that he/she has verified and examined the descriptions of the registration statement, him/herself, with due care;
4. The fact that an internal accounting management system is operated in accordance with Articles 2-2 and 2-3 of the Act on External Audit of Stock Companies, where the corporation is subject to the external audit under Article 2 of the aforesaid Act.
 Article 124-2 (Special Cases concerning Submission of Registration Statement of Sale)
(1) "Conditions prescribed by Presidential Decree are met, such as where enough disclosures are made on the issuer and securities of the same type" in Article 119 (6) of the Act means meeting all of the following requirements:
1. The issuer shall be a corporation subject to business reporting and shall have submitted a business report, half-yearly reports, and quarterly reports by the deadline during the most recent one year;
2. The issuer shall have neither been subject to a penalty surcharge imposed under Article 429 of the Act nor any disposition provided in Article 138 or 175 of this Decree for its violation of disclosure regulations during the most recent one year;
3. A registration statement of the same type of securities as the securities intended to sell shall have been filed and taken effect during the most recent two years;
4. The sale of securities shall not be intended to list them on a securities market;
5. The sale shall be conducted through an investment trader or investment broker;
6. Other requirements prescribed and publicly notified by the Financial Services Commission shall be met.
(2) Notwithstanding paragraph (1), no registration statement need be submitted in relation to the sale of any state bonds issued by a foreign government pursuant to Article 119 (6) of the Act, if the state bonds meet all of the following requirements: <Newly Inserted by Presidential Decree No. 27291, Jun. 28, 2016>
1. The credit rating, etc. of that foreign government shall meet the criteria prescribed and publicly notified by the Financial Services Commission;
2. The sale of the state bonds shall be conducted through an investment trader or investment broker;
3. The investment trader or investment broker referred to in subparagraph 2 shall post the information about the state bonds and the issuer thereof on its website, etc. by the method prescribed and publicly notified by the Financial Services Commission;
4. Other requirements prescribed and publicly notified by the Financial Services Commission shall be met.
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
 Article 125 (Matters to be Contained in Registration Statements and Accompanying Documents)
(1) Each registration statement filed under Article 119 (1) of the Act (excluding those for collective investment securities and asset-backed securities) shall contain the following matters: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Signatures of the representative director and the director responsible for filing the registration statements under Article 119 (5) of the Act on the matters referred to in the subparagraphs of Article 124;
2. The following matters concerning public offering or sale:
(a) General matters concerning the public offering or sale;
(b) Details of rights to securities publicly offered or sold;
(c) Investment risks ensuing from acquisition of securities publicly offered or sold;
(d) Matters concerning the underlying asset of securities publicly offered or sold (applicable only to derivatives-linked securities and debt securities prescribed and publicly notified by the Financial Services Commission);
(e) The underwriter's opinion on securities publicly offered or sold (applicable only where there is an underwriter);
(f) An assessment opinion issued by an analyst institution that meets the requirements prescribed and publicly notified by the Financial Services Commission (hereafter referred to as "securities analysis institution" in this Article), where an unlisted stock corporation (including a corporation in the process of incorporation) files a registration statement with respect to public offering or sale of equity securities (including depositary receipts related to the equity securities) without an underwriter's underwriting (hereinafter referred to as "direct public offering"): Provided, That such opinion may be omitted in cases prescribed and publicly notified by the Financial Services Commission;
(g) Purposes for which the funds are used;
(h) Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors;
3. The following matters concerning the issuer (limited to matters prescribed and publicly notified by the Financial Services Commission, if the corporation is in the process of incorporation):
(a) An overview of the company;
(b) Details of business;
(c) Matters concerning financial standing;
(d) An auditor's opinion;
(e) Matters concerning the organizational structure of the company, such as the board of directors, and its affiliated companies;
(f) Matters concerning shareholders;
(g) Matters concerning executive officers and employees;
(h) Details of transactions with interested parties;
(i) Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(2) Each registration statement filed under paragraph (1) shall be accompanied by the following documents. In such cases, the Financial Services Commission shall verify the corporation registration certificate by sharing administrative information under Article 36 (1) of the Electronic Government Act: <Amended by Presidential Decree No. 22151, May 4, 2010; Presidential Decree No. 22467, Nov. 2, 2010; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013>
1. The articles of incorporation or any other equivalent document that stipulates the operation of organizations, and rights and obligations of investors;
2. A copy of the minutes of the general meeting of shareholders (referring to the general meeting of promoters, if the corporation is in the process of incorporation) or directors’ meeting at which a resolution was passed to issue securities (including specific purposes of issuing the securities for business management, the relationship between persons other than a certain shareholder and the issuer, and the reasons for selecting persons other than the shareholder, where the securities are issued in accordance with Article 418 (2) of the Commercial Act) or any other document evidencing a resolution to issue securities;
3. A document substantiating the incorporation, equivalent to a corporation registration certificate (limited to where the incorporation is unverifiable by a corporation registration certificate);
4. A document substantiating that permission, authorization, approval, etc. has been granted where such permission, authorization, approval, etc. from an administrative agency is required with respect to the issuance of securities;
5. A copy of a contract for the underwriting of securities, if such contract has been executed;
6. A document containing the results of a preliminary listing examination by an exchange (referring to a document containing the results of listing examination, if the securities are intended to be listed on the KONEX), which confirms that the securities conform to the criteria for listing, where the corporation seeks to have any of the following securities listed in the securities market:
(a) Equity securities (excluding collective investment securities);
(b) Depositary receipts (limited to those related to equity securities);
(c) Derivatives-linked securities (limited to those representing the right to perform trading of the securities referred to in item (a) or (b) or close a transaction for giving and receiving money in a pre-determined manner by linking those to changes in the price of the securities referred to in item (a) or (b) traded in the securities market or a foreign securities market or an index based on such price);
7. A preliminary investment prospectus, where the corporation intends to use the preliminary investment prospectus prescribed in Article 124 (2) 2 of the Act (hereinafter referred to as "preliminary investment prospectus");
8. A short-form investment prospectus, where the corporation intends to use the short-form investment prospectus prescribed in Article 124 (2) 3 of the Act (hereinafter referred to as "short-form investment prospectus");
9. The following documents, in cases of direct public offering:
(a) An assessment opinion issued by a securities analysis institution;
(b) A non-disclosure agreement signed by the representative to prevent the divulgence of any confidential information related to the assessment under item (a);
(c) A copy of the contract for the management of subscription deposits concluded under Article 137 (1) 3-2 and a copy of the bankbook opened to place the subscription deposits under the same contract;
10. Other documents prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(3) A corporation that has a subsidiary as prescribed in Article 1-3 (1) of the Enforcement Decree of the Act on External Audit of Stock Companies (hereinafter referred to as "corporation obligated to prepare consolidated financial statements"), among corporations required to submit a registration statement under paragraph (1), shall state in its registration statement matters concerning financial standing referred to in paragraph (1) 3 (c) and other matters prescribed and publicly notified by the Financial Services Commission based on its consolidated financial statements prescribed in subparagraph 2 of Article 1-2 of the Act on External Audit of Stock Companies (hereinafter referred to as "consolidated financial statements") including its financial statements; and shall state the audit opinion on its consolidated financial statements and financial statements as the auditor's opinion referred to in paragraph (1) 3 (d). <Newly Inserted by Presidential Decree No. 22197, Jun. 11, 2010>
(4) Except as specifically provided in paragraphs (1) through (3), the form of the registration statement; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 22197, Jun. 11, 2010>
 Article 126 (Matters to be Contained in Universal Shelf Registration Statement and Accompanying Documents)
(1) Each universal shelf registration statement (excluding collective investment securities) shall contain the following matters:
1. Signatures of the representative director and the director responsible for filing the registration statements under Article 119 (5) of the Act on the matters referred to in the subparagraphs of Article 124;
2. The scheduled period for issuance;
3. Amount to be issued;
4. Matters concerning the issuer referred to in Article 125 (1) 3;
5. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(2) Each universal shelf registration statement shall be accompanied by the following documents. In such cases, the Financial Services Commission shall verify the corporation registration certificate by sharing administrative information under Article 36 (1) of the Electronic Government Act: <Amended by Presidential Decree No. 22151, May 4, 2010; Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 22467, Nov. 2, 2010>
1. Articles of incorporation or any other similar document that stipulates the operation of organizations, and the rights and obligations of investors;
2. A copy of the minutes of the directors’ meeting at which a resolution was passed to file a universal shelf registration statement or any other document substantiating such resolution;
3. A document substantiating the incorporation, equivalent to a corporation registration certificate (limited to where the incorporation is unverifiable by a corporation registration certificate);
4. An auditor's audit report;
5. An auditor’s audit report on the consolidated financial statements, if the corporation is obligated to prepare consolidated financial statements;
6. Other documents prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(3) Except as specifically provided in paragraphs (1) and (2), the form of the universal shelf registration statement; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 127 (Matters, etc. to be Contained in Registration Statements on Collective Investment Securities)
(1) Each registration statement of collective investment securities shall contain the following matters pursuant to Article 119 (7) of the Act: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 24697, Aug. 27, 2013>
1. Signatures of the representative director and the director responsible for filing the registration statements under Article 119 (5) of the Act on matters referred to in the subparagraphs of Article 124;
2. The following matters concerning public offering or sale:
(a) General matters concerning public offering or sale;
(b) Details of rights to collective investment securities publicly offered or sold;
(c) Investment risks ensuing from acquisition of collective investment securities publicly offered or sold;
(d) The underwriter's opinion on collective investment securities publicly offered or sold (applicable only where there is an underwriter);
(e) Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors;
3. The following matters concerning the collective investment scheme:
(a) Name of the collective investment scheme;
(b) Matters concerning the objectives, policies and strategies of investment;
(c) Matters concerning management remuneration, sales commission, sales remuneration, and other expenses;
(d) Matters concerning contributions (excluding where an investment trust is involved);
(e) Matters concerning financial standing: Provided, That this shall not apply to the filing of the initial registration statement;
(f) Matters concerning the collective investment business entity (including those concerning promoters and supervisory directors in cases of an investment company);
(g) Matters concerning fund managers;
(h) Matters concerning management of collective investment property;
(i) Matters concerning sale and repurchase of collective investment securities;
(j) Matters concerning assessment and public disclosure of collective investment property;
(k) Matters concerning distribution of profits and losses and taxation;
(l) Matters concerning the trust business entity and the fund accounting and administration company (applicable only where such fund accounting and administration company exists);
(m) Matters concerning entrustment of business affairs under Article 42 of the Act (applicable only where business affairs are entrusted to a third party);
(n) Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(2) Each registration statement of collective investment securities referred to in paragraph (1), shall be accompanied by the following documents. In such cases, the Financial Services Commission shall verify the corporation registration certificate by sharing administrative information under Article 36 (1) of the Electronic Government Act: <Amended by Presidential Decree No. 22151, May 4, 2010; Presidential Decree No. 22467, Nov. 2, 2010; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015>
1. The collective investment agreement (including supplementary documents);
2. A document substantiating incorporation, equivalent to a corporation registration certificate (limited to where the incorporation is unverifiable by a corporation registration certificate, but excluding an investment trust, an investment limited partnership, or an undisclosed investment association);
3. A document substantiating the payment of contributions (excluding where an investment trust is involved);
4. A copy of a contract for the entrustment of business affairs (including supplementary documents; hereafter the same shall apply in this subparagraph) concluded with the following entities: Provided, That, if a copy of a contract for the entrustment of business affairs concluded with an entity referred to in item (b) or (c) contains the same terms and conditions as contained in a copy of a contract for the entrustment of business affairs that has been pre-submitted in the relevant business year, the pre-submitted copy may substitute for the copy of the relevant contract for the entrustment of business affairs:
(a) The collective investment business entity (excluding where an investment trust or an undisclosed investment association is involved);
(b) The trust business entity;
(c) The fund accounting and administration company (applicable only where a contract for the entrustment of business affairs has been concluded with the fund accounting and administration company);
(d) The assignee of business affairs under Article 42 of the Act (applicable only where a contract for the entrustment of business affairs has been concluded with that assignee of business affairs);
5. Deleted; <by Presidential Decree No. 21611, Jul. 1, 2009>
6. A copy of an underwriting contract, where an underwriting contract has been concluded with respect to the collective investment securities;
7. Other documents prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(3) Except as specifically provided in paragraphs (1) and (2), the form of the registration statements of collective investment securities; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 128 (Matters to be Contained in Registration Statements on Asset-Backed Securities and Accompanying Documents)
(1) Each registration statement of asset-backed securities shall contain the following matters pursuant to Article 119 (7) of the Act: <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
1. Signatures of the representative director and the director responsible for filing the registration statements under Article 119 (5) of the Act on matters referred to in the subparagraphs of Article 124;
2. The following matters concerning public offering or sale:
(a) General matters concerning public offering or sale;
(b) Details of rights to asset-backed securities publicly offered or sold;
(c) Investment risks ensuing from acquisition of asset-backed securities publicly offered or sold;
(d) The underwriter's opinion on asset-backed securities publicly offered or sold (applicable only where there is an underwriter);
(e) Purposes for which the funds are used;
3. The following matters concerning the issuer:
(a) An overview of the company;
(b) Matters concerning executive officers;
(c) Matters concerning entrustment of business affairs;
4. The following matters concerning the asset holder as defined in subparagraph 2 of Article 2 of the Asset-Backed Securitization Act (hereinafter referred to as "asset holder"):
(a) An overview of the asset holder;
(b) Details of business;
(c) Matters concerning financial standing;
(d) Matters concerning executive officers;
5. The following matters concerning securitized assets:
(a) A detailed list of securitized assets by type;
(b) Details of evaluation of securitized assets;
(c) Methods of transfer, etc. of securitized assets and a detailed plan for transfer;
6. The following matters concerning an asset-backed securitization plan established under Article 3 of the Asset-Backed Securitization Act (hereinafter referred to as "asset-backed securitization plan"):
(a) The detailed structure of the asset-backed securitization plan;
(b) A plan to issue and repay asset-backed securities;
(c) An asset manager prescribed in Article 10 of the Asset-Backed Securitization Act (hereinafter referred to as "asset manager") and the methods for the management of assets;
(d) A plan to borrow and manage funds;
7. Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(2) Each registration statement of asset-backed securities filed under paragraph (1) shall be accompanied by the following documents. In such cases, the Financial Services Commission shall verify the corporation registration certificate by sharing administrative information under Article 36 (1) of the Electronic Government Act: <Amended by Presidential Decree No. 22151, May 4, 2010; Presidential Decree No. 22467, Nov. 2, 2010>
1. Documents referred to in Article 125 (2) 1 through 5;
2. A copy of a contract for the entrustment of asset management;
3. A copy of a contract for the entrustment of business affairs;
4. Other documents prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors.
(3) Except as specifically provided in paragraphs (1) and (2), the form of the registration statements of asset-backed securities; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission.
 Article 129 (Special Rules Applicable to Descriptions and Accompanying Documents of Registration Statement)
The Financial Services Commission may, if it is deemed necessary for protecting investors, prescribe and publicly notify different rules on the descriptions and accompanying documents of registration statements, notwithstanding Articles 125 through 128, taking into consideration the characteristics of issuers, such as foreign enterprises, and the categories, types, and other factors of the securities under Article 4 (2) of the Act.
 Article 130 (Corrections, etc. of Registration Statements)
(1) "Material fact prescribed by Presidential Decree" in the latter part of Article 122 (3) of the Act means any of the following matters:
1. Any of the following matters, where any securities, other than collective investment securities, are involved:
(a) Terms and conditions of issuance, including the price publicly offered or sold and the interest rates for issuance;
(b) The base date for distribution, subscription perio