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
Presidential Decree No. 28384, Oct. 17, 2017
Presidential Decree No. 28564, Dec. 29, 2017
Presidential Decree No. 28796, Apr. 10, 2018
PART I GENERAL PROVISIONS
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; |
| Article 3 (Scope of Financial Investment Instruments) |
| 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); |
| 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. |
| 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"): |
| Article 4-2 (Financial Investment Instruments Excluded from Derivatives-Combined Securities) |
[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; |
[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; |
| 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; |
| 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; |
| 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; |
| (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> | 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; |
[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); |
| (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; |
| 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; |
| 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: |
| (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> |
| (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> | 4. | A securities finance company; |
| 6. | A fund brokerage company; |
| 9. | Other financial institutions designated and publicly notified by the Financial Services Commission. |
| Article 7-3 (Financial Investment Instruments Market, etc.) |
| 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: <Amended by Presidential Decree No. 27291, Jun. 28, 2016; Presidential Decree No. 27414, Jul. 28, 2016> |
| 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: |
| 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> |
| 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; |
| 14. | A mutual savings bank established under the Mutual Savings Banks Act and the National Federation of Mutual Savings Banks; |
| 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; |
| 4-2. | Deleted; <by Presidential Decree No. 25945, Dec. 30, 2014> |
| 6. | The Korea Securities Depository established under Article 294 of the Act (hereinafter referred to as the "Securities Depository"); |
| 9. | A collective investment scheme; |
| 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; |
| 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> |
| (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; |
| (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. |
| 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. | 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) |
| 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; |
| (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) |
| 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. | 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) | “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; Presidential Decree No. 28796, Apr. 10, 2018> |
| (b) | Where the small and medium enterprise engages in the business referred to in item (a) jointly with at least one enterprise (including enterprises other than 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: |
| 2. | Local government bonds; |
| 4. | Equity securities (excluding collective investment securities); |
| 5. | Listed stock certificates; |
| 6. | Collective investment securities; |
| (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> |
| 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; |
| 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. |
| (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: |
| (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> |
| (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: |
| 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> |
| 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> |
| (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; |
| (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: |
| 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; |
| 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; |
| (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. |
[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 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; |
| (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 affiliated persons) and major shareholders; |
| 6. | Matters concerning transactions with affiliated 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. |
| 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> |
| (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; |
| (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 affiliated persons as a consequence of the change of affiliated 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 affiliated 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. |
| (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. |
| 1. | Trading under an unfavorable condition for the relevant financial investment business entity when it trades with any of its major shareholders or affiliated persons, compared to trading with any party other than such major shareholder or affiliated 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 any of the following trading: <Amended by Presidential Decree No. 28384, Oct. 17, 2017> |
| 1. | A transaction through which collateral is provided for a major shareholder (including his/her affiliated persons; hereafter the same shall apply in this paragraph); |
| 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 by any other means; |
| (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 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 an 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; |
| (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. |
| (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; |
| (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"); |
| 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; |
| 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: |
| 2. | Management of a third party's security interests in securities, money, etc. in investors' accounts; |
| 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; |
| 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): |
| (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) of the Act, 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. |
| 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; |
| (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. | 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. |
| (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> |
| (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) of the Act 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; |
| (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); |
| (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) |
| 1. | Electronic mail or any other similar electronic means of communication; |
| 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) of the Act, 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. |
[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); |
| 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. |
| 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. | 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; |
| 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. | 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. |
| 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. | 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; |
| 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. |
| 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. |
| 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> |
| 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; |
| 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; |
| (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) |
| 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. | 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. |
| (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> |
| (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; |
| (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 trading inducement or price fluctuation has been used intentionally 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 by 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; Presidential Decree No. 28384, Oct. 17, 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.; |
| 2-2. | Failure to record the sales process or failure to provide the tape-recorded file despite a request of the relevant investor, in selling any financial investment instrument referred to in Article 52-2 (1) 1 or 3 (hereafter referred as "instrument subject to tape-recording" in this paragraph and Article 109 (3) 1-2) to any of the following ordinary investors: |
| (a) | A person in whose case it is found to be unsuitable or inappropriate to purchase an instrument subject to tape-recording, as a result of grasping the information on his/her purpose of investment, property status, investment experience, etc. pursuant to Article 46 (2) of the At or 46-2 (1) of the Act; |
| (b) | A person aged 70 or above; |
| 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 an affiliated 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 affects 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 Articles 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:
| Article 72 (Exceptional Transfer, etc. of Investor's Deposit) |
| 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> |
| 5. | An investment trader or investment broker; |
| 6. | A securities finance company; |
| 1. | Providing a loan secured by securities or negotiable certificates of deposit denominated in KRW; |
| 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: |
| 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. |
| 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; |
| (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. |
| 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) |
| 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. |
| (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; |
| 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: |
| (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. |
| 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): |
| (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; |
| 5. | Trading of bills issued, discounted, traded, intermediated, underwritten, or guaranteed by any of the following financial institutions: |
| (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; |
| 6. | Trading of negotiable certificates of deposit; |
| 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: |
| (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"); |
| (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; |
| (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); |
| (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: |
| (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: |
| (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: |
| (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; |
| 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. |
| (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. |
| (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; |
| 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> |
| Article 81 (Grounds, etc. for Exceeding Limits of Restrictions on Asset Management in Exceptional Circumstances) |
| 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: | 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; |
| 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. |
| 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): |
| (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: |
| (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: |
| (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. |
| 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) | "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> |
| (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: |
| 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 an affiliated 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 an affiliated 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) |
| (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; |
| 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); |
| 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; |
| 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. |
| (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. |
| 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. |
| 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.; |
| (c) | It shall satisfy requirements prescribed and publicly notified by the Financial Services Commission to protect investors and to maintain sound trading practices; |
| (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; |
| (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; |
| (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; |
| (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. |
| 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; |
| 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. |
| 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) |
| 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: |
| (b) | Affixing his/her signature and seal; |
| (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) |
| 3. | Beneficiary certificates; |
| 4. | Deleted; <by Presidential Decree No. 24697, Aug. 27, 2013> |
| 5. | Derivatives-linked securities; |
| (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> |
| 4. | A securities finance company; |
| 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): |
| (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: |
| 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> |
| (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; |
| (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 as 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 processed 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; Presidential Decree No. 28384, Oct. 17, 2017> |
| 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; |
| 1-2. | Failing to record the process of concluding a trust contract or failing to provide the tape-recorded file despite a request of an ordinary investor, in concluding the relevant trust contract with the relevant investor who falls under any item of Article 68 (5) 2-2 (limited to cases where the trust property is managed for instruments subject to tape-recording); |
| 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: |
| (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; |
| 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. | A plan for issuing the beneficiary certificate; |
| 2. | A fund management plan; |
| 3. | Terms and conditions of the trust or the trust contract. |
| 1. | The issue date of the beneficiary certificate; |
| 2. | The identification code and number of the beneficiary certificate. |
| Article 112 (Purchase of Beneficiary Certificates) |
| Article 113 (Restriction on Exercise of Voting Rights) |
| (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) |
| 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) |
| Article 117 (Exemption from Audit) |
| 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; |
| 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. |
| (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 affiliated 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. | 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; |
| (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: |
| 2. | Location of the head office; |
| 3. | Matters concerning executive officers; |
| 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; |
| (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: |
| 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. |
[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; |
| 3. | Other cases prescribed and publicly notified by the Financial Services Commission as unlikely to undermine sound trading practices or protection of investors. |
| 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. |
[This Article Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016]
| Article 118-12 (Grounds for Exceptional Transfer, etc. of Subscription Deposits) |
| 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: |
| 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; |
| (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; |
| 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). |
| 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. |
| (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) |
| (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: |
| (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: <Amended by Presidential Decree No. 28796, Apr. 10, 2018> |
| 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: |
| (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 six months 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. <Amended by Presidential Decree No. 28796, Apr. 10, 2018> |
| (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. | 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. |
| 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; |
| 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); |
| (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; |
| 6. | Information posted on the website of the crowdfunding broker as to the following: |
| (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. |
| 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: |
| 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. |
| 1. | Where related data is provided at the request of a managing institution of subscription deposits pursuant to Article 118-14 (4); |
| 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) |
[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) |
| 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; |
| 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> |
| 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; |
| 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; |
| 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 affiliated 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> |
| 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; |
| (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) |
| Article 124 (Verification and Examination of Registration Statement by Representative Director) |
| 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; |
| 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; |
| (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; |
| 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; |
| (a) | An overview of the asset holder; |
| (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; |
| (a) | The detailed structure of the asset-backed securitization plan; |
| (b) | A plan to issue and repay asset-backed securities; |
| (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 129-2 (Standards for Recognition of Homogeneity of Issuance or Sale of Securities) |
| 1. | Whether the securities were issued or sold in accordance with the same funding plan; |
| 2. | Whether the timing when the securities were issued or sold is close to each other within the extent of six months; |
| 3. | Whether the securities issued or sold are the same type; |
| 4. | Whether the consideration that the issuer or seller receives in return for issuing or selling securities, is the same kind. |
[This Article Newly Inserted by Presidential Decree No. 28796, Apr. 10, 2018]
| 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 period, or payment deadline; |
| (c) | Purposes for which the funds are used; |
| (d) | The underwriter, guaranteeing institution, or trustee company; |
| (e) | Other matters prescribed and publicly notified by the Financial Services Commission as may significantly affect investors' reasonable decisions on investment or the value of the relevant securities; |
| 2. | Any of the following matters, where 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 underwriter (applicable only where there is an underwriter); |
| (d) | Other matters prescribed and publicly notified by the Financial Services Commission as may significantly affect investors' reasonable decisions on investment or the value of the relevant securities. |
| (2) | "Circumstances prescribed by Presidential Decree" in the latter part of Article 122 (3) of the Act means any of the following: |
| 1. | Where the descriptions or indications in a registration statement are too vague to seriously mislead persons who rely on the registration statement; |
| 2. | Where any information unfavorable to the issuer (referring to an investment trust or an undisclosed investment association, where the relevant securities are beneficiary certificates of the investment trust or equity securities of the undisclosed investment association) is omitted, only the information favorable to the issuer is emphasized, or any detail is exaggerated; |
| 3. | Where any of the following events occurs, where any securities, other than collective investment securities, are involved: |
| (a) | Where financial statements for the most recent business year, a half-yearly report, or a quarterly report prescribed in Article 160 of the Act (hereinafter referred to as "quarterly report") are finalized; |
| (b) | Where the issuer's purpose of business is changed; |
| (c) | Where a contract for transfer and acquisition of business or a merger contract is concluded; |
| (d) | Where the issuer becomes a party to a lawsuit that may significantly affect its management, property or other matters; |
| (e) | Where the issuer defaults on any payment for check and bill or the issuer's current account transactions with a bank are suspended or banned; |
| (f) | Where all or an important part of business activities is suspended; |
| (h) | Where a cause of dissolution occurs as prescribed in the Act, the Commercial Act, or any other Act; |
| 4. | Where any of the following events occurs, where collective investment securities are involved: |
| (a) | Where financial statements for the most recent fiscal term are finalized; |
| (b) | Where a merger contract between collective investment schemes is concluded; |
| (c) | Where a lawsuit that may significantly affect collective investment property, etc. is filed. |
| (3) | "Those prescribed by Presidential Decree from among collective investment securities" in the latter part of Article 122 (4) of the Act means open-end collective investment securities. |
| (4) | "Limit prescribed by Presidential Decree" in the proviso to Article 122 (4) of the Act means 20 percent of the amount to be issued: Provided, That the Financial Services Commission may prescribe and publicly notify the limit not more than 20 percent of the amount to be issued, if deemed necessary for the protection, etc. of investors. <Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009> |
| (5) | "Period prescribed by Presidential Decree" in Article 122 (6) of the Act means three months. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| Article 131 (Preparation and Public Disclosure of Investment Prospectus) |
| (1) | The investment prospectus referred to in Article 123 (1) of the Act (hereinafter referred to as "investment prospectus") shall be prepared in two separate sections, which are the title and the main text. |
| (2) | The title of an investment prospectus shall describe the following matters: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 2. | The price of securities publicly offered or sold; |
| 3. | The subscription period; |
| 5. | The place in which a copy of the registration statement and the investment prospectus are available for inspection; |
| 6. | A statement that manipulation for stabilization or market creation may be attempted in the securities market, when the manipulation for stabilization prescribed in Article 176 (3) 1 of the Act (hereinafter referred to as "manipulation for stabilization") or the marker creation prescribed in Article 176 (3) 2 of the Act (hereinafter referred to as "market creation") is intended; |
| 7. | A statement that some of the descriptions of the registration statement is subject to change until the day immediately before the subscription date (or even after the subscription date in cases of open-end collective investment securities, gold savings accounts, etc.); |
| 8. | A statement that the Government does not confirm that the descriptions of the registration statement are true or accurate, nor guarantee or approve the value of the relevant securities; |
| 9. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (3) | The main text of an investment prospectus shall describe the following matters: |
| 1. | Where the registration statement is filed under Article 125 (1): Matters referred to in subparagraphs of Article 125 (1); |
| 3. | Where the registration statement is filed under Article 127 (1): Matters referred to in subparagraphs of Article 127 (1); |
| 4. | Where the registration statement is filed under Article 128 (1): Matters referred to in subparagraphs of Article 128 (1); |
| 5. | Where the registration statement is filed under Article 129: Matters prescribed and publicly notified by the Financial Services Commission. |
| (4) | Where the preliminary investment prospectus is filed under Article 125 (2) 7 and there is no change in descriptions of the registration statement until the relevant securities registration takes effect, the preliminary investment prospectus may be used as the investment prospectus after the securities registration takes effect. In such cases, the title of the preliminary investment prospectus shall be replaced with the title of the investment prospectus stating the matters referred to in the subparagraphs of paragraph (2). |
| 2. | Matters approved by the Financial Services Commission in relation to the business affairs or operations of the issuer. |
| (6) | "Collective investment securities and derivatives-linked securities prescribed by Presidential Decree" in the main sentence of Article 123 (3) of the Act means open-end collective investment securities, gold savings accounts, etc. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (7) | Except as specifically provided in paragraphs (1) through (6), the form of the investment prospectus; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 132 (Persons Exempt from Issuing Investment Prospectus) |
"Those prescribed by Presidential Decree" in the main sentence of Article 124 (1) of the Act means persons falling under any of the following subparagraphs: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24636, Jun. 21, 2013> | 1. | Persons falling under any provision of Article 11 (1) 1 (c) through (f) and items of Article 11 (1) 2; |
| 2. | Persons who expressed their intent to refuse to receive an investment prospectus in writing, by phone, cable, facsimile, e-mails or similar telecommunications, or other methods prescribed and publicly notified by the Financial Services Commission; |
| 3. | Persons who intend to acquire additional collective investment securities equivalent to those already acquired: Provided, That it shall be limited to where the investment prospectus of the relevant collective investment securities provide the same details as the investment prospectus issued immediately before. |
| Article 133 (Methods of Preparing Preliminary Investment Prospectus) |
| 2. | A statement that the relevant registration statement has been filed with the Financial Services Commission, but that the securities registration is not yet effective and that some of the descriptions therein is subject to change until the effective date; |
| 3. | Matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (2) | Article 123 (2) of the Act and Article 131 (1) and (3) of this Decree shall apply mutatis mutandis to the preparation of the preliminary investment prospectus. In such cases, "investment prospectus" shall be construed as "preliminary investment prospectus". |
| (3) | Except as specifically provided in paragraphs (1) and (2), the form of the preliminary investment prospectus; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 134 (Method of Preparing Short-Form Investment Prospectus) |
| (1) | Pursuant to Article 124 (2) 3 of the Act, each short-form investment prospectus shall contain the descriptions or statements about the matters classified below: <Amended by Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | The following matters, if the relevant securities registration is not yet effective: |
| (a) | Matters referred to in Article 131 (2) 2 through 6; |
| (b) | A statement that the relevant registration statement has been filed with the Financial Services Commission, but that the securities registration is not yet effective and that some of the descriptions therein is subject to change until the effective date; |
| (c) | Results of the preliminary listing examination by an exchange (referring to the results of listing examination, if the securities are intended to be listed on the KONEX), confirming that the securities conform to the criteria for listing, where any of the securities referred to in the items of Article 125 (2) 6 is intended to be listed on the securities market; |
| (d) | Matters that must be stated in the main text of the investment prospectus in accordance with Article 131 (3) and are prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors; |
| (e) | A statement that investors are advised to refer to the preliminary investment prospectus or the investment prospectus for further specific details concerning public offering or sale of the securities and the issuer (referring to an investment trust or an undisclosed investment association, if the securities are beneficiary certificates of the investment trust or equity securities of the undisclosed investment association); |
| 2. | The following matters, if the relevant securities registration has already become effective: |
| (a) | Matters referred to in Article 131 (2) 1 through 8; |
| (b) | Matters referred to in subparagraph 1 (c) through (e). |
| (2) | When the matters referred to in subparagraphs of paragraph (1) are described or stated in the short-form investment prospectus, any information unfavorable to the issuer (referring to an investment trust or an undisclosed investment association, if the securities are beneficiary certificates of the investment trust or equity securities of the undisclosed investment association) shall not be omitted, nor shall only information favorable to the issuer be selectively described or stated. |
| (3) | Except as specifically provided in paragraphs (1) and (2), the form of the short-form investment prospectus; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 135 (Persons Liable for Losses Incurred due to False Statements, etc.) |
| (1) | "As specified further by Presidential Decree" in Article 125 (1) 3 of the Act means a person who holds an officially recognized qualification (including an organization to which he/she belongs), including a certified public accountant, an appraiser, a person specializing in credit rating, an attorney-at-law, a patent attorney, and a tax accountant. |
| (2) | "Person prescribed by Presidential Decree" in Article 125 (1) 5 of the Act means any of the following persons: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 28040, May 8, 2017> |
| 2. | An intermediary who is entrusted by an issuer or seller to conduct public offering, private placement, or public sale of the relevant securities by means, other than underwriting or otherwise requested to participate directly or indirectly in shared public offering, private placement, or public sale of securities, and decides the terms and conditions thereof. |
| Article 136 (Matters Excluded from Public Disclosure) |
"Descriptions prescribed by Presidential Decree" in the latter part of Article 129 of the Act means descriptions of matters falling under any of the following subparagraphs: <Amended by Presidential Decree No. 22917, Jun. 11, 2010>
| Article 137 (Public Offering or Sale without filing for registration Statement) |
| (1) | "Measures prescribed by Presidential Decree" in Article 130 (1) of the Act means the following measures: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 28796, Apr. 10, 2018> |
| 1. | An issuer shall submit, to the Financial Services Commission, documents describing the financial status and business performance of the issuer before public offering or sale of securities (referring to an investment trust or an undisclosed investment association, if the securities are beneficiary certificates of the investment trust or equity securities of the undisclosed investment association; excluding corporations obligated to submit business reports under Article 159 (1) of the Act and foreign corporations, etc. falling under the subparagraphs of Article 176 (1); hereafter the same shall apply in this Article). In such cases, such documents (collective investment securities are exempted) shall be those that have undergone an accounting audit by an accounting auditor, or those that have been confirmed by a certified public accountant and to which the certified public accountant's opinion is attached, as prescribed and publicly notified by the Financial Services Commission; |
| 2. | Recommendation for subscription shall be issued in writing or other means describing or indicating the following matters. In such cases, any description or indication of the financial status and business performance therein shall not differ from the details of the documents submitted in accordance with subparagraph 1, nor shall any false statement on fact be described or indicated therein: |
| (a) | Matters under Article 125 (1) 2 and 3 (referring to matters under Article 127 (1) 2 and 3 in cases of collective investment securities, and matters under Article 128 (1) 2 through 7 in cases of asset-backed securities); |
| 3. | Once an issuer begins public offering or sale of securities, it shall submit to the Financial Services Commission, details of the methods of soliciting subscriptions and details of the printed matters or any other means under subparagraph 2 by not later than three days before commencing the sale. The same shall also apply to cases where the methods of soliciting subscriptions and any description or indication contained in the printed matters or any other means are changed after public offering or sale of securities has begun; |
| 3-2. | A contract for the management of subscription deposit money which includes matters concerning the deposit, escrow and return, etc. thereof to the investor shall be concluded with any of the following persons, and the bank account shall be set up: |
| (a) | An investment trader or investment broker of securities; |
| (b) | A person prescribed in any subparagraph of Article 4; |
| (c) | A securities finance company; |
| 4. | An issuer shall, upon completion of public offering or sale of securities, report the results of the public offering or sale to the Financial Services Commission without delay. |
| 5. | The following documents on the settlement of accounts shall be submitted to the Financial Services Commission within 90 days after each business year passes: Provided, That corporations obligated to submit business reports under Article 159 (1) of the Act, foreign corporations, etc. under the subparagraphs of Article 176 (1), corporations which have completed redemption or amortization of securities provided or sold to the public, and corporations which have issued merely secured corporate bonds under Article 362 (8) shall be excluded: |
| (a) | Financial statements and specifications attached thereto; |
| (b) | Income statements and specifications attached thereto; |
| (c) | Statements of appropriation of retained earnings or statements of disposition of deficits; |
| (d) | Audit reports prepared by accounting auditors (limited to corporations which underwent the accounting audit by the accounting auditors). |
| (2) | Where an issuer is obligated to submit documents concerning the financial status and business performance of the issuer to the Financial Services Commission in accordance with paragraph (1) 1, documents have been submitted before pertinent public offering or sale of securities in relation to the pertinent public offering or sale of securities, but no change has been made in details of the documents submitted, submission of the documents concerning the financial status and business performance of the issuer may be substituted by submitting a written statement referring to the documents. <Amended by Presidential Decree No. 21611, Jul. 1, 2009> |
| (3) | If public sale of securities fully satisfies the following requirements, it shall be deemed that the issuer of the securities has fully performed measures under paragraph (1): |
| 1. | The public sale of securities shall be performed by an over-the-counter transaction under Article 178; |
| 2. | The public sale of securities shall be initiated by a small investor under Article 120 (2) (excluding the issuer and underwriter of the securities); |
| 3. | The issuer of the securities shall disclose the following matters in the manner prescribed and publicly notified by the Financial Services Commission: |
| (a) | Matters concerning the issuer; |
| (b) | Documents describing the financial status and business performance of the issuer. |
| (4) | Where it is deemed necessary for investor protection, etc., notwithstanding paragraph (1), the Financial Services Commission may prescribe and publicly notify different items to be stated in the documents under paragraph (1) 1 and the printed materials under paragraph (1) 2, in consideration of the characteristics of issuers, such as foreign companies, classifications and kinds, etc. of securities falling under the subparagraphs of Article 4 (2) of the Act. <Newly Inserted by Presidential Decree No. 21611, Jul. 1, 2009> |
| (5) | The Financial Services Commission may prescribe and publicly notify detailed guidelines with respect to measures under paragraph (1). |
| (6) | "Matters prescribed by Presidential Decree" in Article 130 (2) of the Act means the matters prescribed in subparagraphs of Article 129-2. <Newly Inserted by Presidential Decree No. 28796, Apr. 10, 2018> |
| Article 138 (Measures of Financial Services Commission) |
"Measures prescribed by Presidential Decree" in the former part of Article 132 of the Act means any of the following measures: | 1. | Imposing restrictions on issuance of securities within the limit of one year; |
| 2. | Recommending the dismissal of executive officers; |
| 3. | Filing criminal complaints or informing a competent investigative agency of violations of the Act, if any; |
| 4. | Informing a related agency or an investigative agency of violations of any other Act, if any; |
| 5. | Issuing warnings or cautions. |
CHAPTER II SYSTEMS RELATED TO CORPORATE ACQUISITION OR MERGER
SECTION 1 Public Tender Offer
| Article 139 (Securities Eligible for Public Tender Offer) |
"Voting stocks or any other securities prescribed by Presidential Decree" in Article 133 (1) of the Act means any of the following securities related to voting stocks (hereinafter referred to as "stocks, etc."): | 1. | Securities issued by a stock-listed corporation, which falls under any of the following items: |
| (b) | Instruments representing preemptive rights to new stocks; |
| (e) | Exchangeable bonds with a right to claim to exchange them with stocks under any provision of items (a) through (d); |
| (f) | Derivative-combined securities based on, as the underlying asset, the securities under any provision of items (a) through (e) (limited to those with rights to acquire the underlying asset by exercising such rights); |
| 2. | Securities issued by any person other than a stock-listed corporation under subparagraph 1 and falling under any of the following items: |
| (a) | Security depository receipts related to securities under subparagraph 1; |
| (b) | Exchangeable bonds with a right to claim to exchange them with securities under subparagraph 1 or securities under item (a); |
| (c) | Derivative-combined securities based on, as the underlying asset, securities under subparagraph 1 or securities under item (a) or (b) (limited to those with rights to acquire the underlying asset by exercising such rights). |
| Article 140 (Guidelines for Calculating Number of Opposite Parties to Public Tender Offer) |
| (1) | "Period prescribed by Presidential Decree" in the main sentence of Article 133 (3) of the Act means a duration of six months before the date of purchasing, etc. the relevant stocks, etc. (referring to the purchase, etc. under Article 133 (2) of the Act; hereafter the same shall apply in this Section). |
| (2) | "Number of persons, equivalent to or more than the number of those prescribed by Presidential Decree" in the main sentence of Article 133 (3) of the Act means the number of persons reaching or exceeding ten persons when adding the number of opposite parties who engage in the purchase, etc. of the stocks, etc. in the instant case to the number of opposite parties who have already engaged in the purchase, etc. of the same issue of the stocks, etc. during the period under paragraph (1). |
| Article 141 (Scope of Specially Related Persons) |
| (1) | "Those who have a special relationship as determined by Presidential Decree" in the main sentence of Article 133 (3) of the Act means affiliated persons and joint holders. |
| (2) | "Joint holders" in paragraph (1) means those who have agreed to perform any of the following acts in accordance with an arrangement or an agreement with the principal: |
| 1. | Jointly acquiring or disposing of stocks, etc.; |
| 2. | Trading stocks, etc. among each other after jointly or solely acquiring such stocks, etc.; |
| 3. | Jointly exercising voting rights (including the power to instruct to exercise voting rights). |
| (3) | Where it is proved in the context under paragraph (1) that the number of stocks, etc. owned by an affiliated is less than 1,000 shares or that the person does not fall under paragraph (2), the person shall not be deemed an affiliated for the purposes of this Section and Section 2 of Chapter II of Part III. |
| Article 142 (Possession Similar to Ownership) |
"Those owned and similarly possessed, as prescribed further by Presidential Decree" in the main sentence of Article 133 (3) of the Act means any of the following: | 1. | Where stocks, etc. are owned on a person's own account, regardless of in whose name they are held; |
| 2. | Where a person holds a right to claim delivery of stocks, etc. pursuant to a provision of an Act, as a result of a transaction, or under any other contract; |
| 3. | Where a person holds a voting right (including the power to instruct the exercise of the voting right) of stocks, etc. pursuant to a provision of an Act or under a money trust contract, a collateral agreement, or any other contract; |
| 4. | Where a person holds a right to acquire or dispose of the relevant stocks, etc. pursuant to a provision of an Act or under a money trust contract, a collateral agreement, a discretionary investment contract, or any other contract; |
| 5. | Where a person holds a right to complete a trade by unilateral reservation for trading stocks, etc. and acquires the status of purchaser by exercising that right; |
| 6. | Where a person holds a contractual right as prescribed in Article 5 (1) 2 of the Act to a contract for an underlying asset of stocks, etc. and acquires the status of purchaser by exercising that contractual right; |
| 7. | Where a person holds a stock option and acquires the status of purchaser by exercising that stock option. |
| Article 143 (Purchase, etc. for which No Public Tender Offer is Required) |
| 1. | Purchase, etc. of stocks, etc. for the purpose of retirement; |
| 2. | Purchase of stocks in response to the exercise of appraisal rights; |
| 3. | Purchase, etc. of stocks, etc. by exercising rights to instruments representing preemptive rights to new stocks, convertible bonds, bonds with warrant, or exchangeable bonds; |
| 4. | Purchase, etc. of stocks, etc. by exercising rights to derivatives-linked securities; |
| 5. | Purchase, etc. of stocks, etc. from an affiliated person; |
| 6. | Deleted; <by Presidential Decree No. 24697, Aug. 27, 2013> |
| 7. | Purchase, etc. of stocks, etc. prescribed and publicly notified otherwise by the Financial Services Commission as unlikely to undermine other investors' interests. |
| Article 144 (Purchase not Deemed Purchase in Securities Market) |
"Purchasing as prescribed by Presidential Decree" in Article 133 (4) of the Act means purchasing of stocks, etc. by stipulating the issue, price, volume, and other matters by contract or any other arrangement between a seller and a purchaser and closing the trade and settling the payment through the securities market.
| Article 145 (Public Notice, etc. of Tender Offer) |
| (1) | A person who intends to give a public notice of tender offer under Article 134 (1) of the Act (hereinafter referred to as "public notice of tender offer") shall issue such public notice through two or more newspapers circulated nationwide among ordinary daily newspapers or daily newspapers specializing in economy under the Act on the Promotion of Newspapers, etc. in the manner prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 22003, Jan. 27, 2010> |
| (2) | "Stocks, etc. prescribed by Presidential Decree" in Article 134 (1) 2 of the Act means exchangeable bonds and derivative-combined securities. |
| 1. | The issuer of stocks, etc., which are the underlying securities, in cases of security depository receipts; |
| 2. | The issuer of stocks, etc. subject to the exchange, in cases of exchangeable bonds; |
| 3. | The issuer of stocks, etc., which are the underlying asset, in cases of derivative-combined securities. |
| 1. | The current status of the tender offeror under Article 134 (2) of the Act (hereinafter referred to as "tender offeror") and his/her specially related persons (referring to the specially related persons under Article 133 (3) of the Act; hereinafter the same shall apply); |
| 3. | The method of tender offer; |
| 4. | The fact as to whether there was an advance agreement with executive officers or the largest shareholder of the issuer (referring to the issuer of stocks, etc. subject to the tender offer under Article 134 (1) 2 of the Act; hereinafter referred to as "company subject to the tender offer") of stocks, etc. subject to the tender offer, and details of the agreement, if any; |
| 5. | A plan for the future of the company subject to the tender offer after closing the tender offer; |
| 6. | The fact as to whether there are contracts executed on purchase, etc. of the relevant stocks, etc. before giving public notice of tender offer, and details of the contracts, if any; |
| 7. | The place in which the public tender statement under Article 134 (2) of the Act (hereinafter referred to as "public tender statement") and the prospectus for tender offer under Article 137 (1) of the Act (hereinafter referred to as "prospectus for tender offer") are available for inspection. |
| Article 146 (Tender Offer Statement, etc.) |
| (1) | No tender offer statement shall contain any description that differs from the contents of the public notice of the tender offer, nor omit any contents of such public notice. |
| 1. | Matters concerning the tender offer agent; |
| 2. | The status of the company subject to the tender offer; |
| 3. | The method of the tender offer; |
| 4. | Details of procurement of the funds or securities for the exchange, required for the tender offer (including the lender, if borrowed from a third party); |
| 5. | The status of stocks, etc. of the company subject to the tender offer, held by the tender offeror and his/her specially related persons, and details of transactions of such stocks, etc. by such persons during the most recent one year; |
| 6. | The fact as to whether there was an advance agreement with executive officers or the largest shareholder of the company subject to the tender offer, and details of the agreement, if any; |
| 7. | A future plan of the company subject to the tender offer after closing the tender offer; |
| 8. | Details of a broker or an intermediary for the tender offer, if any; |
| 9. | The place where the tender offer statement and prospectus for tender offer are furnished for inspection. |
| (3) | "Period set by Presidential Decree" in Article 134 (3) of the Act means a period of not less than 20 days and not more than 60 days. |
| (4) | Every tender offer statement shall be accompanied by the following documents. In such cases, the Financial Services Commission shall verify an abridged copy of the resident registration card including resident registration number (limited to individuals), or corporation registration certificate (limited to corporations), of the tender offeror by sharing administrative information under Article 36 (1) of the Electronic Government Act; or shall require the tender offeror to submit an abridged copy of his/her resident registration card including his/her resident registration number, if he/she does not consent to verification of an abridged copy of his/her resident registration card including his/her resident registration number: <Amended by Presidential Decree No. 22151, May 4, 2010; Presidential Decree No. 22467, Nov. 2, 2010; Presidential Decree No. 28564, Dec. 29, 2017> |
| 1. | Any document equivalent to a certified transcript of the resident registration card, if the tender offeror is a foreigner; |
| 2. | Articles of association and any other document equivalent to the corporation registration certificate, if the tender offeror is a corporation or any other organization (limited to where the incorporation is unverifiable by the corporation registration certificate); |
| 3. | A copy of a contract for the administrative affairs related to the tender offer; |
| 4. | A document substantiating the balance of deposits in financial institutions or any funds pooled, equivalent to or more than the amount required for the public tender; |
| 5. | A document substantiating the securities are secured that the tender offeror has obtained to deliver in return for exchange, where the tender offer is made for the exchange with other securities: Provided, That a document substantiating the issuance of new stocks is required where the tender offer is made to accept an investment in kind with intent to circumvent the guidelines provided in Article 8-2 (2) 2 of the Monopoly Regulation and Fair Trade Act; |
| 6. | A document with the same contents as those to be stated in the registration statement filed under Article 119 (1) or (2) of the Act, where filing such registration statement is required with respect to the tender offer for exchange with other securities; |
| 7. | A document substantiating that permission, authorization, or approval has been granted by an administrative agency, if such permission, authorization or approval is required for the purchase, etc. of stocks, etc.; |
| 8. | Details of the public notice of the tender offer; |
| 9. | A copy of a contract, if a contract has been concluded for the purchase, etc. of stocks, etc. before the public notice of tender offer; |
| 10. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for ascertaining the descriptions of the tender offer statement. |
| (5) | Except as specifically provided in paragraphs (1) through (4), the form of the tender offer statement; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 147 (Prohibition on Change of Terms and Conditions of Tender Offer) |
| 1. | Reducing the tender offer period; |
| 2. | Changing the type of consideration to be provided to subscribing shareholders prescribed in Article 139 (4) of the Act (hereafter referred to as "subscribing shareholders" in this subparagraph): Provided, That an addition to the types of consideration which subscribing shareholders may choose shall be excluded herefrom; |
| 3. | Changing terms and conditions of the tender offer to the extent that it leads to an extension of the payment period for the tender offer: Provided, That the following cases shall be excluded herefrom: |
| (a) | Increasing the purchase price, where the arithmetic mean of prices (based on closing prices) formed in the securities market for the relevant stocks, etc. during the three-day period before the date of filing the corrective registration statement under Article 136 (1) of the Act is not less than 90 percent of the tender offer price or where there is a counter tender offer prescribed in Article 139 (1) of the Act (hereinafter referred to as "counter tender offer"); |
| (b) | Increasing the number of stocks, etc., to be purchased, where the total number of the stocks, etc. is changed after the public notice of the tender offer or where there is a counter tender offer; |
| (c) | Extending the tender offer period (extended until the closing date of the counter tender offer period), where there is a counter tender offer. |
| Article 148 (Preparation, etc. of Prospectus for Tender Offer) |
Each prospectus for tender offer shall state the matters referred to in the subparagraphs of Article 134 (2) of the Act pursuant to Article 137 (1) of the Act: Provided, That a tender offeror may omit to state the matters prescribed and publicly notified by the Financial Services Commission therein, if the tender offeror is a stock-listed corporation.
| Article 149 (Expression of Opinions on Tender Offer) |
| (1) | The issuer of the stocks, etc. against which a public tender statement is filed shall, when it seeks to express its opinion thereon in accordance with Article 138 (1) of the Act, communicate its opinion by advertisement, letter (including electronic mail), or any other document. |
| (2) | The opinion expressed in accordance with paragraph (1) shall include the issuer's position on whether it assents to, opposes, or remains neutral in the tender offer and the reasons for its position, and shall promptly notify a significant change in its opinion in the manner provided for in paragraph (1), if it makes a significant change in its position after expressing its opinion. |
| Article 150 (Exceptional Revocation of Tender Offer) |
"As prescribed further by Presidential Decree" in the proviso to Article 139 (1) of the Act means any of the following cases: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> | 1. | Where the tender offeror defaults on payments for cheques and bills or where its current account transactions with banks are suspended or banned; |
| 2. | Where the tender offer publicly notified included a condition that the tender offer may be revoked, if any of the following events occurs in relation to a company subject to the tender offer and the condition was also included in the public tender statement, and where any of such events actually occurs: |
| (a) | Merger, division, merger after division, all-embracing transfer of stocks, or all-embracing exchange; |
| (b) | Transfer of an essential business or asset falling under any subparagraph of Article 171 (2); |
| (e) | Dishonoring a bill, a note, a check issued; |
| (f) | Suspension of or ban on check account transactions with banks; |
| (g) | Delisting of stocks, etc; |
| (h) | Where any loss incurred during the latest business year due to a natural disaster, war, upheaval, or any other calamity reaches or exceeds 10 percent of total assets. |
| Article 151 (Acquisition of Stocks in Any Manner other than Tender Offer) |
"As prescribed by Presidential Decree" in the proviso to Article 140 of the Act means any of the following cases: | 1. | Where a contract for purchase, etc. of the relevant stocks, etc. was executed before the tender offer is publicly notified, but it did not fall under the subject matter of the tender offer under Article 133 (1) of the Act when the contract was executed, and the public notice of the tender offer and the public tender statement mention the facts and terms of the contract; |
| 2. | Where the tender offer agent involved accepts entrustment of purchasing, etc. the relevant stocks, etc. from any person other than the tender offeror and his/her specially related persons. |
| Article 152 (Measures of Financial Services Commission) |
"Measures prescribed by Presidential Decree" in the main sentence of Article 146 (2) of the Act means measures falling under any of the following subparagraphs: | 1. | Imposing restrictions on public tender offer within the limit of one year (applicable only to the tender offeror and his/her specially related persons); |
| 2. | Imposing restrictions on a business conducting administrative affairs of public tender offer within the limit of one year (applicable only to the tender offer agent); |
| 3. | Recommending the dismissal of executive officers; |
| 4. | Filing criminal complaints of violations of the Act or informing an investigative agency of such violations, if any; |
| 5. | Informing a related agency or an investigative agency of violations of other Acts, if any; |
| 6. | Issuing warnings or cautions. |
SECTION 2 Reports on Stocks, etc. Held in Bulk
| Article 153 (Reporting on Stocks, etc. Held in Bulk) |
| 1. | Matters concerning the person (hereinafter referred to as "holder of stocks in bulk") who comes to hold stocks, etc. in bulk (referring to holding in bulk as provided for in Article 147 (1) of the Act) and his/her related persons; |
| 2. | Matters concerning the issuer (referring to an issuer prescribed in Article 148 of the Act) of the stocks, etc. held in bulk; |
| 3. | Grounds for such change; |
| 4. | The date, price, and method of acquisition or disposition; |
| 6. | Details of procurement of funds necessary for acquisition or the goods subject to the exchange (including lenders, if the funds or the goods are borrowed); |
| 7. | Detailed matters prescribed and publicly notified by the Financial Services Commission in relation to the matters referred to in subparagraphs 1 through 6. |
| (3) | Where a holder of stocks, etc. in bulk is required to report the status of holding the stocks, etc. or details of a change, the base date for such reporting shall be any of the following dates: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | The date of listing, where stocks issued by an unlisted stock corporation are listed in the securities market; |
| 2. | The date of the merger in cases of the merger by absorption, and the date of listing in cases of consolidation of corporations; |
| 3. | The execution date of the contract, where stocks, etc. are traded in the securities market (including transactions via an alternative trading system; hereafter the same shall apply in this paragraph); |
| 4. | The execution date of the contract, where stocks, etc. are acquired outside the securities market; |
| 5. | The earlier of the payment date or the date of delivery of stocks, etc. where stocks, etc. are disposed of outside the securities market; |
| 6. | The date immediately following a payment date of a stock price, where new stocks allocated for capital increase for consideration are acquired; |
| 7. | The execution date of the contract for borrowing stocks where stocks, etc. are borrowed, and the date of delivery of stocks, etc., where such stocks, etc. are returned; |
| 8. | The effective date as prescribed in the Civil Act, where a person receives stocks, etc. as gift, and the date of delivery of stocks, etc., where a person conveys such stocks, etc. as a gift; |
| 9. | The date the inheritance is finalized by absolute acceptance or by qualified acceptance, where there is one heir, and the date the division of property related to stocks, etc. is completed, where there are at least two heirs, if such stocks, etc. are acquired by inheritance; |
| 10. | The date a relevant legal act, etc. takes effect by operation of a relevant Act, such as the Civil Act and the Commercial Act, where reporting is required on any ground, other than those provided in subparagraphs 1 through 9. |
| (4) | Where a report required under Article 147 (1) of the Act is filed by the principal jointly with his/her related persons, the report jointly signed by the principal and the related persons may be submitted by a person who holds the largest number of stocks, etc. as their representative. |
| 1. | Where new stocks are issued by allocating the stocks in proportion to the number of stocks held by each shareholder and thus each shareholder acquires only the stocks so allocated; |
| 2. | Where an acquisition of a certificate of preemptive right issued on the basis of the preemptive right to have new stocks allocated in proportion to the number of stocks held by a shareholder, alone results in the increase of the number of stocks, etc. held; |
| 3. | Deleted; <by Presidential Decree No. 27751, Dec. 30, 2016> |
| 4. | Where the ratio of stocks, etc. held by a shareholder is changed by capital reduction; |
| 5. | Where an adjustment of the issuance price or exchange price of stocks, etc. issued or exchanged in response to the exercise of rights granted to an instrument representing the preemptive right to new stocks (excluding certificates of preemptive rights), bonds with warrant, convertible bonds, or exchangeable bonds, alone results in the increase of the number of stocks held by a shareholder. |
| (6) | The form of the report filed under Article 147 (1) and (4) of the Act, instructions to complete the form, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 154 (Special Cases concerning Reporting on Stocks Held in Bulk) |
| (1) | "Matters prescribed further by Presidential Decree" in the latter part of Article 147 (1) of the Act means exercising de facto influence over the company or its executive officers with respect to any of the following events (including exercise of the right prescribed in Article 363-2 or 366 of the Commercial Act or assigning a third party to exercise such right in accordance with the Commercial Act or any other Act): <Amended by Presidential Decree No. 25843, Dec. 9, 2014> |
| 1. | Appointment or dismissal of an executive officer, or suspension of performance of duties of an executive officer; |
| 2. | Amendment of the articles of incorporation with respect to the organization of the company, such as the board of directors; |
| 3. | Change of the company's capital; |
| 4. | Determination of dividends of the company: Provided, That the same does not apply where the dividends are determined by the person referred to in Article 10 (3) 12; |
| 5. | Merger, split-off, and merger after a split-off of the company; |
| 6. | Comprehensive exchange or transfer of stocks; |
| 7. | Complete transfer and acquisition of business or transfer and acquisition of an essential part of business prescribed and publicly notified by the Financial Services Commission; |
| 8. | Disposal of all assets or disposal of an essential part of assets prescribed and publicly notified by the Financial Services Commission; |
| 9. | Conclusion of, amendments to, or rescission of a contract for leasing all business or delegating business administration, or entirely sharing the profit and loss with another person, or any other similar contract; |
| 10. | Dissolution of the company. |
| (2) | "Professional investor prescribed by Presidential Decree" in the latter part of Article 147 (1) of the Act means any of the following entities: |
| 4. | Other persons prescribed and publicly notified by the Financial Services Commission as persons, for whom it is required to apply different rules with respect to details of, and timing for reporting and other matters. |
| (3) | Pursuant to the latter part of Article 147 (1) of the Act, if a person, other than the professional investors prescribed in paragraph (2), holds stocks not for exercising influence over the management rights of the issuer under Article 148 of the Act, the person may file a report containing the following matters, and if any change occurs in the holding status, he/she may report it by no later than the tenth of the month following the month during which the change occurs: <Amended by Presidential Decree No. 21611, Jul. 1, 2009> |
| 1. | The status of stocks held by the shareholder; |
| 3. | A commitment that he/she will not engage in any conduct to exercise influence over the management rights as prescribed in paragraph (1) while holding the stocks, etc. |
| (4) | Pursuant to the latter part of Article 147 (1) of the Act, any of the entities referred to in paragraph (2), among professional investors, may file a report containing the following matters, and if any change occurs in the holding status by no later than the tenth of the month following the quarter during which any change occurs in stocks, etc. or holding status: <Amended by Presidential Decree No. 21611, Jul. 1, 2009> |
| 1. | The status of stocks held by the entity and details of the change on the date any cause requiring a report occurs; |
| Article 155 (Reporting on Changes in Material Facts) |
"Material fact prescribed by Presidential Decree, such as a change in an essential term and condition of the contract" in Article 147 (4) of the Act means any of the following: <Amended by Presidential Decree No. 21611, Jul. 1, 2009> | 1. | Purposes of holding stocks; |
| 2. | Terms and conditions of a trust contract, collateral agreement, or any other important contract for the stocks, etc. held by the shareholder (limited to where the number of stocks, etc. subject to such contract is not less than one percent of the total number of such stocks, etc.); |
| 3. | Form of holding (limited to where a change occurs between ownership and holding without ownership, and the number of stocks, etc., for which the form of holding is changed, is not less than one percent of the total number of such stocks, etc.). |
| Article 156 (Dispatching Reports on Holding Stocks in Bulk to Issuer) |
"Person prescribed by Presidential Decree, in cases of stocks, etc. prescribed by Presidential Decree" in Article 148 of the Act means any of the following persons: | 1. | The issuer of stocks, etc. subject to exchange in cases of exchangeable bonds; |
| 2. | The issuer of stocks, etc. which are the underlying assets of derivative-combined securities, in cases of derivative-combined securities; |
| 3. | The issuer of stocks, etc. which are the underlying securities, in cases of security depository receipts. |
| Article 157 (Scope of Material Facts) |
| 1. | Matters concerning a holder of stocks in bulk and his/her related persons; |
| 2. | Objectives of holding stocks, etc.; |
| 3. | The class and number of stocks, etc. held or changed; |
| 4. | Date of acquisition or disposition; |
| 5. | Terms and conditions of a trust contract, collateral agreement, or any other important contract for stocks, etc. held by the shareholder. |
| Article 158 (Period for which Exercising Voting Rights is Restricted) |
| 1. | Where a person fails to file a report required under Article 147 (1), (3), or (4) of the Act; a person files a report containing a false statement of any of the matters referred to in subparagraphs of Article 157 or a person omits to state such therein either intentionally or by gross negligence, the period beginning on the date the relevant stocks, etc. were purchased and ending on the date on which six months elapse after filing the report (including a corrective report; hereafter the same shall apply in this paragraph); |
| 2. | Where the status of stocks, etc. held in bulk or details of changes in such stocks, etc. have already been reported to the Financial Services Commission and the exchange in accordance with the Act, this Decree, or any other statutes; or a person delays filing a report required under Article 147 (1), (3), or (4) of the Act because of the occurrence of an error due to the fact that the stocks, etc. were acquired or disposed of in accordance with the approval, guidance, recommendation, etc. of the Government, the period beginning on the date the relevant stocks, etc. were purchased and ending on the date the report is filed. |
| Article 159 (Measures of Financial Services Commission) |
"Measures prescribed by Presidential Decree" in Article 151 (2) of the Act means measures falling under any of the following subparagraphs: | 1. | Recommending the dismissal of executive officers; |
| 2. | Filing criminal complaints against violations of the Act or informing an investigative agency of such violations, if any; |
| 3. | Informing a related agency or an investigative agency of violations of other Acts, if any; |
| 4. | Issuing warnings or cautions. |
SECTION 3 Restrictions on Solicitation to Exercise Voting Rights by Proxy
| Article 160 (Method of Delivering Proxy Forms) |
A proxy solicitor under Article 152 (1) of the Act (hereinafter referred to as "proxy solicitor") shall deliver to a solicited voting right-holder under the aforesaid paragraph (hereinafter referred to as "solicited voting right-holder") the proxy form and reference documents as follows before or simultaneously when he/she solicits to exercise voting rights by proxy: <Amended by Presidential Decree No. 25843, Dec. 9, 2014> | 1. | Delivery in person by the proxy solicitor to the solicited voting right-holder; |
| 2. | Sending them by mail or facsimile; |
| 3. | Sending them by electronic mail (limited to where the solicited voting right-holder has expressed a wish to receive the proxy form and reference documents by electronic mail); |
| 4. | Dispatching them together with a notice to convene a general meeting of shareholders (limited to where the proxy solicitor is the issuer of the relevant listed stocks (including security depository receipts related to such listed stocks; hereafter the same shall apply in this Section)); |
| 5. | Making use of website. |
| Article 161 (Cases Not Deemed Solicitation to Exercise Voting Rights by Proxy) |
| 1. | Where any person, other than the issuer (including its specially related persons) of the relevant listed stocks and its executive officers (including their specially related persons), solicits less than ten solicited voting rights holders to exercise their voting rights for the stocks by proxy; |
| 2. | Where a person who owns stocks in another person's name under a trust or any other legal relationship solicits such another person to exercise the voting rights for the stocks by proxy; |
| 3. | Where a person performs an act falling under any subparagraph of Article 152 (2) of the Act by advertising to a number of unspecified people through a newspaper, broadcasting medium, magazine, etc., but indicates only the name of the issuer of the relevant listed stocks, the reasons for the advertisement, and the place in which the agenda of the general meeting of shareholders, the proxy form, and reference documents are available. |
| Article 162 (Scope of Public-Purpose Corporation) |
"Public-purpose corporation" in Article 152 (3) of the Act (hereinafter referred to as "public-purpose corporation") means a corporation designated by the Financial Services Commission, subject to consultation with Ministers of related ministries and agencies and reporting to the State Council, as one fully satisfying the following requirements: | 1. | It shall be a corporation with solidly established business foundations and with potential for sustainable growth; |
| 2. | It shall be a corporation with a healthy financial structure and expected to yield high profits; |
| 3. | It shall be a corporation with capital sufficient enough to enable to distribute its stocks broadly so that a large number of nationals can hold some of its stocks. |
| Article 163 (Matters to be Stated in Proxy Form and Reference Documents) |
| (1) | Each proxy form shall be prepared in such a manner that the solicited voting right-holder can clearly state the following matters pursuant to Article 152 (6) of the Act: <Amended by Presidential Decree No. 25843, Dec. 9, 2014> |
| 1. | The fact that the voting right is delegated to be exercised by proxy; |
| 2. | The person to whom the voting right is delegated, including the proxy solicitor; |
| 3. | The number of voting stocks held by the solicited voting right-holder; |
| 4. | The number of stocks subject to proxy; |
| 5. | Each agenda item of the general meeting of shareholders and whether it is agreed or disagreed on each agenda item; |
| 6. | Whether the power to exercise the voting right for a new agenda item or a modified agenda time during the general meeting of shareholders is delegated and the details of the power so delegated; |
| 7. | The date and time of proxy appointment (where the exercise of the preferential voting right for some agenda items of a general meeting of shareholders is delegated to a proxy, referring to the relevant date and time of proxy appointment); |
| 8. | The name and resident registration number (referring to the trade name and business registration number in cases of a corporation) of the delegator. |
| 1. | The following matters concerning solicitation to exercise the voting right by proxy: |
| (a) | The name or trade name of the proxy solicitor, the class and number of stocks held by the proxy solicitor, and the class and number of stocks held by his/her specially related persons; |
| (b) | The name of an agent of the proxy solicitor, and the class and number of stocks held by the agent (applicable only where an agent is involved); |
| (c) | The relationship between the proxy solicitor and his/her agent and the relevant stock-listed corporation; |
| 2. | The agenda items of the general meeting of shareholders; |
| 3. | The reasons for soliciting to exercise the voting right by proxy. |
| (3) | Detailed descriptions of the proxy form referred to in paragraph (1) and the reference documents referred to in paragraph (2), and forms of the reference documents, methods of preparation, and other necessary matters shall be prescribed by the Financial Services Commission. |
| Article 163-2 (Calculation of Periods Related to Solicitation to Exercise Voting Rights by Proxy) |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 164 (Submission Date of Proxy Form and Reference Documents) |
| Article 165 (Demand for Correction) |
| (2) | "Material fact prescribed by Presidential Decree" in the latter part of Article 156 (3) of the Act means any of the following facts: |
| 2. | Facts referred to in Article 163 (2) 1 (excluding the name or trade name of the proxy solicitor referred to in item (a)) or 2. |
| (3) | "As prescribed further by Presidential Decree" in the latter part of Article 156 (3) of the Act means cases where the descriptions under Article 163 (2) 3 fall under any of the following: |
| 1. | Where the descriptions or indications are so vague as to seriously mislead solicited voting rights holders; |
| 2. | Where any information unfavorable to the proxy solicitor is omitted, or there is any exaggeration in descriptions, such as an emphasis of the information favorable to the proxy solicitor only. |
| Article 166 (Measures of Financial Services Commission) |
"Measures prescribed by Presidential Decree" in the main sentence of Article 158 (2) of the Act means measures falling under any of the following subparagraphs: | 1. | Imposing restrictions on solicitation to exercise voting rights by proxy within the limit of one year; |
| 2. | Recommending the dismissal of executive officers; |
| 3. | Filing criminal complaints or informing a competent investigative agency of violations of the Act, if any; |
| 4. | Informing a related agency or an investigative agency of violations of other Acts, if any; |
| 5. | Issuing warnings or cautions. |
CHAPTER III LISTED CORPORATION'S BUSINESS REPORTS
| Article 167 (Corporations, etc. Obligated to Submit Business Reports) |
| (1) | "Corporation prescribed by Presidential Decree" in the main sentence of Article 159 (1) of the Act means any of the following, which is: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26898, Jan. 12, 2016; Presidential Decree No. 28796, Apr. 10, 2018> |
| 1. | An issuer that have listed any of the following securities on the securities market: |
| (a) | Equity securities other than stock certificates (excluding collective investment securities and investment securities issued by a specialized securitization company, etc. (referring to the specialized securitization company, etc. as prescribed in Article 3 of the Asset-Backed Securitization Act) under an asset-backed securitization plan); |
| (b) | No-warranty bonds (referring to bonds other than mortgage bonds or guaranteed bonds prescribed in Article 362 (8)); |
| (c) | Convertible bonds, bonds with warrant, participating bonds, or exchangeable bonds; |
| (d) | Instruments representing preemptive rights to new stocks; |
| (e) | Depositary receipts (limited to depositary receipts related to stock certificates or the securities or bonds referred to in items (a) through (d)); |
| (f) | Derivatives-linked securities; |
| 2. | An issuer, other than the issuer referred to in subparagraph 1, that has publicly offered or sold (excluding public offerings or sales under Article 117-10 (1) of the Act and the main sentence of Article 130 (1) of the Act) any of the following securities (including issuers who once were stock-listed corporations or issuers referred to in subparagraph 1, however, the stocks of which have been delisted): |
| (b) | Any of the securities or bonds referred to in the items of subparagraph 1; |
| 3. | An issuer that is a corporation subject to external audit as prescribed in Article 2 of the Act on External Audit of Stock Companies, other than those referred to in subparagraph 1 and 2, if the number of persons (referring to the number of persons counted by the method prescribed and publicly notified by the Financial Services Commission; hereafter the same shall apply in this Article) who hold any of the securities referred to in the items of subparagraph 2 is not less than 500 persons (including an issuer whose securities were once owned by not less than 500 persons, but are now owned by less than 500 persons and who do not fall under paragraph (2) 5). |
| (2) | "Reason prescribed by Presidential Decree" in the proviso to Article 159 (1) of the Act means any of the following: <Amended by Presidential Decree No. 25843, Dec. 9, 2014> |
| 1. | Where a corporation subject to business reporting becomes bankrupt; |
| 3. | Where an issuer is a stock-listed corporation or one referred to in paragraph (1) 1 and meets the requirements for delisting, and where the Financial Services Commission confirms that it is impracticable for the issuer to submit a business report due to a cause or event for which the corporation is not liable; |
| 4. | Where the issuer referred to in paragraph (1) 2 has issued any of the securities referred to in the items of paragraph (1) 2, and the Financial Services Commission recognizes that the number of holders of such securities is less than 25 persons in total: Provided, That the issuer is required to submit a business report for the business year in which the number of holders has declined to less than 25 persons; |
| 5. | Where the issuer referred to in paragraph (1) 3 issued any of the securities referred to in the items of paragraph (1) 2, and the number of holders of the securities is less than 300 persons in total: Provided, That the issuer is required to submit a business report for the business year in which the number of holders has declined to less than 300 persons. |
| Article 168 (Matters to be Contained in Business Reports and Accompanying Documents) |
| (1) | "Those prescribed by Presidential Decree" in Article 159 (2) 2 of the Act means the total amount of remuneration paid to all executive officers during the pertinent business year. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | "Amount prescribed by Presidential Decree" in Article 159 (2) 3 of the Act means 500 million won. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016> |
| (3) | "Matters prescribed by Presidential Decree" in Article 159 (2) 5 of the Act means the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Signatures of the representative director and the director responsible for submitting a business report under Article 159 (7) of the Act on the matters referred to in the subparagraphs of Article 169; |
| 2. | An overview of the company; |
| 3. | Matters concerning the organization of the company, including the board of directors, and its affiliated companies; |
| 4. | Matters concerning shareholders; |
| 5. | Matters concerning executive officers and/or employees; |
| 6. | Details of transactions with major shareholders (including their affiliated persons), executive officers and/or employees of the company; |
| 7. | Matters concerning financial standing and supplementary schedules; |
| 8. | The auditor's opinion; |
| 9. | Other matters prescribed and publicly notified by the Financial Services Commission and need to be notified to the investors. |
| (4) | A corporation required to prepare consolidated financial statements among corporations subject to business reporting shall state in its business report matters concerning financial standing and supplementary schedules referred to in paragraph (3) 7 and other matters prescribed and publicly notified by the Financial Services Commission based on its consolidated financial statements, including its financial statements, and state the audit opinion on its consolidated financial statements and financial statements as the auditor's opinion referred to in paragraph (3) 8. <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 24697, Aug. 27, 2013> |
| (5) | Notwithstanding paragraph (4), a corporation whose total assets are less than two trillion won as of the end of the most recent business year and who does not apply the Financial Reporting Standards established by the Korea Accounting Institute pursuant to Article 7-2 (1) of the Enforcement Decree of the Act on External Audit of Stock Companies and adopted in accordance with International Financial Reporting Standards (hereinafter referred to as "Korean International Financial Reporting Standards (K-IFRS)") may state in its business report matters concerning financial standing, supplementary schedules, and other matters prescribed and publicly notified by the Financial Services Commission based on its financial statements, and may submit the business report containing the audited the financial statements by the deadline specified in Article 159 (1) of the Act. In this regard, the corporation may submit a supplementary report containing matters concerning its financial standing and supplementary schedules based on the consolidated financial statements, other matters prescribed and publicly notified by the Financial Services Commission, and the auditor's opinion on its consolidated financial statements within 30 days upon the expiration of 90 days from the closing of each business year. |
| (6) | Each business report shall be accompanied by the following documents pursuant to Article 159 (2) of the Act: Provided, That the auditor’s report on the consolidated financial statements referred to in subparagraph 1 may be submitted by the deadline set forth in paragraph (5) (applicable only to a corporation that submits its business report pursuant to paragraph (5)): <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | The auditor's report (referring to the auditor’s report on the financial statements and consolidated financial statements of the corporation); |
| 3. | The auditor's report assessing the status of operation of the internal monitoring system of the corporation (referring to the board of directors' authority to supervise directors' performance of duties, the power of the auditor (referring to the audit committee, if an audit committee has been established; hereafter the same shall apply in this subparagraph), and other internal monitoring system of the corporation); |
| 4. | Deleted; <by Presidential Decree No. 24697, Aug. 27, 2013> |
| 5. | Other documents prescribed and publicly notified by the Financial Services Commission. |
| Article 169 (Verification and Examination of Representative Director and Another Director on Business Report) |
| 1. | The fact that no description or indication is false or has been omitted with respect to material facts in the descriptions of the business report; |
| 2. | The fact that no description or indication is seriously misleading any person who relies on the descriptions or indications of the business report; |
| 3. | The fact that he/she himself/herself has verified and examined the descriptions of the business report with due care; |
| Article 170 (Descriptions and Accompanying Documents of Half-yearly and Quarterly Reports) |
| (1) | Article 168 (1) through (4) (paragraph (4) shall apply only to corporations obligated to prepare consolidated financial statements to which the international accounting principles adopted by the Republic of Korea are applicable) shall apply mutatis mutandis to matters that shall be described in half-yearly and quarterly reports. In such cases, the statements annexed thereto under Article 168 (3) 7 may be omitted, and the accounting auditor's audit opinion under subparagraph 8 of the aforesaid paragraph shall be prepared in compliance with the following guidelines: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | In cases of a half-yearly report, it may be substituted by the accounting auditors' verification and comment in any of the following manners: |
| (a) | Where the corporation is obligated to prepare consolidated financial statements to which the international accounting principles adopted by the Republic of Korea are applicable: The accounting auditor's verification and comment on the financial statements of the corporation and also his/her verification and comment on the consolidated financial statements; |
| (b) | Where the corporation does not fall under item (a): The accounting auditor's verification and comment on the financial statements of the corporation; |
| 2. | In cases of a quarterly report, the accounting auditor's audit opinion may be omitted: Provided, That each quarterly report of a financial institution (referring to institutions subject to inspection under Article 38 of the Act on the Establishment, etc. of Financial Services Commission) or a stock-listed corporation whose total assets reach or exceed 500 billion won as at the end of the latest business year shall comply with the provisions of subparagraph 1. |
| (2) | Each half-yearly and quarterly report shall be accompanied by the following documents: |
| 1. | A half-yearly audit or review report prepared by the accounting auditor in cases of a half-yearly report: Provided, That half-yearly audit or review reports prepared by the accounting auditor on consolidated financial statements shall be submitted together with the report in cases of a corporation obligated to prepare consolidated financial statements to which the international accounting principles adopted by the Republic of Korea are applicable; |
| 2. | A quarterly audit or review report prepared by the accounting auditor in cases of a quarterly report (applicable only to corporations under the proviso to paragraph (1) 2): Provided, That quarterly audit or review reports prepared by the accounting auditor on consolidated financial statements shall be submitted together with the report in cases of a corporation obligated to prepare consolidated financial statements to which the international accounting principles adopted by the Republic of Korea are applicable. |
| Article 171 (Grounds, etc. for Submission of Reports on Material Facts) |
| (1) | "To adjust any of the capital or liabilities meeting the conditions prescribed by Presidential Decree" in Article 161 (1) 5 of the Act means any of the following: Provided, That cases where a registration statement is filed under Article 119 (1) of the Act and cases prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors and sound trading practices, such as a change in capital due to exercise of stock options (referring to the stock options prescribed in Article 340-2 or 542-3 of the Commercial Act), shall be excluded herefrom: <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016; Presidential Decree No. 28564, Dec. 29, 2017> |
| 1. | Capital increase or decrease; |
| 2. | Increase of liabilities caused by the issuance of contingent capital securities. |
| (2) | "Where a resolution to acquire by transfer, an essential business or asset prescribed by Presidential Decree, or to transfer such business or asset, is passed" in Article 161 (1) 7 of the Act means where a resolution on any of the following matters is passed: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 24497, Apr. 5, 2013; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Acquisition or transfer of a business division, where the amount of assets (referring to the larger of the book value or the transaction amount) of the business division to be acquired or transferred is not less than ten percent of the total amount of assets (referring to the total amount of assets on the consolidated financial statements in cases of a corporation required to prepare consolidated financial statements in accordance with the Korean International Financial Reporting Standards (K-IFRS)) of the corporation as of the end of the most recent business year; |
| 2. | Acquisition or transfer of a business division, where the sales revenue of the business division to be acquired or transferred is not less than ten percent of the sales revenue (referring to the sales revenue on the consolidated financial statements in cases of a corporation required to prepare consolidated financial statements in accordance with the Korean International Financial Reporting Standards (K-IFRS)) of the corporation as of the end of the most recent business year; |
| 3. | Acquisition of a business, where liabilities to be assumed following acquisition of the business are not less than ten percent of the total amount of liabilities (referring to total liabilities on the consolidated financial statements in cases of a corporation required to prepare consolidated financial statements in accordance with the Korean International Financial Reporting Standards (K-IFRS)) of the corporation as of the end of the most recent business year; |
| 4. | Deleted; <by Presidential Decree No. 27291, Jun. 28, 2016> |
| 5. | Acquisition or transfer of assets, where the amount of the assets (referring to the larger of the book value or the transaction amount) to be acquired or transferred is not less than ten percent of the total amount of assets (referring to the total amount of assets on the consolidated financial statements in cases of a corporation required to prepare consolidated financial statements in accordance with the Korean International Financial Reporting Standards (K-IFRS)) of the corporation as of the end of the most recent business year: Provided, That excluded herefrom is the acquisition or transfer of assets prescribed and publicly notified by the Financial Services Commission, such as trading commodities, products or raw materials as part of ordinary business activities. |
| (3) | "Where there occurs any other cause or event prescribed by Presidential Decree" in Article 161 (1) 9 of the Act means any of the following cases: <Amended by 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. 26135, Mar. 3, 2015; Presidential Decree No. 27115, Apr. 29, 2016; Presidential Decree No. 27291, Jun. 28, 2016> |
| 2. | Where a lawsuit that may significantly affect any of the securities referred to in the items of Article 167 (1) 2 is filed; |
| 3. | Where a decision is made to list or delist stocks on a foreign securities market; the stocks have been listed or delisted; or a measure for delisting or suspending trading, or any other measure is taken by a foreign financial investment supervisory agency, a foreign exchange, etc. under Article 406 (1) 2 of the Act (hereinafter referred to as "foreign exchange"); |
| 4. | Where a decision is made to issue convertible bonds, bonds with warrant or exchangeable bonds: Provided, That excluded herefrom is where the issuance of the bonds related to the relevant stock certificates is caused by the public offering or sale of securities and a corporation files the registration statement under Article 119 (1) of the Act; |
| 5. | Where a decision is made to conclude a contract granting a right to transfer (limited to the acquisition or transfer prescribed in paragraph (2) 1 and 5) equity securities or other assets (hereafter referred to as "equity securities, etc." in this subparagraph) of another corporation, at a predetermined value, to a person who is to acquire the equity securities, etc., or other equivalent contract; |
| 6. | Where any trigger event occurs, leading to the conversion of contingent capital securities to stocks or any other trigger event occurs, leading to the relief from the duty to redeem the contingent capital securities and the payment of interest; |
| 7. | Where any other event prescribed and publicly notified by the Financial Services Commission occurs, as significantly affecting the management, assets, or other matters of the corporation. |
| (4) | "Documents prescribed by Presidential Decree" in Article 161 (2) of the Act means the following documents or copies of such documents: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | A document evidencing relevant facts, such as a bank's certificate of default on payments of cheques and bills, where a default on payments of cheques and bills occurs as prescribed in Article 161 (1) 1 of the Act; |
| 2. | A document evidencing relevant facts, such as a bank's certificate of suspension of current account transactions, where the current account transactions with a bank are suspended or banned as prescribed in Article 161 (1) 1 of the Act; |
| 3. | A document evidencing that the business has been suspended, such as minutes of the directors' meeting and a written order issued by an administrative agency to suspend the business, in cases falling under Article 161 (1) 2 of the Act; |
| 4. | A document evidencing relevant facts, such as an application for commencement of rehabilitation proceedings filed with a court, in cases falling under Article 161 (1) 3 of the Act; |
| 5. | A document evidencing the occurrence of an event, such as minutes of the directors' meeting and a written decision on bankruptcy, in cases falling under Article 161 (1) 4 of the Act; |
| 8. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| Article 172 (Institutions Requested to Furnish Information) |
The Financial Services Commission may request necessary information from any of the following institutions by sending it a document (including an electronic document) stating the grounds for such request or by facsimile transmission: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27115, Apr. 29, 2016>
| 4. | Other administrative agencies and related institutions that hold relevant information with respect to other matters. |
| Article 173 (Scope of Securities Subject to Liability for Damage) |
| 1. | Exchangeable bonds with a right to claim an exchange with the relevant securities (including depositary receipts related to the securities; hereafter the same shall apply in this paragraph); |
| 2. | Derivatives-linked securities based on the underlying asset comprised only of the relevant securities and the exchangeable bonds referred to in subparagraph 1. |
| (2) | "Person prescribed by Presidential Decree" in Article 162 (1) 3 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). |
| Article 174 (Matters Excluded from Public Disclosure of Business Reports) |
"Matters prescribed by Presidential Decree" in the latter part of Article 163 of the Act means the following matters: <Amended by Presidential Decree No. 22197, Jun. 11, 2010>
| Article 175 (Measures of Financial Services Commission) |
| 1. | Imposing restrictions on issuance of securities within the limit of one year; |
| 2. | Recommending the dismissal of executive officers; |
| 3. | Filing criminal complaints or informing a competent investigative agency of violations of the Act, if any; |
| 4. | Informing a related agency or an investigative agency of violations of any other Act, if any; |
| 5. | Issuing warnings or cautions. |
| Article 176 (Special Cases concerning Submission of Business Reports, etc.) |
| 2. | A foreign local government; |
| 3. | A foreign public institution whose equities are owned by a foreign government or a foreign local government, which is established to engage in business activities for the public interest in accordance with statutes of a foreign country; |
| (2) | A foreign corporation, etc. (excluding foreign corporations, etc. referred to in the subparagraphs of paragraph (1); hereafter the same shall apply in this Article) may submit its business report within 30 days after the expiration of the period set forth in the main sentence of Article 159 (1) of the Act, and may also submit its half-yearly and quarterly report within 15 days after the expiration of the period set forth in the former part of Article 160 of the Act. |
| (3) | Notwithstanding paragraph (2), if a foreign corporation, etc. has submitted any document equivalent to a business report under Article 162 (1) of the Act (hereinafter referred to as "business report, etc.") to its home country, it may submit its business report, etc. or submit the document equivalent to the business report, as submitted to its home country, along with a summarized Korean translation prescribed and publicly notified by the Financial Services Commission, within ten days (or five days in cases of a material fact report) from the date it has submitted such document. |
| (4) | Notwithstanding Articles 168 and 170, where a foreign corporation, etc. required to submit its business report, half-yearly reports or quarterly reports pursuant to paragraph (2) or (3) has submitted a document equivalent to consolidated financial statements upon the occurrence of any of the events prescribed and publicly notified by the Financial Services Commission, the foreign corporation, etc. may elect not to submit its financial statements. In such cases, the foreign corporation, etc. may elect not to state the following matters in its business report, half-yearly reports or quarterly reports: |
| 1. | The following matters in cases of the business report: |
| (a) | Matters concerning financial standing and supplementary schedules based on the financial statements of the foreign corporation, etc.; |
| (b) | The auditor's opinion on the financial statements of the foreign corporation, etc.; |
| 2. | The following matters in cases of the half-yearly reports or quarterly reports: |
| (a) | Matters concerning financial standing and supplementary schedules based on the financial statements of the foreign corporation, etc.; |
| (b) | The auditor's opinion or verification and comment on the financial statements of the foreign corporation, etc. |
| (5) | A foreign corporation, etc. whose equity securities are listed on the securities market shall file a material fact report with the Financial Services Commission by the date prescribed and publicly notified by the Financial Services Commission, where any of the following events occurs (including where any of the following events occurs in relation to a subsidiary company (referring to a company subject to consolidation in accordance with the Financial Reporting Standards adopted by a foreign holding company) of a foreign holding company (referring to a company established pursuant to the statutes of a foreign country, whose main business is to exercise control over another company's business through ownership of equity securities; hereinafter the same shall apply)), in addition to the occurrence of any of the events provided for in the subparagraphs of Article 161 (1) of the Act: |
| 1. | Where the statutes, etc. of a foreign country that significantly affects the foreign corporation, etc. or its investors are amended in relation to the issues, such as restriction of the transfer of equity securities and nationalization of the foreign corporation, etc.; |
| 2. | Where there is a public tender offer, manipulation for stabilization, or market creation in a foreign country with respect to stocks, etc. of the foreign corporation, etc.; |
| 3. | Where it becomes subject to a measure taken by a foreign financial investment supervisory agency or a foreign exchange for its violation of a relevant statute; |
| 4. | Where it becomes subject to a measure taken by a foreign exchange, such as suspension or termination of trading, or delisting. |
| (6) | Financial statements or consolidated financial statements which are included in or attached to the business report, quarterly reports, half-yearly reports of a foreign corporation, etc. whose equity securities are listed on the securities market shall be prepared based on any of the following Financial Reporting Standards: <Newly Inserted by Presidential Decree No. 22197, Jun. 11, 2010> |
| 1. | Korean International Financial Reporting Standards (K-IFRS); |
| 2. | International Financial Reporting Standards developed by the International Accounting Standards Board; |
| 3. | Generally Accepted Accounting Principles in the United States. |
| (7) | The Financial Services Commission shall prescribe and publicly notify different rules on specific descriptions, accompanying documents, forms, and other matters of the business reports, etc. of foreign corporations, etc., in consideration of the types and nature of the foreign corporations, etc, foreign statutes, and other factors. <Amended by Presidential Decree No. 22197, Jun. 11, 2010> |
| (8) | "Securities market prescribed by Presidential Decree" in Article 165 (2) of the Act means the KONEX. <Newly Inserted by Presidential Decree No. 24841, Nov. 13, 2013> |
| (9) | Article 160 of the Act shall not apply to corporations that have issued stock certificates listed on the KONEX. <Newly Inserted by Presidential Decree No. 24841, Nov. 13, 2013> |
CHAPTER III-2 SPECIAL CASES CONCERNING STOCK-LISTED CORPORATIONS
| Article 176-2 (Guidelines for Acquisition and Disposal of Treasury Stocks) |
| (1) | Where a stock-listed corporation acquires or disposes of treasury stocks or concludes or terminates a trust contract pursuant to Article 165-3 of the Act, its board of directors shall pass resolutions on the following matters: Provided, That the same does not apply where the corporation distributes treasury stocks following the exercise of stock options, and where the term of a trust contract expires: <Amended by Presidential Decree No. 24655, Jul. 5, 2013> |
| 1. | Where the stock-listed corporation seeks to acquire or dispose of treasury stocks under Articles 165-3 (1) 1 of the Act, the objective, amount, and methods of such acquisition or disposal, the number and type of stocks, and other matters prescribed and publicly notified by the Financial Services Commission; |
| 2. | Where the stock-listed corporation seeks to conclude or terminate a trust contract under Article 165-3 (1) 2 of the Act, the purpose of conclusion or termination of the contract, the amount and term of the contract, and other matters prescribed and publicly notified by the Financial Services Commission. |
| (2) | No stock-listed corporation shall acquire or dispose of treasury stocks under Article 165-3 of the Act, nor conclude or terminate any trust contract during any of the following periods: <Amended by Presidential Decree No. 22516 Dec. 7, 2010; Presidential Decree No. 24655, Jul. 5, 2013; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | One month before the date on which the board of directors passes a resolution for a merger with another corporation; |
| 2. | One month before the base date (in cases of a general public offering, the subscription date) for the allocation of new stocks in connection to paid-in capital increase to the subscription date; |
| 3. | The period beginning on the date on which the board of directors passes a resolution for the capitalization of reserves and ending on the base date for the allocation of new stocks; |
| 4. | The period for market creation under Article 205 (1) 5; |
| 6. | Three months after disposal (including termination of a trust contact) or six months after acquisition (including conclusion of a trust contract): Provided, That the same does not apply in any of the following cases: |
| (a) | Where the corporation distributes treasury stocks to executive officers and/or employees as bonuses; |
| (b) | Where the corporation distributes treasury stocks following the exercise of stock options; |
| (d) | Where the corporation pays (including contributions to intra-company labor welfare funds established under the Framework Act on Labor Welfare) treasury stocks to employees and executive officers as retirement allowances, rewards, or incentives; |
| (f) | Where the corporation disposes of treasury stocks inevitably to comply with statutes or discharge its liabilities; |
| (h) | Where a company that has acquired treasury stocks from the State or the Korea Deposit Insurance Corporation established under the Depositor Protection Act issues exchangeable bonds entailing rights to claim the exchange with the treasury stocks (excluding item (i)). In such cases, it shall be limited to exchangeable bonds entailing rights to claim the exchange upon the expiration of the six-month period following the date of acquisition of treasury stocks subject to exchange; |
| (i) | Where the company prescribed in item (h), issues exchangeable bonds overseas, with which one may claim the exchange with depositary receipts issued in lieu of treasury stocks; |
| (j) | Where the corporation disposes of treasury stocks to issue depositary receipts with the underlying treasury stocks overseas upon the expiration of the period prescribed and publicly notified by the Financial Services Commission following the date of acquisition of the treasury stocks; |
| (3) | Where a stock-listed corporation intends to acquire treasury stocks pursuant to Article 165-3 (1) or (2) of the Act, it shall acquire the treasury stocks via the securities market by the methods prescribed and publicly notified by the Financial Services Commission within the three-month period beginning on the date following the date on which the resolution of the board of directors is disclosed under Article 391 of the Act. <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24655, Jul. 5, 2013> |
| (4) | For the purposes of this Article, when a stock-listed corporation has issued corporate bonds entailing rights to exchange with treasury stocks or to be redeemed with treasury stocks, among listed securities it holds pursuant to Article 469 (2) 2 of the Commercial Act, the stock-listed corporation shall be deemed to have disposed of the treasury stocks at the time of issuing the corporate bonds. <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 25843, Dec. 9, 2014> |
| (5) | Where a stock-listed corporation has caused a trust business entity to acquire treasury stocks under a monetary trust contract, when the period referred to in any of paragraph (2) 1 through 5 commences, the stock-listed corporation shall promptly notify the trust business entity of the commencement of such period. <Newly Inserted by Presidential Decree No. 23924, Jun. 29, 2012> |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Articles 176-3 and 176-4 Deleted. <by Presidential Decree No. 24655, Jul. 5, 2013> |
| Article 176-5 (Requirements, Methods, etc. of Merger) |
| (1) | When a stock-listed corporation seeks to merge with another corporation, it shall adopt the merger value calculated by any of the following methods. In such cases, when the stock-listed corporation is unable to calculate the price referred to in subparagraph 1 or the main sentence of subparagraph 2 (a), the price referred to in subparagraph 2 (b) shall apply: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 25843, Dec. 9, 2014> |
| 1. | In cases of a merger between stock-listed corporations, the value (hereafter referred to as "standard market price" in this Article) computed by discounting or adding up to 30 percent (10 percent in cases of a merger between affiliated companies) of the average of the following closing prices (referring to the closing prices formed in the securities market; hereafter the same shall apply in this paragraph), counted from the day preceding the earlier of the date the board of directors passes a resolution for the merger or the date of concluding the merger contract. In such cases, the average closing price referred to in item (a) or (b) shall be calculated by the weighted average of the closing prices by trading volume: |
| (a) | Average closing price for the most recent one month: Provided, That when any ex-dividend or ex-right exists during the period for calculation and the period from the date such ex-dividend or ex-right occurs to the initial date of calculation is not less than seven days, the average closing price during such period; |
| (b) | Average closing price for the most recent one week; |
| (c) | The most recent closing price; |
| 2. | In cases of a merger between a stock-listed corporation (excluding corporations whose stock certificates are listed on the KONEX; hereafter the same shall apply in this subparagraph and paragraph (4)) and an unlisted corporation, the price according to each of the following standards: |
| (a) | In cases of the stock-listed corporation, the price referred to in subparagraph 1: Provided, That when the price referred to in subparagraph 1 is below the value of assets, the price may be the value of assets; |
| (b) | In cases of the unlisted corporation, the weighted average of the asset value and earnings value. |
| (2) | Where the merger value is calculated at the price referred to in paragraph (1) 2 (b), a comparison with the values of corporations engaging in a similar category of business calculated by the methods prescribed and publicly notified by the Financial Service Commission (hereafter referred to as "relative value" in this paragraph) shall be disclosed to the public, and the asset value, earnings value, and the method of calculating their weighted average under each item of paragraph (1) 2 and the methods of disclosing the relative value shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | Notwithstanding paragraph (1), where a stock-listed, special-purpose acquisition company intends to merge with another corporation for the purposes of protecting investors and ensuring sound trading practices by fulfilling the requirements prescribed and publicly notified by the Financial Services Commission, and thereby the new corporation formed by the merger intends to become a stock-listed corporation, the merged value may be computed at the price classified as follows: <Newly Inserted by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | In cases of the stock-listed, special-purpose acquisition company: The price calculated under paragraph (1) 1; |
| 2. | In cases of another corporation that merges with the special-purpose acquisition company: The price classified as follows: |
| (a) | Where another corporation is a stock-listed corporation: The price calculated under paragraph (1) 1: Provided, That the latter part of paragraph (1) shall apply mutatis mutandis where it is unable to calculate such price; |
| (b) | Where another company is an unlisted corporation: A price determined in consultation with a special-purpose acquisition company. |
| (4) | When a stock-listed corporation becomes a stock-listed corporation through a merger with an unlisted corporation, it shall meet all of the following requirements: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 23924, Jun. 29, 2012> |
| 1. | Deleted; <by Presidential Decree No. 24697, Aug. 27, 2013> |
| 2. | The unlisted stock corporation shall meet both of the following requirements when at least two values among its total assets, capital, and amount of sales is greater than those of the stock-listed corporation, based on the financial statements of the business year preceding the business year which includes the date a stock-listed corporation which becomes a party to the merger filed a material fact report pursuant to Article 161 (1) of the Act: |
| (a) | Requirements for finance, etc. specified in Listing Regulations of securities established under Article 390 of the Act (hereafter referred to as "Listing Regulations" in this subparagraph); |
| (b) | Requirements specified in Listing Regulations for auditor's opinion, pending litigation, and other matters necessary for fair mergers. |
| (5) | Paragraph (4) shall apply mutatis mutandis where a corporation whose stock certificates are listed on a specific securities market, becomes a corporation listed on the specific securities market or a corporation listed on any other securities market following a merger with a corporation whose stock certificates are listed on any other securities market. In such cases, "stock-listed corporation" shall be construed as "corporation listed on the same securities market despite the merger"; and "unlisted corporation" shall be construed as "corporation to be listed on another securities market after the merger." <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013> |
| (6) | Deleted. <by Presidential Decree No. 24697, Aug. 27, 2013> |
| (7) | Where a stock-listed corporation merges with another corporation under Article 165-4 (2) of the Act, it shall be assessed by an external assessment institution for the fairness of the merger value classified as follows: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 25843, Dec. 9, 2014> |
| 1. | Where a stock-listed corporation (excluding special-purpose acquisition companies; hereafter the same shall apply in this subparagraph and subparagraph 2) merges with a stock-listed corporation and falls under any of the following cases: |
| (a) | Where the stock-listed corporation calculates the merger value under paragraph (1) 1, at a value computed by discounting or adding more than 10 percent of the standard market price; |
| (b) | Where the stock-listed corporation adopts the merger value calculated under paragraph (1) 2 (b); |
| (c) | Where the stock-listed corporation becomes an unlisted corporation through a merger with a stock-listed corporation: Provided, That excluded herefrom is the case where a company adopts the merger value calculated under paragraph (1) 1 or where a company holding the total number of outstanding stocks of another company merges with that company and issues no new stocks; |
| 2. | Where a stock-listed corporation merges with an unlisted stock corporation and falls under any of the following cases: |
| (a) | Where the stock-listed corporation applies the merger value calculated under paragraph (1) 2 (b); |
| (b) | Where the merger is conducted pursuant to paragraph (4): Provided, That excluded herefrom is the case where a company holding the total number of outstanding stocks of another company merges with that company and issues no new stocks; |
| (c) | Where the stock-listed corporation (excluding corporations whose stock certificates are listed on the KONEX) becomes an unlisted corporation through a merger with an unlisted corporation: Provided, That excluded herefrom is the case where both parties to the merger adopt the merger value calculated under paragraph (1) 1 or where a company holding the total number of outstanding stocks of another company merges with that company and issues no new stocks; |
| 3. | Where a special-purpose acquisition company merges with another stock-listed corporation and that stock-listed corporation adopts the merger value calculated under paragraph (1) 2 (b). |
| (8) | An external assessment institution shall be any of the following: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | A person granted authorization to engage in the business activities provided for in Articles 68 (2) 1 and 2; |
| 2. | A credit rating company; |
| (9) | In any of the following circumstances, an external assessment institution referred to in paragraph (8) (hereinafter referred to as "external assessment institution") is prohibited from providing assessment services pursuant to Article 165-4 (2) of the Act during the relevant period: Provided, That the external assessment institution is prohibited from providing assessment services for the relevant specific company in the circumstance provided for in subparagraph 4: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Where the person referred to in paragraph (8) 1 is subject to a measure issued by the Financial Services Commission, which restricts its participation in the underwriting of stocks, such restriction period; |
| 2. | Where the entity referred to in paragraph (8) 2 is subject to a measure issued by the Financial Services Commission, which suspends it from engaging in credit rating business, such suspension period; |
| 4. | Where the entity referred to in paragraph (8) 3 is subject to a measure restricting audit business for a specific company in accordance with the Act on External Audit of Stock Companies, such restriction period. |
| (10) | Where an external assessment institution has a special relationship prescribed and publicly notified by the Financial Services Commission with a company subject to its assessment, the external assessment institution shall not conduct an assessment on the merger. <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24636, Jun. 21, 2013> |
| (11) | "Circumstances prescribed by Presidential Decree" in Article 165-4 (3) of the Act means any of the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Where an external assessment institution violates paragraph (9) or (10); |
| 2. | Where any executive officer and/or employee of an external assessment institution divulges any confidential information obtained in connection with the assessment or misappropriates it; |
| 3. | Where any executive officer and/or employee of an external assessment institution directly or indirectly receives economic benefits in contravention of the guidelines prescribed and publicly notified by the Financial Services Commission in connection with the assessment related to a merger, etc.; |
| 4. | Other cases prescribed and publicly notified by the Financial Services Commission as likely to undermine the protection of investors and the fairness and independency of the assessment by external assessment institutions. |
| (12) | The Financial Services Commission may impose a restriction on all or part of the affairs of assessment of an external assessment institution pursuant to Article 165-4 (3) of the Act within a specified period not exceeding three years. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016> |
| (13) | Paragraphs (1) through (5) and (7) through (12) shall not apply to any merger conducted under the Acts: Provided, That where a corporation which is a party to a merger is an affiliated company and the merger value is not calculated under paragraph (1) 1, the fairness of the merger value shall be assessed by an external assessment institution. <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013> |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-6 (Requirements, Methods, etc. for Business Acquisition or Transfer, etc.) |
| (1) | "Acquisition or transfer of material business or asset prescribed by Presidential Decree" in Article 165-4 (1) 2 of the Act means those falling under any of the subparagraphs of Article 171 (2). <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | Article 176-5 (1) (Article 176-5 (1) 2 (b) shall apply where the merger value is calculated with respect to a portion subject to the merger of a corporation to be split) shall apply mutatis mutandis to all-inclusive swap or transfer of stocks under Article 165-4 (1) 3 of the Act and split and merger under Article 165-4 (1) 4 of the Act: Provided, That the same shall not apply where the stock-listed corporation becomes a complete subsidiary on its own as a result of the all-inclusive transfer of stocks. <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | In cases of the acquisition or transfer of material business or asset under Article 165-4 (1) 2 of the Act, the all-inclusive exchange or transfer (limited to where a stock-listed corporation is included in corporations to become a complete subsidiary under Articles 360-2 and 360-15 of the Commercial Act and where a complete parent company becomes an unlisted stock corporation) of stocks under subparagraph 3 of the same Article, the split and merger under Article 165-4 (1) 4 of the Act, the appropriateness of the value of the acquisition or transfer of business or asset, the ratio of the all-inclusive exchange of stocks, the ratio of all-inclusive transfer of stocks, or the ratio of split and merger shall be assessed by an external assessment institution excluding an external assessment institution that cannot assess the merger under Article 176-5 (9) and (10)), respectively: Provided, That such assessment by an external assessment institution may not be required in any of the following cases: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Acquisition or transfer of assets which have little necessity of assessment by an external assessment institution, such as the sale and purchase of securities through the securities market, auction of assets, etc., among acquisition or transfer of important assets, as prescribed and publicly notified by the Financial Services Commission; |
| 2. | Acquisition or transfer of an essential business or asset, all-embracing transfer or exchange of stocks, or merger after division of a corporation, between a corporation whose stocks are listed on the KONEX and unlisted stock corporation. |
| (4) | Article 176-5 (11) through (13) shall apply mutatis mutandis to the acquisition or transfer of material business or assets under Article 165-4 (1) 2 of the Act, the all-inclusive exchange or transfer of stocks under Article 165-4 (1) 3 of the Act, and split-off or split and merger under Article 165-4 (1) 4 of the Act. <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24636, Jun. 21, 2013; Presidential Decree No. 24697, Aug. 27, 2013> |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-7 (Appraisal Rights of Shareholders) |
| (1) | "Split which is prescribed by Presidential Decree” in Article 165-5 (1) of the Act and the former part of Article 165-5 (5) of the Act means a split which is not a simple division under Article 530-12 of the Commercial Act and where stock certificates issued by a corporation established following a split-off is not listed on a securities market (including where the stock certificates to be issued by such corporation are confirmed to be nonconforming to the guidelines for listing as a result of a preliminary examination for listing conducted by an exchange). <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | "Cases prescribed by Presidential Decree" in Article 165-5 (1) of the Act means where any of the following acts is done by the business day following the date the resolution of the board of directors was disclosed to the public: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 8, 27. 2013> |
| 1. | Conclusion of a sales agreement for the relevant stocks; |
| 2. | Termination of a contract for loan for consumption of the relevant stocks; |
| 3. | Other legal acts related to the acquisition of the relevant stocks. |
| (3) | "Amount calculated in a manner prescribed by Presidential Decree" in the proviso to Article 165-5 (3) of the Act means any of the following amounts: |
| 1. | In cases of stocks whose transactions are made on the securities market, the average of the prices to be calculated as follows: |
| (a) | Average of final quotations of the stocks traded on the securities market and disclosed on a daily basis for two months (if a trading reference price is adjusted due to ex-dividends or ex-rights during the same period, and the day immediately preceding the date of the resolution of the board of directors comes after at least seven days from the date the ex-dividends or ex-rights occur, such period) before the day immediately preceding the date the resolution of the board of directors is made, weighted by trading volume by real transactions; |
| (b) | Average of final quotations of the stocks traded on the securities market and disclosed on a daily basis for one month (if a trading reference price is adjusted due to ex-dividends or ex-rights during the same period, and the day immediately preceding the date of the resolution of the board of directors comes after at least seven days from the date the ex-dividends or ex-rights occur, such period) before the day immediately preceding the date the resolution of the board of directors is made, weighted by trading volume by real transactions; |
| (c) | Average of final quotations of the stocks traded on the securities market and disclosed on a daily basis for one week before the day immediately preceding the date the resolution of the board of directors is made, weighted by trading volume by real transactions; |
| 2. | In cases of stocks whose transactions are not made on the securities market, the price referred to in Article 176-5 (1) 2 (b). |
| (4) | "Period prescribed by Presidential Decree" in Article 165-5 (4) of the Act means five years from the date the relevant stocks are purchased. <Amended by Presidential Decree No. 25843, Dec. 9, 2014> |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-8 (Methods, etc. of Issuance and Allocation of Stocks) |
| (1) | "Special relationship prescribed by Presidential Decree" in Article 165-6 (2) 1 of the Act means the relationship as affiliated companies. <Amended by Presidential Decree No. 28796, Apr. 10, 2018> |
| 1. | Listing on a securities market; |
| 2. | Making a sale, brokerage, or mediation of preemptive rights certificates or agent service therefor effectuated through at least two investment traders (referring to investment traders or investment brokers not related to a stock-listed corporation as affiliates thereof). In such cases, detailed matters necessary for the sale or brokerage, mediation or agent service shall be prescribed and publicly notified by the Financial Services Commission. |
| (5) | "Reasonable standards prescribed by Presidential Decree, such as a demand forecast" in Article 165-6 (4) 4 of the Act means a demand forecast (referring to detecting investors' investment tastes, including their demand for prices, quantity, etc. of stocks to be issued and the period of holding stocks) in accordance with the methods prescribed and publicly notified by the Financial Services Commission. |
[This Article Wholly Amended by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 176-9 (Exceptions, etc. to Special Cases concerning Allocation of Stocks to Members of Employee Stock Ownership Association) |
| (1) | “Stock-listed corporation prescribed by Presidential Decree” in the main sentence of Article 165-7 (1) of the Act means a corporation whose stock certificates are listed on a securities market established by the Korea Exchange for the trading of securities prescribed in the subparagraphs of Article 4 (2) of the Act and prescribed and publicly notified by the Financial Services Commission (hereinafter referred to as "marketable securities market"). <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | "Securities market prescribed by Presidential Decree" in the main sentence of Article 165-7 (1) of the Act means a marketable securities market. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | "Cases prescribed by Presidential Decree" in Article 165-7 (1) 2 of the Act means any of the following cases: <Amended by Presidential Decree No. 22516 Dec. 7, 2010; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Where a stock-listed corporation (referring to a corporation whose stock certificates are listed on a marketable securities market) makes a public offering of new or outstanding stocks and the aggregate of the subscription price of a member of the employee stock ownership association (referring to the member of an employee stock ownership association established under the Framework Act on Labor Welfare; hereafter the same shall apply in this Article) and the acquisition value (if the acquisition value falls below its par value, referring to the par value; hereafter the same shall apply in this Article) of stocks of that corporation acquired for 12 months before the subscription pursuant to the main sentence of Article 165-7 (1) of the Act exceeds the total amount of wages (referring to wages subject to income tax) paid for 12 months immediately before the subscription from the corporation; |
| 2. | Deleted. <by Presidential Decree No. 24697, Aug. 27, 2013> |
| (4) | The number of stocks held by members of an employee stock ownership association under Article 165-7 (2) of the Act shall be calculated based on the stocks, the entry of which has been changed in the name of the representative of the employee stock ownership association on the register of shareholders on the day immediately preceding the date the registration statement of public offering or sale of securities is filed with the Financial Services Commission pursuant to Article 119 (1) of the Act (if the registration statement is not filed because a universal shelf registration statement referred to in the former part of Article 119 (2) of the Act has been filed, the date the resolution of the general meeting of shareholders or the board of directors is made): Provided, That in cases of stocks deposited to the Securities Depository by a trust company referred to in Article 43 (1) of the Framework Act on Labor Welfare, the number shall be calculated based on the investors' account book under Article 310 (1) of the Act. <Amended by Presidential Decree No. 22516 Dec. 7, 2010; Presidential Decree No. 24697, Aug. 27, 2013> |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-10 (Minimum Issue Price of Stocks to be Issued Less Than Par Value) |
"Price calculated by the methods prescribed by Presidential Decree" in the latter part of Article 165-8 (2) of the Act means 70 percent of the highest of the prices calculated by the following methods: | 1. | Average of final quotations of the stocks traded on the securities market and disclosed on a daily basis for one month before the day immediately preceding the date the resolution of the board of directors is made to decide on calling a general meeting of shareholders (hereafter referred to as "board of directors to call a general meeting of shareholders" in this Article) to issue stocks at a price less than par value; |
| 2. | Average of final quotations of the stocks traded on the securities market and disclosed on a daily basis for one week before the day immediately preceding the date the resolution of the board of directors is made to call a general meeting of shareholders; |
| 3. | Final quotations of the stocks traded on the securities market on the day immediately preceding the date the resolution of the board of directors to call a general meeting of shareholders is made. |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-11 Deleted. <by Presidential Decree No. 24655, Jul. 5, 2013> |
| Article 176-12 (Issuance, etc. of Convertible Contingent Capital Securities) |
| (1) | A stock-listed corporation that intends to issue, under Article 165-11 (1) of the Act, bonds which shall be converted to stocks on condition that any ground preliminarily prescribed in accordance with objective and reasonable standards occurs when the relevant bonds are issued (hereinafter referred to as "convertible contingent capital securities") shall prescribe the following matters in its articles of incorporation: |
| 1. | The purport that it may issue convertible contingent capital securities; |
| 2. | Total amount of convertible contingent capital securities; |
| 3. | Conditions of conversion; |
| 4. | Types and contents of stocks to be issued by conversion; |
| 5. | The purport that the preemptive rights of convertible contingent capital securities shall be given to shareholders, and the amount of convertible contingent capital securities which are the subject-matter of the preemptive rights; |
| 6. | Matters concerning the issuance of convertible contingent capital securities to persons other than shareholders, and the amount of convertible contingent capital securities issued for them. |
| (2) | Where any convertible contingent capital securities are issued, the grounds for the conversion of the relevant convertible contingent capital securities to stocks shall be those that can be indicated by the price, indicator, unit or index that can be computed or observed by a reasonable method or incidents such as timely corrective measures under Article 10 (1) of the Act on the Structural Improvement of the Financial Industry (hereafter referred to as "grounds, etc." in this paragraph), and such grounds, etc. shall fulfill all of the following guidelines: |
| 1. | The grounds, etc. shall be highly unlikely to be changed or occur by usual efforts of a person related to the issuance of convertible contingent capital securities, such as the issuer and any shareholder or investor of the issuer, and shall comply with the requirements prescribed and publicly notified by the Financial Services Commission; |
| 2. | The grounds, etc. shall be sufficiently notified or announced to the public through the securities market, etc. in accordance with the guidelines and methods prescribed and publicly notified by the Financial Services Commission. |
| (4) | A bond subscription form and a bond register of convertible contingent capital securities shall specify the following: |
| 1. | The purport that the convertible contingent capital securities may be converted to stocks; |
| 2. | Grounds for and conditions of conversion; |
| 3. | Types and contents of stocks to be issued by conversion. |
| (5) | The conversion of convertible contingent capital securities to stocks shall take effect on the third business day from the date any ground for conversion occurs. |
| (6) | Where a stock-listed corporation issues any convertible contingent capital securities, it shall register the following matters at the location of its head office within two weeks from the date the payment under Article 476 of the Commercial Act is completed: |
| 1. | Total amount of convertible contingent capital securities; |
| 2. | Amount of each convertible contingent capital securities; |
| 3. | Payment amount of each convertible contingent capital securities; |
| 4. | Matters referred to in subparagraphs of paragraph (4). |
| (8) | The price for the conversion of convertible contingent capital securities to stocks attributable to occurrence of grounds for conversion and other detailed matters necessary for the issuance, circulation, etc. of convertible contingent capital securities other than those prescribed in paragraphs (1) through (7) shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Wholly Amended by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 176-13 (Issuance, etc. of Bail-In Contingent Capital Securities) |
| (1) | A stock-listed corporation that intends to issue, under Article 165-11 (1) of the Act, bonds with conditions that the obligation to redeem the bonds and to pay the interests thereof shall be mitigated upon the occurrence of any trigger event specified in accordance with objective and reasonable standards when the relevant bonds are issued (hereinafter referred to as "bail-in contingent capital securities"), shall prescribe the following matters in its articles of incorporation: |
| 1. | The purport that it may issue bail-in contingent capital securities; |
| 2. | Total amount of bail-in contingent capital securities; |
| 3. | Conditions of mitigation of the obligation to redeem bonds and pay interests thereof (hereafter referred to as "debt readjustment" in this Article); |
| 4. | Contents of bail-in contingent capital securities to be changed due to debt readjustment. |
| (2) | A bond subscription form and a bond register of bail-in contingent capital securities shall specify the following: |
| 1. | The purport that the bail-in contingent capital securities may be subject to debt adjustment; |
| 2. | Grounds for and conditions of debt adjustment; |
| 3. | Contents of bail-in contingent capital securities to be changed due to debt adjustment. |
| (3) | The debt adjustment of bail-in convertible contingent capital securities to stocks shall take effect on the third business day from the date any ground for debt adjustment occurs. |
| (4) | Article 176-12 (2) shall apply mutatis mutandis to the grounds for debt adjustment of bail-in contingent capital securities and Article 176-12 (3) shall apply mutatis mutandis to the issuance thereof. |
[This Article Wholly Amended by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 176-14 (Matters to be Reported at General Meeting of Shareholders concerning Dividends and Method of Calculating Market Price of Stocks Dividends) |
| (1) | "Matters prescribed by Presidential Decree, such as the basis for computation of dividends" in Article 165-12 (9) of the Act means the following: <Newly Inserted by Presidential Decree No. 27291, Jun. 28, 2016> |
| 1. | Basis for computation of dividends; |
| 2. | Where the ratio of dividends to profits for the year is substantially changed as compared with the immediately preceding fiscal year, the details and the cause of the change; |
| 3. | Other matters prescribed and publicly notified by the Financial Services Commission to protect the rights and interests of shareholders related to the dividends. |
| (2) | Where stock dividends are made pursuant to Article 165-13 of the Act, the market price of the stocks shall be the lesser of the average of the final quotations of the stocks traded on the securities market and disclosed on a daily basis for the period retroactively calculated from the day immediately preceding the date of the general meeting of shareholders which resolves on the stock dividends to the commencement date of the business year which includes the date of the general meeting of shareholders and the final quotations of the stocks traded in the securities market on the day immediately preceding the date of the general meeting of shareholders. |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-15 (Special Cases concerning Dividends of Public Purpose Corporations, etc.) |
| (1) | A public purpose corporation shall, when it needs to distribute profits or interests under Article 165-14 (1) of the Act, distribute them in accordance with the number of stocks which are directly acquired from the Government (if the Bank of Korea, the Korea Development Bank or the other public agencies under the Act on the Management of Public Agencies sold stocks issued by a public purpose corporation owned by it, including such organization; hereafter the same shall apply in this Article) and continuously held by a person falling under any subparagraph of the same paragraph. |
| (2) | "Person who meets standards prescribed by Presidential Decree" in Article 165-14 (1) 2 of the Act means a person falling under any of the following subparagraphs: |
| 3. | A person whose annual income is not more than 7.2 million won. |
| (3) | A public purpose corporation shall, when it needs to issue stocks under Article 165-14 (2) of the Act, distribute them in accordance with the number of stocks continuously held by a person falling under any subparagraph of paragraph (1) of the same Article after purchasing directly from the Government. |
| (4) | A person who acquires stocks pursuant to Article 165-14 (2) of the Act shall deposit them for five years from the date the stocks are acquired as prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-16 (Corporations Issuing Non-Voting Stocks) |
| (1) | "Manner prescribed by Presidential Decree" in Article 165-15 (1) 1 of the Act means that a stock-listed corporation and a corporation which publicly offers or sells stocks to list them initially issue overseas securities as non-voting stocks, as prescribed and publicly notified by the Financial Services Commission. |
| 1. | A corporation, not less than 15 percent of whose stocks or equity is held by the Government (including the Bank of Korea, the Korea Development Bank, and public institutions prescribed in the Act on the Management of Public Institutions); |
| 2. | A corporation operating business in which stock acquisition or equity participation is restricted in accordance with other Acts. |
| 1. | Exercising a right, such as a preemptive right, conversion right, etc. by a shareholder or bondholder; |
| 2. | Capitalizing reserves; |
| 4. | Exercising a stock option. |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-17 (Standards, etc. for Financial Management of Stock-listed Corporations) |
| (1) | "Overseas securities prescribed by Presidential Decree" in Article 165-16 (1) 3 of the Act means stocks, corporate bonds related to stocks, participating bonds, and security depository receipts issued overseas by a stock-listed corporation, and other securities similar thereto. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | "Matters prescribed by Presidential Decree" in Article 165-16 (1) 4 of the Act means any of the following matters: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Matters concerning the issuance of participating bonds; |
| 2. | Matters concerning deficit; |
| 3. | Matters concerning the methods of reporting and disclosing accounting statements and matters on finance. |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-18 (Reporting, etc. on Granting Stock Options) |
| (1) | When a stock-listed corporation passes a resolution on granting stock options at a general meeting of shareholders or the board of directors pursuant to Article 340-2 (1) of the Commercial Act, the stock-listed corporation shall promptly file a report thereon to the Financial Services Commission and the exchange pursuant to Article 165-17 (1) of the Act. In such cases, the stock-listed corporation shall the report along with minutes of the general meeting of shareholders or the board of directors. |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 176-19 (Special Cases concerning Outside Directors and Standing Auditors) |
[This Article Newly Inserted by Presidential Decree No. 24841, Nov. 13, 2013]
CHAPTER IV OVER-THE-COUNTER TRADING
| Article 177 (Method of Over-the-Counter Trading) |
Except for trading conducted under Articles 178 (1) and 179, securities or over-the-counter derivatives outside a securities market or an alternative trading system shall be traded between a single seller and a single buyer in accordance with Article 166 of the Act. <Amended by Presidential Decree No. 24697, Aug. 27, 2013>
| Article 177-2 (Exemption from Deliberation on Over-the-Counter Derivatives) |
| 1. | Where information on underlying assets of over-the-counter derivatives under Article 166-2 (1) 6 (a) of the Act or the price of the underlying assets, an interest rates, an indicator, a unit, or an index based on any of the aforesaid factors is fully provided on the securities market, derivatives market, foreign securities markets or derivatives markets, or other markets prescribed and publicly notified by the Financial Services Commission: Provided, That over-the-counter derivatives for ordinary investors shall be excluded herefrom; |
| 2. | Where derivatives have the same or similar structure of the over-the-counter derivatives which have underwent a prior deliberation from the Association and meet the standards prescribed by the Association; |
| 3. | Other cases prescribed and publicly notified by the Financial Services Commission as equivalent to cases falling under subparagraphs 1 and 2. |
[This Article Newly Inserted by Presidential Decree No. 22197, Jun. 11, 2010]
| Article 178 (Over-the-Counter Trading through Association, etc.) |
| (1) | When the Association performs any business affairs related to over-the-counter trading of stock certificates not listed on a securities market pursuant to Article 286 (1) 5 of the Act or when a comprehensive financial investment business entity performs any business affairs related to over-the-counter trading of stock certificates not listed on a securities market pursuant to Article 77-6 (1) 1, it shall observe the following guidelines: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 28040, May 8, 2017> |
| 1. | It shall announce to the public the issues of stock certificates that the parties offer to trade between a number of parties simultaneously, the price bid for purchasing (hereinafter referred to as "bidding price") or the price asked for selling (hereinafter referred to as "asking price"), and the volume of the stock certificates; |
| 2. | Where a single price prescribed and publicly notified for each item of stock certificates by the Financial Services Commission or an asking price coincides with a bidding price, it shall close the trade at such price; |
| 3. | It shall establish business guidelines concerning the criteria for designation of stock certificates for trading and cancellation of such designation, the trading method, the settlement method, and other matters, report them to the Financial Services Commission, and publish them to inform the general public; |
| 4. | It shall disclose the status of the issuer, including its financial standing, business performance, and a change in its capital, as prescribed and publicly notified by the Financial Services Commission. |
| (2) | No person other than the Association or a comprehensive financial investment business entity shall act as a broker for trading of stock certificates outside a securities market or an alternative trading system in the manner provided for in paragraph (1). <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 28040, May 8, 2017> |
| Article 179 (Over-the-Counter Trading through Inter-Dealer Brokers) |
Every investment broker who holds authorization for 2i-11-2i of attached Table 1 (hereinafter referred to as "inter-dealer broker") among the authorized business units referred to in the aforesaid Table pursuant to Article 166 of the Act shall observe the following guidelines when acting as a broker for trading of debt securities outside a securities market: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> | 1. | The brokerage of a trade of debt securities shall be conducted for trading debt securities between any of the following persons with respect to the debt securities subject to the brokerage of trading: |
| (a) | Any of the persons referred to in Article 10 (2) 1 through 17 and any of the persons referred to in paragraph (3) 1 through 13 of the aforesaid Article; |
| (c) | Other persons prescribed and publicly notified by the Financial Services Commission; |
| 2. | It shall announce the issues of debt securities (where an investment broker conducts the brokerage of repurchase agreements, a number of issues of debt securities to be traded may be deemed one issue; hereafter the same shall apply in this Article) that the parties offer to trade between a number of parties simultaneously, the bidding price or the asking price, and the volume of the stocks to the public; |
| 3. | It shall close a trade at the price at which the asking price and the bidding price of parties for each issue of debt securities coincide with each other; |
| 4. | The operation method and other matters shall satisfy the criteria prescribed and publicly notified by the Financial Services Commission. |
| Article 180 (Over-the-Counter Trading through Specialized Bond Dealer) |
| (1) | A person who is designated by the Financial Services Commission pursuant to Article 166 of the Act to perform a role of facilitating trades of the bonds held by the persons who engage in an investment trading business for bonds by simultaneously offering an asking price and a bidding price for such bonds (hereafter referred to as "specialized bond dealer" in this Article) shall, when there is a trade offer from an investor for trading any of the following bonds, accept such order within the limit set for each investor by the specialized bond dealer: <Amended by Presidential Decree No. 23924, Jun. 29, 2012> |
| 1. | Bonds for which an asking price and a bidding price are offered simultaneously; |
| 2. | Bonds sold by the specialized bond dealer to the investor. |
| (2) | The guidelines for designation of specialized bond dealer and revocation of such designation, the obligations of specialized bond dealers, the support to specialized bond dealers, and other necessary matters concerning specialized bond dealers shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 181 (Repurchase Agreements) |
| (1) | Every investment trader shall observe the following guidelines when executing a repurchase agreement with any person, other than those referred to in the items of Article 7 (4) 3 (hereafter referred to as "ordinary investor, etc." in this Article) pursuant to Article 166 of the Act: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Securities traded shall be state bonds, local government bonds, special purpose bonds, or any other securities prescribed and publicly notified by the Financial Services Commission; |
| 2. | Securities shall be traded at the trading price prescribed and publicly notified by the Financial Services Commission; |
| 3. | The repurchase date or resale date shall be fixed. In such cases, if it is intended to sell securities purchased with a resale agreement under the condition to buy-back, the date of buy-back of such securities sold with a buy-back agreement shall be earlier than the date set for resale of such securities purchased with the resale agreement; |
| 4. | The entity shall observe the guidelines prescribed and publicly notified by the Financial Services Commission with respect to keeping in custody, replacement, and other matters of the securities sold under a buy-back agreement. |
| (2) | No concurrently-run financial investment business entity (excluding a person prescribed and publicly notified by the Financial Services Commission) that holds authorization provided for in 11r-1r-1 of attached Table 1 among the authorized business units referred to in the aforesaid Table shall engage in executing purchase and resale agreements with ordinary investors. |
| (3) | In any of the following cases, any person referred to in the items of Article 7 (4) 3 shall tender the securities and the price therefor simultaneously for settlement in the manner prescribed and publicly notified by the Financial Services Commission: Provided, That where the Financial Services Commission prescribes and publicly notifies otherwise, it is unnecessary to tender the securities and the price therefor simultaneously for settlement: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Where a repurchase agreement is executed between the persons referred to in the items of Article 7 (4) 3 through an investment broker; |
| 2. | Where a repurchase agreement is executed with an investment trader as the other party (excluding where a trust business entity executes a repurchase agreement with the trust property). |
| Article 182 (Transactions of Borrowing and Lending Securities) |
| (1) | Every investment trader or broker shall observe the following guidelines when engaging in a transaction of borrowing and lending securities or acting as a broker, an intermediary or an agent for such transaction pursuant to Article 166 of the Act: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| 1. | It shall require the borrower to offer collateral in the manner prescribed and publicly notified by the Financial Services Commission: Provided, That the same does not apply to the brokerage of transactions of borrowing and lending securities (excluding brokerage of borrowing and lending provided in paragraph (2)) deemed necessary by an investment trader or investment broker under separate terms and conditions agreed between the borrower and the lender; |
| 2. | The relevant securities shall be delivered simultaneously with offering of collateral in the manner prescribed and publicly notified by the Financial Services Commission: Provided, That the same does not apply to transactions of borrowing and lending between foreigners; |
| 3. | It shall disclose the details of a transaction of borrowing and lending securities to the public on the date of the transaction through the Association. |
| (2) | Every investment trader or broker may engage in the brokerage of transactions of borrowing and lending in the form of brokerage of borrowing and lending (referring to the brokerage in the form of transactions of borrowing and lending prescribed and publicly notified by the Financial Services Commission). |
| (3) | Necessary matters concerning the ratio and management of the collateral, the method of disclosing transactions of borrowing and lending, and other matters shall be prescribed and publicly notified by the Financial Services Commission. |
| (4) | Paragraphs (1) through (3) shall apply mutatis mutandis where any entity that is established or holds authorization pursuant to the Act, other than investment traders or brokers, engages in transactions of borrowing and lending securities, or acts as a broker, an intermediary or an agent for such transactions. |
| Article 183 (Over-the-Counter Transactions of Commercial Paper, etc.) |
| (1) | Every investment trader or broker shall observe the following guidelines when trading commercial paper or acting as a broker, an intermediary or an agent for such trading pursuant to Article 166 of the Act: <Amended by Presidential Decree No. 21765, Oct. 1, 2009> |
| 1. | The commercial paper shall have a credit rating assigned by two or more credit rating companies; |
| 2. | It shall not guarantee, directly or indirectly, payment for the commercial paper. |
| (2) | Necessary matters concerning the method of trading commercial paper, the method of credit rating, and other matters shall be prescribed and publicly notified by the Financial Services Commission. |
| (3) | Paragraphs (1) and (2) shall apply mutatis mutandis to the over-the-counter transactions of short-term electronic bonds, etc. <Newly Inserted by Presidential Decree No. 24497, Apr. 5, 2013> |
| Article 184 (Transactions, etc. in Overseas Markets) |
| (1) | Every ordinary investor (including professional investors prescribed and publicly notified by the Financial Services Commission) that intends to trade foreign currency securities or exchange-traded derivatives in an overseas securities market or an overseas derivatives market (including trading via a foreign alternative trading system; hereafter the same shall apply in this Article) as defined in Article 5 (2) 2 of the Act (hereinafter referred to as "overseas derivatives market"), he/she shall trade them through an investment broker pursuant to Article 166 of the Act. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | Where an investment broker is entrusted by an ordinary investor referred to in paragraph (1) to trade foreign currency securities or exchange-traded derivatives in an overseas securities market or derivatives market, it shall open a separate account with a foreign investment broker, etc. for such trading in addition to its account for trading on its own account. |
| (3) | The acceptance of entrustment of trade offers or orders for trading in overseas securities market and derivatives market, the settlement of such trading, the notices of results of execution, exercise of rights, and other matters, and necessary matters concerning domestic transactions by investment traders or brokers of foreign currency securities and exchange-traded derivatives shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 23924, Jun. 29, 2012> |
| Article 185 (Other Over-the-Counter Transactions of Securities) |
| (1) | No person, other than investment traders, shall sell bonds that he/she does not own, outside a securities market or an alternative trading system pursuant to Article 166 of the Act. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | When an investment trader receives a trade offer from an investor to trade listed stocks of less than the trading unit of a securities market or an alternative trading system outside a securities market or an alternative trading system, he/she shall accept the trade offer: Provided, That the investment trader may refuse to accept an offer, where it receives an offer to purchase certain listed stocks that it does not own. <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | Except as specifically provided in paragraphs (1) and (2), the methods of trading securities, etc. outside a securities market or an alternative trading system and settlement of such trading, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission, in consideration of the types of securities, trading, and forms, etc. of transactions. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| Article 186 Deleted. <by Presidential Decree No. 21291, Feb. 3, 2009> |
| Article 186-2 (Transactions for Risk Avoidance) |
"Transactions to hedge risk prescribed by Presidential Decree" in the former part of Article 166-2 (1) 1 of the Act means transactions for the purpose of reducing all or some of the economic loss which is likely to be incurred to the assets, liabilities, contracts, etc. (hereinafter referred to as "objects of avoiding risk") owned or to be owned by a person who intends to avoid risk, which meet each of the following requirements at the time of execution of such contracts: | 1. | The objects of risk avoidance shall be owned or to be owned by the person; |
| 2. | Any profit and loss which are likely to be generated in trading over-the-counter derivatives during the contract term for such over-the-counter derivative transactions shall not exceed the range of the profit and loss which are likely to be generated in the objects of avoiding risk. |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 186-3 (Duties to Clear Over-the-Counter Transactions) |
| (1) | The term "person prescribed by Presidential Decree" in Article 166-3 of the Act means a foreign financial investment business entity. |
| (2) | The term "trade of over-the-counter derivatives or any other over-the-counter transaction prescribed by Presidential Decree" in Article 166-3 of the Act means a trade whereby the interest of fixed rate and variable rate for won-denominated original amount shall be exchanged with won currency at every specific point of time in the future for a fixed period, which fulfills the requirements prescribed and publicly notified by the Financial Services Commission relating to underlying assets, maturity of trade, etc.: Provided, That a trade which is unable to be liquidated through a central counterparty (including a business entity authorized to engage in central counterparty clearing business under Article 323-3 of the Act) pursuant to the Act, foreign statutes, etc. corresponding to the Act, and which is further prescribed and publicly notified by the Financial Services Commission, shall be excluded herefrom. |
| (3) | The term "any other entity corresponding thereto which is prescribed by Presidential Decree" in Article 166-3 of the Act means a business entity approved by the Financial Services Commission among the entities that engage in a business corresponding to central counterparty clearing business in foreign countries under foreign statutes (hereinafter referred to as "foreign central counterparties") and fulfill all of the following requirements: |
| 1. | A foreign central counterparty shall obtain permission, authorization, approval, etc. from a foreign financial investment supervisory agency, to engage in a business corresponding to the relevant central counter party clearing business; |
| 2. | A foreign central counterparty shall be under appropriate supervision of a foreign financial investment supervisory agency in connection with a business corresponding to the relevant central counter party clearing business; |
| 3. | It shall be a foreign central counterparty of a country where the Financial Services Commission is able to receive data on the investigations or inspections conducted in the way prescribed by the Act or foreign statutes corresponding to the Act with respect to a violation of the Act or foreign statutes corresponding to the Act committed by a foreign central counterparty from a foreign financial investment supervisory agency in accordance with the principle of reciprocity. |
| 4. | The Financial Services Commission shall have entered into a cooperation agreement, etc. with a foreign financial investment supervisory agency of the country where the foreign central counter party is located on the matters prescribed and publicly notified by the Financial Services Commission including mutual exchange of information and trades subject to clearing. |
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 187 (Limits on Acquisition, etc. of Securities or Exchange-Traded Derivatives by Foreigners) |
| (1) | Except as otherwise prescribed and publicly notified by the Financial Services Commission, no foreigner as prescribed in Article 168 (1) of the Act (hereafter referred to as "foreigner" in this Chapter), foreign corporation, etc. shall acquire equity securities issued by a public-purpose corporation on his/her or its own account in excess of the following limits, regardless of in whose name they are held. In such cases, necessary matters concerning the disposition of the amounts in excess of the limits, the guidelines for calculating such limits on acquisition and the management of such limits, and other matters shall be prescribed and publicly notified by the Financial Services Commission: |
| 1. | The limit on acquisition for a foreigner, a foreign corporation, etc. by issue per person: The limit stipulated in the articles of incorporation of that public-purpose corporation; |
| 2. | The total limit on acquisition for foreigners, foreign corporations, etc. by issue: 40 percent of the total number of equity securities of the relevant issue. |
| (2) | If deemed necessary for stabilizing the securities market (including trades via an alternative trading system) or the derivatives market or protecting investors, the Financial Services Commission may prescribe and publicly notify the limits on acquisition of securities or exchange-traded derivatives (limited to those traded in the derivatives market) by type of business, type or issue, and item of securities and exchange-traded derivatives, in addition to the limits on acquisition provided for in paragraph (1). <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | When a foreign securities depository prescribed in subparagraph 5 of Article 296 of the Act (hereinafter referred to as "foreign securities depository") intends to acquire equity securities issued by a domestic corporation for the purpose of issuing depositary receipts overseas, it shall obtain prior consent from the domestic corporation that issued the equity securities: Provided, That the same does not apply where such equity securities are newly issued or in cases prescribed and publicly notified by the Financial Services Commission. |
| Article 188 (Registration, etc. of Foreigner's Investment) |
| (1) | Where a foreigner, a foreign corporation, etc. intends to acquire or dispose of securities listed on the securities market (hereinafter referred to as "listed securities") or securities that will be listed, such as securities publicly offered or sold to be listed on the securities market, the foreigner or foreign corporation shall register his/her personal data and other information (hereinafter referred to as "investor registration") in advance with the Financial Services Commission. In such cases, matters necessary for the requirements, methods, and procedures for the investor registration, the revocation of such registration, and other matters shall be prescribed and publicly notified by the Financial Services Commission. |
| (2) | A foreigner, a foreign corporation, etc. shall comply with the following guidelines to trade listed securities or exchange-traded derivatives (limited to those traded in the derivatives market; hereafter the same shall apply in this paragraph) or conduct any other trading: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | When trading listed securities: |
| (a) | He/she/it shall trade them through the securities market (including trading via an alternative trading system) except in cases prescribed and publicly notified by the Financial Services Commission; |
| (b) | He/she/it shall satisfy the guidelines prescribed and publicly notified by the Financial Services Commission concerning opening of trading accounts, keeping in custody of purchased securities, appointment of a domestic agent, reporting on details of trading, and other matters; |
| 2. | When trading exchange-traded derivatives, he/she/it shall satisfy the guidelines prescribed and publicly notified by the Financial Services Commission concerning opening of trading accounts, reporting on details of trading, and other matters; |
| 3. | When trading listed securities by any method, other than sale, he/she/it shall satisfy the guidelines prescribed and publicly notified by the Financial Services Commission concerning reporting on details of trading, and other matters. |
| Article 189 (Accounting Auditor's Audit Certificate) |
| (1) | "Person prescribed by Presidential Decree" in the main sentence of Article 169 (1) of the Act means a person falling under any of the following subparagraphs: <Amended by Presidential Decree No. 28796, Apr. 10, 2018> |
| 1. | A corporation obligated to submit a business report; |
| 1. | A section of documents related to financial affairs, which describes the matters falling under any subparagraph of Article 131 (5); |
| 2. | Documents related to financial affairs in half-yearly and quarterly reports: Provided, That in cases of half-yearly reports and quarterly reports submitted by a corporation falling under the proviso to Article 170 (1) 2, the same shall apply only to those with verification and comment of an accounting auditor. |
| Article 190 (Special Cases concerning Audit of Foreign Corporations, etc.) |
| 1. | Any of the foreign corporations, etc. referred to in the subparagraphs of Article 176 (1), has been audited pursuant to the statutes of a foreign country or a treaty, articles of incorporation, regulations, etc. under which it is incorporated; |
| 2. | A foreign corporation established pursuant to the statutes of a foreign country has been audited by an external auditor pursuant to statutes of that foreign country: Provided, That if the accounting standards adopted by the foreign corporation differ from the accounting standards established under the Act on External Audit of Stock Companies, it shall submit documents stating the matters prescribed and publicly notified by the Financial Services Commission along with the relevant audit report. |
| Article 191 (Scope of Securities Subject to Liability for Damage) |
| 1. | Exchangeable bonds with rights to claim exchange with securities (including depositary receipts related to such securities; hereafter the same shall apply in this Article) issued by a corporation that shall be audited by an auditor; |
| 2. | Derivatives-linked securities issued with its underlying asset comprised of securities issued by a corporation that shall be audited by an auditor and exchangeable bonds referred to in subparagraph 1. |
| Article 192 (Alternative Payment for Security Deposit) |
| (1) | "Guarantee money or deposit money prescribed by Presidential Decree" in Article 171 (1) of the Act means any of the following: |
| 4. | Statutory deposit money. |
| (2) | Listed stocks that can be used as an alternative means for paying guarantee money or deposit money under Article 171 (1) of the Act are as follows: |
| 1. | Debt securities (excluding commercial paper); |
| (3) | The values of listed stocks that can be used as alternative means for paying money or deposit money shall be appraised according to the substitute prices determined by an exchange. |
| Article 193 (Deposit Certificates) |
| (1) | To issue a deposit certificate prescribed in Article 171 (4) of the Act (hereafter referred to as "deposit certificate" in this Article), the Securities Depository shall issue the deposit certificate for the deposit owned by a depositor prescribed in Article 171 (5) of the Act (hereinafter referred to as "depositor") based on the depositor’s account book while it shall issue such deposit certificate for the deposit made by an investor based on the investors' account book of which the relevant depositor has notified the Securities Depository. |
| (2) | The deposit certificate issued under paragraph (1) shall describe the following: |
| 1. | The name or trade name and address of an actual owner on the depositors' account book or investors' account book; |
| 2. | The type and number of depositary receipts, etc. referred to in Article 309 (3) 2 of the Act (hereinafter referred to as "depositary receipts, etc."); |
| 3. | The purpose for which the deposit certificate is used; |
| 4. | A statement that the deposit certificate may not be used for any purpose other than an alternative payment of guarantee money or deposit money under Article 192 (1); |
| 5. | A statement that a person who receives the deposit certificate as alternative payment of guarantee money or deposit money under Article 192 (1) may file an application for transferring the relevant depositary receipts, etc. to its own account on the investors' account book or the depositors' account book; |
| 6. | A statement that if the person prescribed in subparagraph 5 files an application for transfer under the aforesaid subparagraph, it shall return the relevant deposit certificate to the Securities Depository or the depositor and that, in such cases, the Securities Depository or the depositor will remove the restrictions on disposition under Article 171 (5) of the Act; |
| 7. | A statement that the depositor who redeems the deposit certificate under subparagraph 6 shall return it to the Securities Depository without delay. |
PART IV REGULATION OF UNFAIR TRADING
| Article 194 (Scope of Employees Obligated to Return Short-Swing Profit) |
"Person as prescribed by Presidential Decree" in the main sentence of Article 172 (1) of the Act means a person falling under any of the following subparagraphs and deemed by the Securities and Futures Commission as one who has knowledge of the material, nonpublic information under Article 174 (1) of the Act (hereinafter referred to as "material, nonpublic information"): | 1. | An employee who is in charge of the establishment of, revision to, promotion of, or public disclosure of a matter falling under any subparagraph of Article 161 (1) of the Act, or any other business affair related to such matter in the relevant corporation; |
| 2. | An employee who is in charge of a business affair related to financial affairs, accounting, planning, or research and development of the relevant corporation. |
| Article 195 (Methods, etc. of Calculation of Short-Swing Profit) |
| 1. | Where specific securities, etc. have been sold or purchased within six months (including the first day; hereafter the same shall apply in this Article) after the purchase (including sale of specific securities, etc. (referring to specific securities, etc. prescribed in the former part of Article 172 (1) of the Act; hereinafter the same shall apply) in which the person in question becomes the counterparty to the exercise of a right and holds the status of purchaser; hereafter the same shall apply from this Article through Article 199) or sale in question (including purchase of specific securities, etc. in which the person in question can exercise his/her right and holds the status of seller; hereafter the same shall apply from this Article through Article 199) was made, the profit therefrom shall be calculated by multiplying the difference between the unit selling price and the unit buying price by the smaller of the volume purchased or the volume sold (hereafter referred to as "matching volume" in this Article) and subtracting trading commission, securities transaction tax, and special tax for rural development for the matching volume. In such cases, if the amount so calculated is below the decimal point, it shall be deemed that there is no profit; |
| 2. | Where specific securities, etc. have been sold or purchased at least twice within six months after the purchase or sale in question, the profit therefrom shall be calculated by applying the formula prescribed in subparagraph 1 to the purchase made at the earliest time and the sale made at the earliest time; applying the same formula to the securities purchased and sold thereafter consecutively until the amount purchased or sold, to which the formula applies, are completely exhausted. In such cases, the volume exceeding the matching volume out of the amount purchased or sold, to which the formula was applied, shall be deemed to be the purchase or sale not related to the purchase or sale in question in applying the formula. |
| (2) | Where the profit is calculated by the formula prescribed in paragraph (1) 1 or 2, the buying price and selling price shall be the prices determined in accordance with the following, depending upon the class and issue of specific securities, etc.: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| 1. | Where specific securities, etc. purchased and specific securities, etc. sold are the same in class but different in issue: If there is a profit from the sale after the purchase, the closing price of the specific securities, etc. on the date of sale shall be the selling price of the specific securities, etc. sold, while if there is a profit from the purchase after the sale, the closing price of the specific securities, etc. on the date of purchase shall be the buying price of the specific securities, etc. purchased; |
| 2. | Where specific securities, etc. purchased and specific securities, etc. sold are different in class: The price of specific securities, etc., other than equity securities, shall be that calculated by converting them into equity securities by the formula prescribed and publicly notified by the Securities and Futures Commission. |
| (3) | Where specific securities, etc. purchased and specific securities, etc. sold are different in class, the volume shall be calculated by the formula prescribed and publicly notified by the Securities and Futures Commission. <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| (4) | Where a profit is calculated in accordance with any provision of paragraphs (1) through (3), specific securities, etc. go ex-rights, ex-dividend, or ex-interest or any similar event prescribed and publicly notified by the Securities and Futures Commission occurs after purchase or sale, the profit shall be calculated based on the price and volume converted in consideration of such event. <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| (5) | Deleted. <by Presidential Decree No. 21291, Feb. 3, 2009> |
| (6) | Except as specifically provided for in paragraphs (1) through (4), specific guidelines and formulas for calculating short-swing profits under the former part of Article 172 (1) of the Act (hereinafter referred to as "short-swing profit") and other necessary matters shall be prescribed and publicly notified by the Securities and Futures Commission. <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| Article 196 (Securities Exempt from Return of Short-Swing Profit) |
| 1. | Debt securities: Provided, That securities falling under any of the following items shall be excluded herefrom: |
| (d) | Exchangeable bonds with a right to claim their exchange with equity securities (including security depository receipts related to such securities) or securities under any provision of items (a) through (c) (including security depository receipts related to such securities) issued by the same corporation; |
| 2. | Beneficiary certificates; |
| Article 197 (Public Disclosure of Short-Swing Profit) |
"Manner prescribed by Presidential Decree" in the latter part of Article 172 (3) of the Act means ensuring that the following matters are disclosed to the public without delay: | 1. | The position of the person who is obligated to return short-swing profits (referring to an executive officer (including a person under any subparagraph of Article 401-2 (1) of the Commercial Act), an employee, or a major shareholder; hereafter the same shall apply in this Article); |
| 2. | The amount (referring to the sum aggregated for each executive officer, employee, or shareholder) of the short-swing profit; |
| 3. | The date it was notified by the Securities and Futures Commission that the short-swing profit was realized; |
| 4. | The corporation's plan for claiming to return the short-swing profit; |
| 5. | A statement that any shareholder of the corporation (including any person who holds equity securities or security depository receipts, other than stocks; hereafter the same shall apply in this subparagraph) may demand the corporation to claim the person who realized short-swing profit to return the profit, and the shareholder may, if the corporation does not file such claim within two months from the date it is demanded to do, file a claim on behalf of the corporation. |
| Article 198 (Exceptions to Return of Short-Swing Profits) |
"Cases prescribed by Presidential Decree" in Article 172 (6) of the Act means any of the following: <Amended by Presidential Decree No. 22516 Dec. 7, 2010; Presidential Decree No. 24697, Aug. 27, 2013> | 1. | Where the purchase or sale is inevitable under the relevant statutes; |
| 2. | Where the purchase or sale is made in accordance with permission, authorization, approval, etc., or the written guidance or recommendation, of the Government; |
| 3. | Where the purchase and sale or the sale and purchase are made for manipulation for stabilization or market creation; |
| 4. | Where specific securities, etc. publicly offered, privately placed, or publicly sold are acquired by underwriting, or where such underwritten specific securities, etc. are disposed of; |
| 5. | Where stocks are acquired by exercising a stock option; |
| 6. | Where stocks are acquired by exercising rights of equity securities, an instrument representing preemptive right to new stocks, convertible bonds, or bonds with warrant already owned; |
| 9. | Where specific securities, etc. are acquired as a result of subscription for specific securities, etc. publicly offered or sold; |
| 10. | Where stocks are acquired by a member of an employee stock ownership association through the employee stock ownership association in accordance with Articles 36 through 39 or 44 of the Framework Act on Labor Welfare (applicable only where the stocks so acquired are deposited at the Securities Depository under Article 43 of the aforementioned Act); |
| 11. | Where stocks are disposed of by exercising an appraisal right; |
| 12. | Where stocks, etc. are disposed of by accepting a tender offer; |
| 13. | Where the Securities and Futures Commission deems that there is no likelihood that any material nonpublic information will be used. |
| Article 199 (Duration Applicable Mutatis Mutandis to Investment Traders) |
The provisions applicable mutatis mutandis to investment traders with respect to insiders' short-swing profits as provided for in Article 172 (7) of the Act shall apply mutatis mutandis to cases where an investment trader makes a purchase or sale within three months from the date an underwriting contract is executed and makes a sale or purchase within six months from the date of such sale or purchase (excluding cases falling under subparagraph 4 of Article 198): Provided, That where an investment trader makes a trade for manipulation for stabilization or market creation, the provisions shall apply mutatis mutandis to cases where it makes a purchase or sale during the relevant period for manipulation for stabilization or market creation and makes a sale or purchase within six months from the date of the purchase or sale (excluding cases falling under subparagraph 3 of Article 198).
| Article 200 (Reporting on Status of Specific Securities, etc. Owned by Executive Officers, etc.) |
| (1) | "Days prescribed by Presidential Decree" in the former part of Article 173 (1) of the Act means the days referred to in the subparagraphs of Article 153 (1). <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | When an executive officer (including persons referred to in the subparagraphs of Article 401-2 (1) of the Commercial Act) or a major shareholder of a stock-listed corporation prepares a report on the status of specified securities, etc. he/she owns and any changes therein pursuant to Article 173 (1) of the Act, he/she shall state the following in the report: |
| 2. | The relevant stock-listed corporation; |
| 3. | Matters concerning the status of specific securities, etc. owned by type and changes therein. |
| (3) | The base date for a reporting period applicable in the case where an executive officer (including the persons referred to in the subparagraphs of Article 401-2 (1) of the Commercial Act) or a major shareholder of a stock-listed corporation is required to report the status of specific securities, etc. owned, is as follows: |
| 1. | Where any person who was not an executive officer of the stock-listed corporation is appointed as an executive officer at the relevant general meeting of shareholders: The date of appointment; |
| 3. | Where a person becomes a major shareholder of the stock-listed corporation by acquisition, etc. of stocks issued by that corporation: The date of acquisition, etc. of the stocks; |
| 4. | Where stock certificates issued by an unlisted stock corporation are listed on the securities market: The date of listing; |
| 5. | Where an executive officer (including the persons referred to in the subparagraphs of Article 401-2 (1) of the Commercial Act; hereafter the same shall apply in this Article) or a major shareholder of an unlisted stock corporation becomes an executive officer or a major shareholder of a stock-listed corporation by a merger, merger after a split-off, or comprehensive exchange or transfer of stocks: The date the stocks issued by the merger, merger after the split-off, or comprehensive exchange or transfer of stocks are listed. |
| (4) | Where an executive officer or a major shareholder of a stock-listed corporation is required to report a change in the status of specific securities, etc. owned, the date of changes to be reported are as follows: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | The date of settlement, where the specific securities, etc. are traded on the securities market (including trades via an alternative trading system; hereafter the same shall apply in this paragraph) or the derivatives market; |
| 2. | The earlier of the date the price is paid, or the date the specific securities, etc. are delivered, where the specific securities, etc. are purchased outside the securities market or the derivatives market; |
| 3. | The earlier of the date the price is received, or the date the specific securities, etc. are delivered, where the specific securities, etc. are sold outside the securities market or the derivatives market; |
| 4. | The date immediately after the date the stock price is paid, where new stocks allocated for capital increase for value are acquired; |
| 5. | The date the specific securities, etc. are received, where such securities, etc. are borrowed; and the date the specific securities, etc. are delivered, where such securities, etc. are returned; |
| 6. | The date the specific securities, etc. are received, where such securities, etc. are received as a gift; and the date the specific securities, etc. are delivered, where such securities, etc. are transferred as a gift; |
| 7. | The date inheritance is finalized by absolute acceptance or qualified acceptance, where specific securities, etc. are acquired by inheritance and there is only one heir; and the date division of property related to the specific securities, etc. is completed, where there are at least two heirs; |
| 8. | The date the relevant legal act, etc. takes effect pursuant to a relevant Act, such as the Civil Act and the Commercial Act, in any case, other than cases provided for in subparagraphs 1 through 7. |
| (5) | "Insignificant change in the status of securities owned which is prescribed by Presidential Decree" in the former part of Article 173 (1) of the Act means where the quantity of specific securities, etc. changed, as calculated by the formula prescribed and publicly notified by the Securities and Futures Commission, is less than 1,000 shares and the amount of acquisition or disposal is less than ten million won: Provided, That excluded herefrom is the case where the total quantity of specific securities, etc. changed, as calculated by the formula prescribed and publicly notified by the Securities and Futures Commission, after the most recent date of reporting is not less than 1,000 shares, or the total amount of acquisition or disposal is not less than ten million won. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (6) | "Extenuating circumstances prescribed by Presidential Decree" in the latter part of Article 173 (1) of the Act means any of the following cases: <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| 2. | Capitalization of reserves; |
| 3. | A stock split or a reverse stock split; |
| (7) | "Persons prescribed by Presidential Decree" in the latter part of Article 173 (1) of the Act means the following persons who hold specific securities, etc., for the purposes, other than exercising influence over management rights of the relevant corporation (as referred to in Article 154 (1)): <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016> |
| 2. | Any of the persons referred to in Article 10 (3) 1 through 14 (excluding the persons referred to in subparagraphs 5 and 13). |
| (8) | Where the status of specific securities, etc. owned by an executive officer or a major shareholder of a stock-listed corporation changes due to any of the circumstances referred to in paragraph (6), the executive officer or the major shareholder may report the details of such change by no later than the 10th day of the month following such change pursuant to the latter part of Article 173 (1) of the Act. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (9) | Where the status of specific securities, etc. owned by any of the persons referred to in paragraph (7) changes, the person may report the details of such change by no later than the 10th day of the month following such change pursuant to the latter part of Article 173 (1) of the Act. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (10) | Except as specifically provided for in paragraphs (2) through (9), the form and method for preparation of the report referred to in paragraph (2) and other necessary matters shall be prescribed by the Securities and Futures Commission. <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 24697, Aug. 27, 2013> |
| Article 200-2 (Reporting on Exchange-Traded Derivatives Held in Bulk) |
| (1) | "Others prescribed by Presidential Decree" in Article 173-2 (1) of the Act means the price indexes of stocks computed in compliance with the guidelines and methods prescribed and publicly notified by the Financial Services Commission. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | "Matters prescribed by Presidential Decree" in Article 173-2 (1) of the Act means the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Matters concerning a person who holds exchange-traded derivatives in bulk and a financial investment business entity entrusted with holding such derivatives by the person; |
| 2. | Issues and items of transactions of the relevant exchange-traded derivatives; |
| 3. | Timing for holding the relevant exchange-traded derivatives, the price and quantity thereof; |
| 4. | Matters prescribed and publicly notified by the Financial Services Commission as related to matters prescribed in subparagraphs 1 through 3. |
| (4) | Where a person required to report to the Financial Services Commission and an exchange pursuant to Article 173-2 (1) of the Act is a trustor, the person may have a financial investment business entity file a report on his/her behalf, and if any reason to report changes occurs by the day immediately preceding the date the status of exchange-traded derivatives held in bulk and the changes thereof are to be reported, the new changes shall be reported together when the initial status of exchange-traded derivatives held in bulk and the changes thereof are reported. |
| (5) | Except as specifically provided in paragraphs (1) through (4), the methods and procedures for filing reports and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 201 (Disclosure, etc. of Information) |
| (1) | "Methods of corporate combination prescribed by Presidential Decree" in Article 174 (1) of the Act means any of the following methods through which a major shareholder of an unlisted corporation or an affiliated person of the major shareholder (hereafter referred to as "major shareholder, etc." in this Article) becomes the largest shareholder of a listed corporation as a result of corporate combination: <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Where the listed corporation acquires the essential business referred to in Article 161 (1) 7 of the Act from the unlisted corporation and, in return, delivers the stocks, etc. issued by that listed corporation; |
| 2. | Where the listed corporation acquires essential assets referred to in Article 161 (1) 7 of the Act from the major shareholders, etc. of the unlisted corporation and, in return, delivers the stocks, etc. issued by that relevant listed corporation; |
| 3. | Where the major shareholders, etc. of the unlisted corporation make an investment in kind in a listed company under Article 422 of the Commercial Act, and, in return, receive stocks, etc. issued by the listed corporation. |
| (2) | "Manner prescribed by Presidential Decree" in Article 174 (1) of the Act means that a period or hours prescribed in any of the following has elapsed since the relevant corporation (including a person who is delegated with the authority to make disclosures by that corporation) or its subsidiary company (referring to a subsidiary company as prescribed in Article 342-2 (1) of the Commercial Act, and including a person who is delegated with the authority to make disclosures by the subsidiary company) disclosed information in any of the following manners: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 22003, Jan. 27, 2010> |
| 1. | Information contained in the document filed with or reported to the Financial Services Commission or the exchange in accordance with statutes: One day after the document containing such information is made available for inspection, as prescribed by the Financial Services Commission or the exchange; |
| 2. | Information disclosed through the electronic communications medium established and run by the Financial Services Commission or an exchange: Three hours after the disclosure; |
| 3. | Information published in at least two newspapers circulated nationwide, among ordinary daily newspapers and daily newspapers specializing in the economy under the Act on the Promotion of Newspapers, Etc.: Six hours from midnight of the day following the date of publishing: Provided, That where information is published in the form of electronic publication under relevant statutes, six hours after the publishing; |
| 4. | Information broadcasted through a terrestrial broadcasting station with nationwide coverage, among broadcasting stations under the Broadcasting Act: Six hours after the broadcasting; |
| (3) | "Manner prescribed by Presidential Decree" in Article 174 (2) of the Act means that the period or hours prescribed in the relevant subparagraph has elapsed since a tender offeror (including a person who is delegated with the authority to make disclosures by the tender offeror) disclosed information in any of the manners prescribed in the subparagraphs of paragraph (2). <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (4) | "Acquisition or disposition, as prescribed by Presidential Decree" in Article 174 (3) of the Act means acquisition or disposition satisfying each of the following requirements: |
| 1. | It shall be done for the purposes provided for in Article 154 (1) (applicable only to acquisition); |
| 2. | It shall be acquisition or disposition in bulk of not less than the ratio prescribed and publicly notified by the Financial Services Commission; |
| (5) | "Manner prescribed by Presidential Decree" in Article 174 (3) of the Act means that the period or hours prescribed in the relevant subparagraph has elapsed since a person who intends to acquire or dispose of stocks, etc. in bulk (including a person who is delegated with the authority to make disclosures by the person) disclosed information in any of the manners prescribed in the subparagraphs of paragraph (2). <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| Article 202 (Market Price Subject to Market Price Manipulation) |
"Market price prescribed by Presidential Decree" in Article 176 (2) 1 of the Act means the first formed market price in the securities market for newly listed securities (including the listing prescribed and publicly notified by the Financial Services Commission).
| Article 203 (Persons Authorized to Conduct Manipulation for Stabilization and Market Creation) |
| 1. | An investment trader authorized by the registration statement as a person who can conduct manipulation for stabilization or market creation, where such registration statement under Article 119 (1) of the Act is filed; |
| 2. | An investment trader authorized by the underwriting contract as a person who can conduct manipulation for stabilization or market creation, where a registration statement under Article 119 (1) of the Act is not filed. |
| Article 204 (Methods of Manipulation for Stabilization, etc.) |
| (1) | Every investment trader referred to in Article 203 may conduct manipulation for stabilization, only where both of the following matters are stated in the investment prospectus of the relevant securities in accordance with Article 176 (3) 1 of the Act: Provided, That such matters shall be stated in the terms and conditions of the relevant underwriting contract in the case of the investment trader referred to in subparagraph 2 of Article 203: |
| 1. | A statement that manipulation for stabilization is allowed; |
| 2. | The name of the securities market in which manipulation for stabilization is allowed. |
| (2) | No investment trader referred to in Article 203 shall conduct manipulation for stabilization outside the securities market stated in the investment prospectus or terms and conditions of the underwriting contract. |
| (3) | When any of the investment traders referred to in Article 203 conducts the first manipulation for stabilization during the period in which manipulation for stabilization is allowed (hereinafter referred to as "manipulation period for stabilization"), it shall file a statement on manipulation for stabilization describing the following matters (hereinafter referred to as "statement on manipulation for stabilization") with the Financial Services Commission and the exchange without delay: |
| 1. | The trade name of the investment trader that conducts manipulation for stabilization; |
| 2. | The trade name of another investment trader, if manipulation for stabilization is conducted jointly with another investment trader; |
| 3. | The issue and trading price of the stocks subject to such manipulation for stabilization; |
| 4. | The beginning date and time of the manipulation for stabilization; |
| 5. | The manipulation period for stabilization; |
| 6. | The publicly offered or selling price of securities of which manipulation for stabilization is intended to promote public offering or sale and the total value of securities publicly offered or sold; |
| 7. | The name of the securities market in which the manipulation for stabilization is conducted. |
| (4) | No investment trader referred to in Article 203 shall purchase securities subject to manipulation for stabilization (hereinafter referred to as "securities subject to manipulation for stabilization") in excess of the price prescribed in the following: |
| 1. | On the date of manipulation for stabilization begins: |
| (a) | If the first manipulation for stabilization is conducted: The lower of the trading price of the securities traded in the securities market immediately before the beginning date of manipulation for stabilization or the average trading price in the securities market for the 20-day period before the beginning date of manipulation for stabilization. In such cases, the method of calculating the average trading price shall be prescribed and publicly notified by the Financial Services Commission; |
| (b) | If manipulation for stabilization is re-conducted after the first manipulation for stabilization: The investment trader's beginning price in the manipulation for stabilization; |
| 2. | On a day after the date manipulation for stabilization begins: The lower of the beginning price in the manipulation for stabilization (or the lower of the beginning prices in investment traders' manipulation for stabilization, if not less than two investment traders are involved in the manipulation for stabilization on the same day) and the price of the securities traded in the securities market immediately before the date the manipulation for stabilization was conducted. |
| (5) | Every investment trader referred to in Article 203 shall prepare a report on manipulation for stabilization describing the following matters (hereinafter referred to as "report on manipulation stabilization") with respect to the trades of securities subject to manipulation for stabilization during the period from the first day of the manipulation for stabilization begins until the end day, for each securities market in which manipulation for stabilization has been conducted, and submit it to the Financial Services Commission and the exchange: |
| 1. | The issue of the securities subject to manipulation for stabilization; |
| 2. | The details of trades; |
| 3. | The trade name of the investment trader who has conducted the manipulation for stabilization. |
| (6) | The Financial Services Commission and the exchange shall make the statements and reports on manipulation for stabilization available for inspection for three years from any of the following dates, and shall disclose them on their websites or by other means: |
| 1. | The statement on manipulation for stabilization: The filing date; |
| 2. | The report on manipulation for stabilization: The day immediately after the date manipulation for stabilization ends. |
| (7) | "Day prescribed by Presidential Decree" in Article 176 (3) 1 of the Act means the 20th day before the date the subscription period of securities publicly offered or sold ends: Provided, That where the public offering price or selling price is finally fixed during the period between the aforesaid 20th day and the subscription date, it means the day immediately following the day such price is fixed. |
| (8) | Except as specifically provided in paragraphs (1) through (7), the forms of statements and reports on manipulation for stabilization; methods for preparation thereof; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 205 (Methods of Market Creation, etc.) |
| (1) | Every investment trader referred to in Article 203 shall file a statement on market creation describing the following matters with the Financial Services Commission and the exchange in advance when it seeks to make efforts for market creation in accordance with Article 176 (3) 2 of the Act: |
| 1. | The trade name of the investment trader who will make efforts for market creation; |
| 2. | The trade name of another investment trader, if another investment trader will make joint efforts for market creation; |
| 3. | The issue of the securities targeted for market creation; |
| 4. | The beginning date and time of market creation; |
| 5. | The period for market creation; |
| 6. | Names of the securities markets targeted for market creation. |
| (2) | No investment trader under Article 203 may, when it makes efforts for market creation, purchase securities in excess of the public offering or selling price of the securities targeted for market creation, nor sell such securities at a price lower than the public offering or selling price: Provided, That where such securities go ex-rights, ex-dividend, or ex-interest, the price shall be calculated and determined in consideration of such event. |
| (3) | Article 204 (1), (2), (5), and (6) shall apply mutatis mutandis to the market creation. In such cases, "manipulation for stabilization" shall be construed as "market creation". |
| (4) | "Period prescribed by Presidential Decree" in Article 176 (3) 2 of the Act means the period beginning on the date the securities publicly offered or sold are listed and ending on the date stipulated in the relevant underwriting contract, which shall not be less than one month and not be more than six months. |
| (5) | Except as specifically provided in paragraphs (1) through (4) the forms of statements and reports on market creation; methods for preparation thereof; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 206 (Persons Eligible for Entrustment of Manipulation for Stabilization) |
"Person prescribed by Presidential Decree, such as an executive officer of the issuer" in Article 176 (3) 3 of the Act means any of the following: <Amended by Presidential Decree No. 27414, Jul. 28, 2016> | 1. | A director of the issuer of the securities publicly offered or sold; |
| 2. | The owner of the securities publicly sold: Provided, That where securities were transferred under an underwriting contract, the transferor of such securities shall be deemed to be the owner; |
| 3. | A company that has any of the following relationships with the issuer of the securities publicly offered or sold or a director of such company, if either the owner or such company has such ownership of equity securities issued by the other party as provided for in the corresponding item: |
| (a) | A relationship based on the ownership of equity securities in excess of 30 percent of the total number of equity securities; |
| (b) | A relationship based on the ownership of equity securities in excess of 10 percent of the total number of equity securities and falling under subparagraph 5 of Article 2; |
| 4. | A person designated and notified to the Financial Services Commission and the exchange, in advance, by an issuer or owner of securities publicly offered or sold as a person to whom manipulation for stabilization may be entrusted. |
| Article 206-2 (Cases Eligible for Price Manipulation) |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 207 (Scope of Linked Securities) |
"Securities prescribed by Presidential Decree" in Article 176 (4) 3 of the Act means the following securities: <Amended by Presidential Decree No. 21898, Dec. 21, 2009> | 1. | Securities linked to convertible bonds or bonds with warrant and falling under any of the following items, where the purpose is to earn unjust profits or to enable a third party to earn unjust profits from trading convertible bonds or bonds with warrant: |
| (a) | Exchangeable bonds with rights to claim exchange with such convertible bonds or bonds with warrant; |
| (c) | Derivative-combined securities based on an underlying asset of such convertible bonds or bonds with warrant; |
| (d) | Security depository receipts related to such convertible bonds or bonds with warrant; |
| 2. | Securities subject to exchange with exchangeable bonds and falling under any of the following items, where the purpose is to earn unjust profits or to enable a third party to earn unjust profits from trading exchangeable bonds: |
| (a) | Convertible bonds or bonds with warrant; |
| (c) | Derivative-combined securities; |
| (d) | Security depository receipts; |
| 3. | Securities linked to equity securities and falling under any of the following items, where the purpose is to earn unjust profits or to enable a third party to earn unjust profits from trading equity securities: |
| (a) | Convertible bonds or bonds with warrant; |
| (b) | Exchangeable bonds with rights to claim exchange with such equity securities; |
| (c) | Derivative-combined securities based on an underlying asset of such equity securities; |
| (d) | Security depository receipts related to such equity securities; |
| (e) | Equity securities, other than the relevant equity securities; |
| 4. | Securities based on an underlying asset of derivative-combined securities falling under any of the following items, where the purpose is to earn unjust profits or to enable a third party to earn unjust profits from trading derivative-combined securities: |
| (a) | Convertible bonds or bonds with warrant; |
| (b) | Exchangeable bonds (limited to those with rights to claim exchange with those under item (a), (c), or (d)); |
| (d) | Security depository receipts; |
| 5. | Securities that are underlying securities of security depository receipts and that fall under any of the following items, where the purpose is to earn unjust profits or to enable a third party to earn unjust profits from trading security depository receipts: |
| (a) | Convertible bonds or bonds with warrant; |
| (b) | Exchangeable bonds (limited to those with rights to claim exchange with those under item (a), (c), or (d)); |
| (d) | Derivative-combined securities. |
| Article 207-2 (Exception to Prohibition on Market Disturbance) |
| 1. | Where the person referred to in Article 178-2 (1) 1 (a) of the Act conducts any sale or purchase, or any other transaction (hereafter referred to as "trade, etc." in this Article) of a designated financial investment instrument (referring to the designated financial investment instrument as prescribed in the main sentence of Article 178-2 (1) of the Act) to exercise the right or to perform obligations thereunder by engaging in any of the following activities before he/she becomes aware of material nonpublic information or nonpublic information (referring to the nonpublic information prescribed in the main sentence of Article 174 (2) of the Act or the main sentence of paragraph (3) of the same Article): |
| (a) | Entering into a contract on the designated financial investment instrument; |
| (b) | Subscribing for, or submitting an order for, the trade, etc. of the designated financial investment instrument to an investment trader or investment broker; |
| (c) | Any activity prescribed and publicly notified by the Financial Services Commission, equivalent to those referred to item (a) or (b); |
| 2. | Where any person referred to in Article 178-2 (1) 1 (b) through (d) of the Act conducts any trade, etc. of the designated financial investment instrument to exercise the relevant right or to perform obligations thereunder by engaging any of the activities prescribed in the items of subparagraph 1 before producing or becoming aware of any information provided for in Article 178-2 (1) 2; |
| 3. | Where the trade, etc. of the designated financial investment instrument is conducted inevitably in accordance with any statutes or a corrective order, suspension order, etc. issued by the Government; |
| 4. | Other cases prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors or sound trading practices. |
[This Article Newly Inserted by Presidential Decree No. 26374, Jun. 30, 2015]
| Article 208 (Restrictions on Short Sales) |
| (1) | "Securities prescribed by Presidential Decree" in the main sentence of Article 180 (1) of the Act means any of the following securities: |
| 1. | Convertible bonds, bonds with warrants, participating bonds, or exchangeable bonds; |
| 3. | Beneficiary certificates; |
| 4. | Derivatives-linked securities; |
| 5. | Depositary receipts (limited to the depositary receipts related to securities referred to in subparagraphs 1 through 4). |
| (2) | "Manner prescribed by Presidential Decree" in the proviso to Article 180 (1) of the Act means conducting a short sale prescribed in the proviso to Article 180 (1) of the Act (hereinafter referred to as “covered short sale”) in any of the following means at the price prescribed by the Securities Market Business Regulation under Article 393 (1) of the Act (hereinafter referred to as "Securities Market Business Regulations"); <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24317, Jan. 16, 2013; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016> |
| 1. | Where an investor (including an investment trader or broker, who is not a member of an exchange; hereafter the same shall apply in this subparagraph) requests an investment broker, who is a member of an exchange, to place a selling order: |
| (a) | The investor who requests the sale of securities shall inform the investment broker whether the sale is a short sale. In such cases, if the investor is an executive officer and/or employee of the relevant listed corporation, he/she shall also inform the investment broker that he/she is an executive officer and/or employee of the listed corporation; |
| (b) | Upon receipt of a request of the investor to sell securities, the investment broker shall ascertain whether the sale is a short sale as specified in the Securities Market Business Regulations and whether the investor can settle the payment for the short sale; |
| (c) | Where the investor is likely to settle the payment for a short sale, the investment broker shall not accept a request for the short sale nor place an order for such short sale on the securities market (including transactions of securities via an alternative trading system; hereafter the same shall apply in this Article and Article 208-2); |
| (d) | Where the investment broker is requested by the investor to make a short sale, he/she shall inform the exchange that the sale is a short sale; |
| 2. | Where an investment trader or broker, who is a member of an exchange, makes a sales offer or places a selling order, he/she shall inform the exchange that the sale is a short sale; |
| 3. | Deleted. <by Presidential Decree No. 27291, Jun. 28, 2016> |
| (3) | "As prescribed by Presidential Decree" in Article 180 (2) 3 of the Act means any of the following sales, for which it is possible to settle the payment by the payment day: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| 1. | A sale of a listed security, only if it is confirmed that the listed security is placed in the custody of any depository institution, other than an investment broker requested to place a selling order or is owned by other means; |
| 2. | A sale of a collective investment security to be received following additional issuance of listed collective investment securities; |
| 3. | A sale of a listed security to be received by claiming redemption of collective investment securities of an exchange-traded fund as prescribed in Article 234 of the Act; |
| 4. | A sale of a listed security to be acquired upon the termination of a deposit contract for depositary receipts; |
| 5. | A sale of a listed security that has been lent to someone else, but the return of which is finally confirmed; |
| 6. | A sale of a listed security to be delivered by trading outside the securities market; |
| 7. | A sale of a depositary receipt to be acquired in exchange for the deposit of any of the securities referred to in paragraph (1) 1 through 4; |
| 8. | Others specified in the Securities Market Business Regulations as a sale of a listed security to be delivered according to a contract, an agreement, or exercise of rights. |
| (4) | The Financial Services Commission may, at the request from an exchange, restrict the covered short sale by determining the scope of listed securities and the types, time limit, etc. of transactions, as prescribed in Article 180 (3) of the Act, if it is likely to undermine the stability of the securities market and formation of fair market prices. <Newly Inserted by Presidential Decree No. 27291, Jun. 28, 2016> |
| (5) | Except as specifically provided in paragraphs (1) through (4), the detailed scope of, and criteria for determining the short sale and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. <Newly Inserted by Presidential Decree No. 27291, Jun. 28, 2016> |
| Article 208-2 (Reporting on Net Positions) |
| 1. | A transaction of securities other than listed stock certificates; |
| 2. | A transaction of listed stock certificates for the provision of liquidity and market creation prescribed by the Securities Market Business Regulations and the Derivative Market Business Regulations and Article 393 (2) of the Act; |
| 3. | A transaction of listed stock certificates to fully or partially reduce economic losses that could occur in the future due to the provision of liquidity and market creation referred to in subparagraph 2; |
| 4. | Other transactions of listed stock certificates prescribed and publicly notified by the Financial Services Commission, which are inevitable for operating the securities market efficiently and have a minor effect on the securities market. |
| (3) | The net position prescribed in Article 180-2 (1) of the Act (hereinafter referred to as "net position") shall be calculated by deducting the quantity referred to in subparagraph 2 from the quantity referred to in subparagraph 1 for each item of listed securities: |
| 1. | Total balance held: The aggregate quantities of the following securities held by a seller as prescribed in Article 180-2 (1) of the Act (hereafter in this Article referred to as "seller") at the time prescribed and publicly notified by the Financial Services Commission (hereinafter referred to as "base point of time"): |
| (a) | The quantity of securities owned by the seller on his/her own account, regardless of in whose name they are held (excluding where a third person exercises the right to acquire or disposes of such securities in accordance with provisions of any statute, a money trust contract, a discretionary investment contract, or any other contract); |
| (b) | The quantity of securities lent to a third person in accordance with provisions of any statute, contract, etc.; |
| (c) | Where the right to acquire or dispose of the securities are held for the sake of a third person in accordance with the provisions of any statute, a money trust contract, a discretionary investment contract, or any other contract, the quantity of the securities corresponding thereto; |
| (d) | The quantity of other securities to be delivered in accordance with provisions of any statute, contract, etc.; |
| 2. | Total balance borrowed: The aggregate quantities of the following securities that the seller is required to deliver at the base point of time: |
| (a) | The quantity of securities borrowed before the base point of time and not redeemed as at the base point of time; |
| (b) | The quantity of other securities that a seller is required to deliver in accordance with provisions of any statute, contract, etc. |
| (4) | Any of the following sellers shall file a report stating matters concerning the net position with the Financial Services Commission and the exchange where the relevant securities are listed: |
| 1. | A person in whose case the ratio of daily net position to the total issued quantity (limited to the quantity listed on a securities market as at the base point of time) of each issue of the relevant securities (hereinafter referred to as "ratio of net position") is a negative number and the absolute value of which is not less than 1/10,000: Provided, That excluded herefrom are persons in whose case the appraised value of the daily net position calculated by the formula prescribed and publicly notified by the Financial Services Commission is less than 100 million; |
| 2. | A person in whose case the ratio of net position is a negative number and the appraised value of daily net position calculated by the formula prescribed and publicly notified by the Financial Services Commission is not less than one billion won. |
| (5) | Other details necessary in relation to the timing, procedure and method for filing reports on net positions shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 27291, Jun. 28, 2016]
| Article 208-3 (Public Disclosure of Net Positions) |
| (2) | "Criteria prescribed by Presidential Decree" in Article 180-3 (1) of the Act means where the ratio of daily net position is a negative number and the absolute value of which is not less than 5/1,000. |
[This Article Newly Inserted by Presidential Decree No. 27291, Jun. 28, 2016]
PART V COLLECTIVE INVESTMENT SCHEME
CHAPTER I GENERAL PROVISIONS
| Article 209 (Registration Requirements for Collective Investment Scheme) |
"Requirements prescribed by Presidential Decree" in Article 182 (2) 4 of the Act means the following requirements: <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27414, Jul. 28, 2016> | 1. | For an investment company: The following requirements: Provided, That only the requirement in item (a) shall apply to a foreign collective investment scheme to be registered under the latter part of Article 279 (2) of the Act from among foreign collective investment schemes to be registered under Article 279 of the Act: |
| (b) | Its capital as at the time of filing an application for registration shall not be less than the amount prescribed and publicly notified by the Financial Services Commission, which shall be at least 100 million won; |
| 2. | For an investment limited company, an investment limited partnership company, an investment limited liability company, an investment limited partnership, or an undisclosed investment association: Its capital or contribution as at the time of filing an application for registration shall not be less than the amount prescribed and publicly notified by the Financial Services Commission, which shall be at least 100 million won: Provided, That this shall not apply to a foreign collective investment scheme to be registered under the latter part of Article 279 (2) of the Act from among foreign collective investment schemes to be registered under Article 279 of the Act. |
| Article 210 (Exemption from Revised Registration) |
| 1. | Where any registered matter is revised in accordance with an amendment to the Act or this Decree or an order issued by the Financial Services Commission; |
| 2. | Where minor matters prescribed and publicly notified by the Financial Services Commission, including simple modification of wording of a registered matter, is revised. |
| Article 211 (Methods, Procedures, etc. for Registration) |
| 1. | The name of the collective investment scheme; |
| 2. | Matters concerning objectives, policies, and strategies of investment; |
| 3. | Matters concerning details of rights and investment risks; |
| 4. | Matters concerning management remuneration, sales commission, sales remuneration, and other expenses; |
| 5. | Matters concerning contributions (excluding where an investment trust is involved); |
| 6. | Matters concerning financial standing; |
| 7. | Matters concerning the collective investment business entity (including promoters and supervisory directors, if an investment company is involved); |
| 8. | Matters concerning fund managers; |
| 9. | Matters concerning management of the collective investment property; |
| 10. | Matters concerning sale and redemption of collective investment securities; |
| 11. | Matters concerning appraisal, public disclosure, etc. of the collective investment property; |
| 12. | Matters concerning distribution of profits and losses and taxation; |
| 13. | Matters concerning the trust business entity and the fund accounting and administration company (applicable only where there is a fund accounting and administration company involved); |
| 14. | Matters concerning entrustment of business affairs under Article 42 of the Act (applicable only where the business affairs are entrusted to someone); |
| 15. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (2) | Each application for registration 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. 22197, Jun. 11, 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 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. | Copies of contracts for the entrustment of business affairs concluded with the following persons (including supplementary documents; hereafter the same shall apply in this subparagraph): 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 prior submitted in the relevant business year, the prior-submitted copy may substitute for the copy of the relevant contract for the entrustment of business affairs: |
| (a) | The collective investment business entity (excluding an investment trust or an undisclosed investment association); |
| (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); |
| 5. | Deleted; <by Presidential Decree No. 22197, Jun. 11, 2010> |
| 6. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (3) | An application for revised registration filed under Article 182 (8) of the Act shall contain the reasons for revision and revised contents in the manner prescribed and publicly notified by the Financial Services Commission, and shall be accompanied by the documents substantiating the revised contents, such as a copy of minutes of the general meeting of collective investors or the directors' meeting at which a resolution for such revision was adopted, a collective investment agreement, a certified transcript of the register, and a copy of an essential contract. |
| (4) | The Financial Services Commission shall ascertain facts relevant to the contents of an application for registration or revised registration filed under Article 182 (1) or (8) of the Act, and shall examine whether the contents of the application satisfy the requirements for registration provided in Article 182 (2) of the Act (including the case to which the aforesaid paragraph shall apply mutatis mutandis under paragraph (8) of the aforesaid Article) or the revised registration. |
| (5) | Where a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. files an application for registration under Article 182 (3) of the Act along with a registration statement, the relevant collective investment scheme shall be deemed duly registered when the registration statement takes effect. |
| (6) | Where a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. files a corrective registration statement under Article 122 (1) of the Act, it shall be deemed to have filed an application for revised registration under Article 182 (8) of the Act. In such cases, the registration of the relevant collective investment scheme shall be deemed to be duly revised when the corrective registration statement takes effect. |
| (7) | Deleted. <by Presidential Decree No. 26600, Oct. 23, 2015> |
| (8) | Except as specifically provided in paragraphs (1) through (6), 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. <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| Article 212 (Business Affairs of Fund Accounting and Administration Company) |
| 2. | Business affairs related to the management of an investment company. |
| Article 213 (Investment Company's Disposition of Its Own Collective Investment Securities) |
Pursuant to the former part of Article 186 (1) 1 of the Act, every investment company, etc. shall dispose of collective investment securities it has issued and acquired later within one month from the acquisition date in any of the following manners: | 2. | Sale through an investment trader or broker. |
| Article 214 (Keeping and Maintaining Records of Data of Investment Company, etc.) |
| (1) | Pursuant to Article 187 (1) of the Act, every investment company, etc. shall keep and maintain the following data for the period prescribed below: Provided, That the Financial Services Commission may publicly shorten the periods of time and publicly notify them as shortened: |
| 1. | A list of collective investment property: Ten years; |
| 2. | The ledger of base price of collective investment securities: Ten years; |
| 3. | A full statement of management of collective investment property: Ten years; |
| 4. | Minutes of the general meeting of collective investors and the directors' meeting: Ten years; |
| 5. | Other account books and documents that any other statute require to keep and maintain: The period prescribed in the relevant statutes (if no period is prescribed in the relevant statutes, the period shall be prescribed and publicly notified by the Financial Services Commission, taking into account the preservation periods under subparagraphs 1 through 4). |
| (2) | Further specific guidelines for the types and classifications of data under paragraph (1) and other similar matters shall be prescribed and publicly notified by the Financial Services Commission. |
CHAPTER II ORGANIZATION, ETC. OF COLLECTIVE INVESTMENT SCHEMES
SECTION 1 Investment Trust
| Article 215 (Matters to be Stated in Trust Contract) |
"Matters prescribed by Presidential Decree" in Article 188 (1) 8 of the Act means the following: <Amended by Presidential Decree No. 23924, Jun. 29, 2012> | 1. | The type of the investment trust (referring to the type classified under Article 229 of the Act); |
| 2. | The name of the investment trust; |
| 3. | Investable assets (major investable assets shall be stated separately, except for the mixed asset fund prescribed in subparagraph 4 of Article 229 of the Act); |
| 4. | Matters concerning the business affairs of the collective investment business entity and the trust business entity; |
| 5. | Matters concerning additional issuance and retirement of beneficiary certificates; |
| 6. | The term of the trust contract, if such term has been agreed; |
| 7. | Matters concerning appraisal of assets held by the investment trust and calculation of the base price; |
| 8. | Matters concerning distribution of assets, etc., other than profits; |
| 9. | Matters concerning change of the collective investment business entity and the trust business entity; |
| 10. | Matters concerning amendments to, and termination of, the trust contract; |
| 11. | The fiscal term of the investment trust; |
| 12. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting beneficiaries. |
| Article 216 (Reasons for being Excused from General Meeting of Beneficiaries) |
"Reason prescribed by Presidential Decree" in Article 188 (2) 2 of the Act means any of the following: <Amended by Presidential Decree No. 23924, Jun. 29, 2012> | 1. | Where the trust contract is entirely transferred by transfer of business, etc.; |
| 5. | Where the trust business entity of a collective investment scheme is changed due to the transfer of assets of two or more collective investment schemes to a master fund under Article 245 (5). |
| Article 217 (Matters Subject to Resolution of General Meeting of Beneficiaries) |
"Matters prescribed by Presidential Decree" in Article 188 (2) 4 of the Act means the following matters: <Amended by Presidential Decree No. 26190, Apr. 7, 2015> | 1. | Change of the type of the investment trust (referring to the type classified under Article 229 of the Act): Provided, That excluded herefrom is where it was planned to convert it to any other type of investment trust when the investment trust was created, and the trust contract states such plan; |
| 2. | Change of major investable assets; |
| 2-2. | Change of the limit of investment in investable assets (limited to changes arising by investment provided in Article 80 (1) 3-2); |
| 3. | Change of the collective investment business entity: Provided, That the following cases are excluded herefrom: |
| (a) | Merger, split-off, or merger after a split-off; |
| (b) | Where the collective investment business entity is changed by a measure taken by the Financial Services Commission pursuant to Article 420 (3) 1 or 2 of the Act; |
| 4. | Change from an investment trust, which is not a closed-end investment trust (referring to an investment trust with a prescribed term of existence during which claims for redemption of beneficiary certificates are not permitted; hereinafter the same shall apply), to a closed-end investment trust; |
| 5. | An extension of the payment deadline for redemption price; |
| 6. | Other matters prescribed and publicly notified by the Financial Services Commission, as necessary for protecting beneficiaries. |
| Article 218 (Matters to be Stated in Beneficiary Certificates) |
| 1. | The name of the investment trust; |
| 3. | The timing for distribution of profits, etc.; |
| 4. | Terms and conditions of redemption of beneficiary certificates (or a statement that it is not permitted to claim redemption, in the case of a beneficiary certificate of a closed-end investment trust); |
| 5. | The term of the trust contract, if such term has been agreed; |
| 6. | The name of the investment trader or broker who sells the beneficiary certificates. |
| Article 219 (Special Cases concerning Prohibition on Furnishing Information) |
| Article 220 (Convening General Meetings of Beneficiaries) |
| (1) | Every collective investment business entity (including a trust business entity or a beneficiary holding not less than five percent of the total number of units of outstanding beneficiary certificates, who calls a general meeting of beneficiaries under the latter part of Article 190 (3) of the Act; hereafter the same shall apply in this Article) shall entrust the Securities Depository with a notice to convene a general meeting of beneficiaries. |
| (2) | To give notice to convene a general meeting of beneficiaries pursuant to paragraph (1) or if requested by a beneficiary, the Securities Depository shall send a form to a beneficiary with which the beneficiary can exercise his/her voting right as prescribed in the main sentence of Article 190 (6) of the Act. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | When the Securities Depository sends a form to a beneficiary with which the beneficiary can exercise his/her voting right pursuant to paragraph (2), it shall ensure that each beneficiary can express his/her intent clearly by manifesting whether he/she agrees or disagrees; require the collective investment business entity to submit materials for reference in exercising voting rights as prescribed by Ordinance of the Prime Minister; and send them to beneficiaries. |
| (4) | To convene a general meeting of beneficiaries that has been adjourned under Article 190 (7) of the Act (hereafter referred to as "postponed general meeting of beneficiaries" in this paragraph), a collective investment business entity shall give notice to convene the postponed general meeting of beneficiaries to beneficiaries under paragraph (1) by one week before the scheduled date for the postponed general meeting of beneficiaries, stating the matters referred to in Article 190 (8) of the Act. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| Article 221 (Exercise of Voting Rights in Writing) |
| (1) | A beneficiary who intends to exercise voting rights in writing in accordance with the main sentence of Article 190 (6) of the Act shall state his/her intent in exercising the voting rights in a form under Article 220 (2) and submit it to the collective investment business entity (including the trust business entity or a beneficiary holding at least 5 percent of the total number of units of outstanding beneficiary certificates, who calls the general meeting of beneficiaries in accordance with the latter part of Article 190 (3) of the Act) by the day immediately before the scheduled opening date of the general meeting of beneficiaries. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | The number of voting rights exercised in writing in accordance with the main sentence of Article 190 (6) of the Act shall be added to the number of voting rights exercised by beneficiaries present at the general meeting of beneficiaries. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | Every collective investment business entity shall retain the forms submitted by beneficiaries for exercising voting rights in accordance with paragraph (1) and the reference materials for exercising voting rights at its head office for six months from the date of the general meeting of beneficiaries. |
| (4) | Every beneficiary may require the collective investment business entity to allow him/her to inspect the forms and materials under paragraph (3) or to provide him/her with a copy thereof at any time during the business hours of the collective investment business entity. |
| (5) | The chairperson of a general meeting of beneficiaries shall be elected from among and by beneficiaries at the general meeting. |
| (6) | "Manner prescribed by Presidential Decree" in Article 190 (6) 1 of the Act means a written document, telephone, telegraph, facsimile, electronic mail or other similar means of electronic communication notifying the details specified in the collective investment agreement under Article 190 (6) 2 of the Act. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (7) | "Methods and procedures prescribed by Presidential Decree" in Article 190 (6) 4 of the Act means informing a beneficiary of the results of deemed exercise of voting rights under the proviso to Article 190 (6) of the Act as prescribed and publicly notified by the Financial Services Commission, for the protection of the beneficiary's interest, the fairness of resolutions of the general meeting of beneficiaries, etc. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| Article 222 (Buy-Out of Beneficiary Certificates from Dissenting Beneficiaries) |
| (1) | "Manner prescribed by Presidential Decree" in Article 191 (1) 2 of the Act means giving written notice of dissent from the merger the collective investment business entity within 20 days from the date of the notice given by the relevant collective investment business entity under Article 225-2 (2). |
| (2) | The collective investment business entity buys out beneficiary certificates with an asset held by an investment trust under the main sentence of Article 191 (3) of the Act, it shall deem that a claim for redemption is filed at the end of a period set for filing claims for buy-out, and buy out such beneficiary certificates in accordance with terms and conditions of the trust contract. |
[This Article Wholly Amended by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 223 (Grounds for Termination Allowed without Approval) |
"Circumstances prescribed by Presidential Decree" in the proviso to Article 192 (1) of the Act means any of the following cases. In such cases, such termination shall satisfy the guidelines prescribed and publicly notified by the Financial Services Commission: <Amended by Presidential Decree No. 22197, Jun. 11, 2010> | 1. | Where all beneficiaries consent to termination; |
| 2. | Where the trust contract is to be terminated with claims for redemption of all beneficiary certificates of the investment trust; |
| 3. | Where the amount of principal is less than five billion won at the first anniversary of the establishment of the investment trust (limited to investment trusts permitted to make additional offers for investment during their existence; hereafter the same shall apply in this Article), which is not a privately placed fund; |
| 4. | Where the amount of principal of the investment trust is less than five billion won continuously for one month after one year has passed since the establishment of the investment trust, which is not a privately placed fund. |
| Article 224 (Method, Procedures, etc. for Approval of Termination) |
| (1) | An entity that intends to apply for approval of termination of an investment trust in accordance with Article 192 (1) of the Act shall file an application for approval of termination with the Financial Services Commission, stating the following matters: |
| 1. | Matters concerning the investment trust subject to termination; |
| 2. | Grounds for termination of the investment trust; |
| 3. | Matters concerning the collective investment business entity, the trust business entity, the investment trader or broker involved in the investment trust subject to termination; |
| 4. | Matters concerning beneficiaries; |
| 5. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting beneficiaries. |
| (2) | An application filed under paragraph (1) shall be accompanied by the following: |
| 1. | A document substantiating the collective investment business entity's decision on termination; |
| 2. | A full statement of the collective investment property as of the day immediately before the date of filing the application for approval; |
| 3. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining approval of termination. |
| (3) | If accounts receivable remain when terminating an investment trust in accordance with Article 192 (1) or (2) of the Act, a collective investment business entity shall acquire the accounts receivable at a fair value prescribed and publicly notified by the Financial Services Commission as of the date of termination of the investment trust: Provided, That such accounts receivable may be transferred through a transaction prescribed in Article 87 (1) 3, where the aforesaid provision is applicable. |
| (4) | If accounts payable remain when terminating an investment trust in accordance with Article 192 (1) or (2) of the Act, a collective investment business entity shall acquire the accounts payable at a fair value prescribed and publicly notified by the Financial Services Commission as of the date of termination of the investment trust: Provided, That such accounts payable may be transferred through a transaction prescribed in Article 87 (1) 3, where the accounts payable are finalized and the aforesaid provision is applicable. |
| (5) | Except as specifically provided in paragraphs (1) through (4), necessary matters concerning termination of an investment trust, including the form and method for preparation of the application for approval of termination of an investment trust, shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 224-2 (Grounds for Exemption from Mandatory Termination) |
"Cases prescribed by Presidential Decree" in the proviso to Article 192 (2) 5 of the Act means the following cases: <Amended by Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016; Presidential Decree No. 27556, Oct. 25, 2016> | 1. | Where a beneficiary is any of the following entities: |
| (d) | The National Credit Union Federation of Korea established under the Credit Unions Act; |
| (i) | A corporation or an organization established under the Act, which is prescribed and publicly notified by the Financial Services Commission among the following entities: |
| (i) | A mutual-aid cooperative; |
| (ii) | A mutual-aid association; |
| (iii) | Any other similar corporation or organization, which is organized for the purposes of mutual aid, promotion of welfare, etc. of members working in the same workplace, engaging in the same occupational category or residing in the same area and provides mutual aid services; |
| 1-2. | Where a beneficiary is any of the following entities and invests in an investment trust created in compliance with the criteria prescribed and publicly notified by the Financial Services Commission with regard to the investment structure, managing entity, etc. for the efficient and transparent management of the fund: |
| (e) | Any other entity prescribed and publicly notified by the Financial Services Commission in consideration of the public nature of fund management; |
| 1-3. | Where a beneficiary is an investment trust prescribed in subparagraph 1-2; |
| 1-4. | Where a beneficiary is an investment company established under subparagraph 1-2 of Article 231-2; |
| 3. | Where one month has not elapsed from the initial date of creation of an investment trust; |
| 4. | Where one month has not elapsed from the date the total number of beneficiaries of an investment trust became one person. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 225 (Reasons for Partial Termination) |
| 1. | Where beneficiary certificates issued remain unsold; |
| 2. | Where a beneficiary files a claim for redemption of beneficiary certificates; |
| Article 225-2 (Special Cases concerning Mergers of Small-Scale Investment Trusts) |
| (1) | A collective investment business entity that has created an investment trust need not prepare a merger plan and present the merger plan to a general meeting of beneficiaries for resolution as required under the main sentence of Article 193 (2) of the Act, where the investment trusts intended to be merged under the proviso to Article 193 (2) of the Act fulfills all of the following requirements. In such cases, if subparagraph 3 or 4 of Article 223 does not apply to one or more investment trusts among those intended to be merged, the collective investment business entity shall obtain verification from the Financial Services Commission before the merger as to the propriety of merger ratio and other matters prescribed and publicly notified by the Financial Services Commission as necessary to protect investors and maintain sound trading practices: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Subparagraph 3 or 4 of Article 223 shall apply to one or more of the investment trusts intended to be merged; |
| 2. | The types of collective investment schemes held by the relevant investment trusts under Article 229 of the Act shall be the same; |
| 3. | The investable assets, etc. stipulated by the collective investment agreements of the relevant investment trusts shall be similar. |
| (2) | Where any merger is conducted under the proviso to Article 193 (2) of the Act, a collective investment business entity shall give written notice of the following matters to beneficiaries by 20 days prior to the date of merger: Provided, That where the following matters are disclosed to the public in any of the manners provided in Article 89 (2) of the Act by 20 days prior to the date of the merger, such written notice shall be deemed to be given to beneficiaries each of whom owns not more than one percent of the total number of units of outstanding beneficiary certificates: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| (3) | A collective investment business entity shall entrust the Securities Depository with the affairs related to giving written notices to beneficiaries under paragraph (2). |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 226 (Merger of Investment Trusts) |
| 1. | The maximum amount of dividends, where profits are distributed due to a merger of investment trusts; |
| 2. | Details of a change in the contract term or fiscal term of an investment trust, if changed due to a merger of investment trusts; |
| 3. | Details of a change in remuneration, redemption fees, etc., if changed; |
| 4. | Matters concerning appraisal of assets held by the investment trust for computing the merged value of beneficiary certificates; |
| 5. | Matters concerning treatment of a fraction, which is less than one unit, where beneficiary certificates are issued due to a merger. |
| (2) | Where investment trusts are merged, the merged value of beneficiary certificates referred to in Article 193 (8) of the Act shall be calculated by subtracting total liabilities from total assets recognized in the balance sheet as of the day immediately before the date of the merger of the investment trusts. |
| (3) | A notice of convening a general meeting of beneficiaries shall contain important matters of the merger plan. |
| (4) | Upon obtaining approval of the matters provided in Article 193 (2) 1 through 6 of the Act and matters provided in the subparagraphs of paragraph (1) of this Article at the general meeting of beneficiaries, a collective investment business entity shall give written notices of the details thereof to beneficiaries without delay. |
| (5) | A collective investment business entity shall entrust the Securities Depository with the affairs related to giving written notices to beneficiaries under paragraph (4). |
| (6) | Except as specifically provided in paragraphs (1) through (5), matters necessary for a merger of investment trusts, including the form and method for preparation of a merger plan of investment trusts, shall be prescribed and publicly notified by the Financial Services Commission. |
SECTION 2 Collective Investment Scheme in Form of Company
| Article 227 (Matters to be Stated in Articles of Incorporation) |
| (1) | "Matters prescribed by Presidential Decree" in Article 194 (2) 11 of the Act means the following: <Amended by Presidential Decree No. 23924, Jun. 29, 2012> |
| 2. | Investable assets (major investable assets shall be stated separately, except for a mixed asset fund prescribed in subparagraph 4 of Article 229 of the Act); |
| 3. | Matters concerning additional issuance and retirement of stocks; |
| 4. | Details of the term of existence of, or grounds for, dissolution, if such term of existence or grounds for dissolution are prescribed; |
| 5. | Matters concerning appraisal the property held by the investment company and calculation of the base price; |
| 6. | Matters concerning distribution of assets, etc., other than profits; |
| 7. | Outline of contracts for the entrustment of business affairs to be concluded with a collective investment business entity, a trust business entity, and a fund accounting and administration company (including matters concerning the method of calculating remuneration and other fees, the method and time for payment); |
| 8. | Matters concerning change of the collective investment business entity and the trust business entity; |
| 9. | Matters concerning amendments to the articles of incorporation; |
| 10. | Matters concerning remuneration for supervisory directors; |
| 11. | The fiscal term of the investment company; |
| 12. | The date of preparation of the articles of incorporation; |
| 13. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting shareholders. |
| (2) | Deleted. <by Presidential Decree No. 26600, Oct. 23, 2015> |
| Article 228 (Accompanying Documents for Registration of Incorporation) |
"Accompanying documents prescribed by Presidential Decree" in the main sentence of Article 194 (10) of the Act means the following documents: | 1. | The articles of incorporation; |
| 2. | A written statement proving subscription (referring to the subscription under Article 293 of the Commercial Act) of stocks; |
| 3. | Directors' inspection reports; |
| 4. | Directors' written statements proving their acceptance of appointment as directors; |
| 5. | A written statement proving entrustment of administrative affairs related to stock transfer; |
| 6. | Other certificates issued by banks responsible for receiving payments of consideration for stocks and other financial institutions concerning receipt and escrow of payments of consideration for stocks. |
| Article 229 (Amendments to Articles of Incorporation) |
| (1) | "Matters prescribed by Presidential Decree" in Article 195 (1) 4 of the Act means the following: <Amended by Presidential Decree No. 26190, Apr. 7, 2015> |
| 1. | Change in the type of the investment company (referring to the type classified under Article 229 of the Act): Provided, That excluded herefrom is where it was planned to convert it to any other type of invest company at the time the investment company was incorporated, and the articles of incorporation states such plan; |
| 2. | Change of major investable assets; |
| 2-2. | Change of the limit of investment in investable assets (limited to any change arising by investment provided in Article 80 (1) 3-2); |
| 3. | Conversion from an open-end investment company as provided in Article 196 (4) of the Act (hereinafter referred to as "open-end investment company") to a closed-end investment company (referring to an investment company with a prescribed term of existence, in which claims for redemption of stocks are not permitted; hereinafter the same shall apply); |
| 4. | An extension of the payment deadline for redemption price; |
| 5. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting shareholders. |
| 1. | Where any of the following events occurs in relation to a collective investment business entity: |
| (a) | Where the collective investment business entity is changed by a measure taken by the Financial Services Commission pursuant to Article 420 (3) 1 or 2 of the Act; |
| 2. | Where any of the following events occurs in relation to a trust business entity: |
| (a) | Where the contract for escrow and management of the investment company's property is entirely transferred due to transfer of business, etc.; |
| (b) | Where the contract for escrow and management of the investment company's property is partially transferred inevitably to comply with Article 184 (4) or 246 (1) of the Act or other relevant statutes; |
| Article 230 (Condition of Issuance of New Stocks) |
"Manner prescribed by Presidential Decree" in the latter part of Article 196 (5) of the Act means the formula for calculating the base price under Article 238 (6) of the Act (hereinafter referred as the "base price"): Provided, That a closed-end investment company may determine the issue value of new stocks, considering the amount calculated according to the formula for calculating the base price and the trading price in the securities market.
| Article 231 (Grounds for Disqualification as Supervisory Director) |
| 1. | An executive officer and/or employee of the fund accounting and administration company of the relevant investment company; |
| 2. | An executive officer and/or employee of the fund rating company that assesses the relevant investment company; |
| 3. | An executive officer and/or employee of the bond rating company that appraises the value of the investment company's property; |
| 4. | An employee of the investment trader or broker that sells the stocks of the relevant investment company; |
| 5. | The auditor of the relevant investment company (referring to certified public accountants who belong to an accounting firm, if the auditor is an accounting firm). |
| Article 231-2 (Grounds for Exemption from Mandatory Dissolution) |
"Cases prescribed by Presidential Decree" in the proviso to Article 202 (1) 7 of the Act means the following cases: <Amended by Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27291, Jun. 28, 2016; Presidential Decree No. 27556, Oct. 25, 2016> | 1. | Where a shareholder is any of the following entities: |
| (d) | The National Credit Union Federation of Korea established under the Credit Unions Act; |
| (i) | A corporation or an organization established under the Act, which is prescribed and publicly notified by the Financial Services Commission among the following entities: |
| (i) | A mutual-aid cooperative; |
| (ii) | A mutual-aid association; |
| (iii) | Any other similar corporation or organization, which is organized for the purposes of mutual aid, promotion of welfare, etc. of members working in the same workplace, engaging in the same occupational category or residing in the same area and provides mutual aid services; |
| 1-2. | Where a shareholder is any of the following entities and invests in an investment trust created in compliance with the criteria prescribed and publicly notified by the Financial Services Commission about the investment structure, managing entity, etc. for the efficient and transparent management of the fund: |
| (e) | Any other entity prescribed and publicly notified by the Financial Services Commission in consideration of the public nature of fund management; |
| 1-3. | Where a shareholder is an investment company prescribed in subparagraph 1-2; |
| 1-4. | Where a shareholder is an investment trust established under subparagraph 1-2 of Article 224-2; |
| 3. | Where one month has not elapsed from the date of establishment of an investment company; |
| 4. | Where one month has not elapsed from the date the total number of shareholders of an investment company became one. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 232 (Registration of Liquidator) |
| (1) | "Documents prescribed by Presidential Decree" in the main sentence of Article 202 (2) of the Act means the following documents: |
| 1. | Where the corporate director acts as liquidator: The articles of incorporation; |
| 2. | Where a person specified by the articles of incorporation acts as liquidator: The articles of incorporation; |
| 3. | Where a liquidator is appointed at the general meeting of shareholders: A copy of minutes of the general meeting of shareholders and a written statement proving acceptance of the appointment; |
| 4. | Where a liquidator is appointed by the Financial Services Commission: A written statement proving the appointment. |
| 1. | Where a supervisory director acts as liquidation overseer: The articles of incorporation; |
| 2. | Where a person specified by the articles of incorporation acts as liquidation overseer: The articles of incorporation; |
| 3. | Where the liquidation overseer is appointed at the general meeting of shareholders: A copy of minutes of the general meeting of shareholders and a written statement proving acceptance of the appointment; |
| 4. | Where the liquidation overseer is appointed by the Financial Services Commission: A written statement proving the appointment. |
| Article 233 (Omission of Procedure for Peremptory Notice to Creditors) |
| (1) | An investment company shall, when it seeks to omit the procedure for peremptory notice to creditors in accordance with the main sentence of Article 203 (4) of the Act, publish the matters related to obligations, including its intent to omit it, the details of obligations, the method of performance of obligations, at least twice through a daily newspaper circulated nationwide, and shall report it to the Financial Services Commission without delay. |
| 1. | Where the investment company is liable for performance of a contract in relation to a trade of exchange-traded derivatives or over-the-counter derivatives; |
| 2. | Where a lawsuit that may affect substantially the investment company's property is pending; |
| Article 233-2 (Special Cases concerning Mergers of Small-Scale Investment Companies) |
| (1) | Where an investment company that intends to conduct a merge as prescribed in Article 204 (1) of the Act fulfills all of the following requirements, it need not obtain a resolution on the merger at the general meeting of shareholders under the proviso to paragraph (2) of the same Article. In such cases, where any item of subparagraph 1 does not apply to one or more investment companies to be merged, the investment company shall obtain verification from the Financial Services Commission before the merger as to the propriety of merger ratio and other matters prescribed and publicly notified by the Financial Services Commission as necessary to protect investors and maintain sound trading practices: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Where any of the following applies to one or more of the investment companies to be merged: |
| (a) | Where any of them is an investment company (limited to investment companies permitted to make additional offers for investment during their existence; hereafter the same shall apply in this subparagraph), which is not a privately placed fund, and the balance of its stock price at the first anniversary of its establishment is less than five billion won; |
| (b) | Where the balance of the stock price of each investment company is less than five billion won continuously for one month after the lapse of one year from its establishment as an investment company, which is not a privately placed fund; |
| 2. | The types of collective investment schemes held by the relevant investment companies under Article 229 of the Act shall be identical; |
| 3. | The investable assets, etc. stipulated by the collective investment agreements of the relevant investment companies shall be similar. |
| (2) | Article 225-2 (2) and (3) shall apply mutatis mutandis to mergers conducted as prescribed in the proviso to Article 204 (2) of the Act. In such cases, "collective investment business entity" shall be construed as "investment company"; "beneficiaries" as "shareholders"; "total number of units of outstanding beneficiary certificates" as "total number of outstanding stocks"; and "right to claim a purchase of beneficiary certificates" as "appraisal right". <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 234 (Matters to be Stated in Articles of Incorporation) |
| (1) | "Matters prescribed by Presidential Decree" in Article 207 (1) 8 of the Act means the following: <Amended by Presidential Decree No. 23924, Jun. 29, 2012> |
| 1. | The type of the investment limited liability company (referring to the type classified under Article 229 of the Act); |
| 2. | Investable assets (major investable assets shall be stated separately, except for a mixed asset fund prescribed in subparagraph 4 of Article 229 of the Act); |
| 3. | Matters concerning additional issuance and retirement of equity securities; |
| 4. | Details of the term of existence of, or grounds for, dissolution, if such term of existence or grounds for dissolution are prescribed; |
| 5. | Matters concerning appraisal of the property held by the investment limited liability company and calculation of the base price; |
| 6. | Matters concerning distribution of assets, etc., other than profits; |
| 7. | Outline of contracts for the entrustment of business affairs to be concluded with a collective investment business entity, a trust business entity, and a fund accounting and administration company (including matters concerning the method of calculating remuneration and other fees, the method and time for payment); |
| 8. | Matters concerning change of the collective investment business entity and the trust business entity; |
| 9. | Matters concerning amendments to the articles of incorporation; |
| 10. | The fiscal term of the investment limited liability company; |
| 11. | The date of preparation of the articles of incorporation; |
| 12. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting partners. |
| 1. | The articles of incorporation; |
| 2. | Certificates issued by banks or other financial institutions responsible for receiving contributions in relation to receipt and escrow of contributions. |
| Article 235 (Descriptions of Equity Securities) |
| 2. | The time for distribution of profits and other items; |
| 3. | Terms and conditions of redemption of equity securities (a statement as to the fact that it is not permitted to claim redemption, where the equity securities do not allow a claim for redemption); |
| 4. | The continuance period, if any; |
| 5. | The name of the investment trader or broker who sold the equity securities. |
| Article 236 (Matters to be Stated in Articles of Incorporation) |
| (1) | "Matters prescribed by Presidential Decree" in Article 213 (1) 8 of the Act means the following matters: <Amended by Presidential Decree No. 23924, Jun. 29, 2012> |
| 1. | The type of the investment limited partnership company (referring to the type classified under Article 229 of the Act); |
| 2. | Investable assets(major investable assets shall be stated separately, except for a mixed asset fund prescribed in subparagraph 4 of Article 229 of the Act); |
| 3. | Matters concerning additional issuance and retirement of equity securities; |
| 4. | Details of the term of existence of, or grounds for, dissolution, if such term of existence or grounds for dissolution are prescribed; |
| 5. | Matters concerning appraisal of the property held by the investment limited partnership company and calculation of the base price; |
| 6. | Matters concerning distribution of assets, etc., other than profits; |
| 7. | Outline of contracts for the entrustment of business affairs to be concluded with a collective investment business entity, a trust business entity, and a fund accounting and administration company (including matters concerning the method of calculating remuneration and other fees, the payment method and the time for payment); |
| 8. | Matters concerning change of the collective investment business entity and the trust business entity; |
| 9. | Matters concerning amendments to the articles of incorporation; |
| 10. | The fiscal term of the investment limited partnership company; |
| 11. | The date of preparation of the articles of incorporation; |
| 12. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting partners. |
| 1. | The articles of incorporation; |
| 2. | Certificates issued by banks or other financial institutions responsible for receiving contributions in relation to receipt and escrow of contributions. |
| Article 236-2 (Matters, etc. to be Stated in Articles of Incorporation) |
| 1. | The type of the investment limited liability company (referring to the type classified under Article 229 of the Act); |
| 2. | Investable assets (major investable assets shall be stated separately, except for a mixed asset fund prescribed in subparagraph 4 of Article 229 of the Act); |
| 3. | Matters concerning additional issuance and retirement of equity securities; |
| 4. | Details of the term of existence of, or grounds for, dissolution, if such term of existence or grounds for dissolution are prescribed; |
| 5. | Matters concerning appraisal of the property held by the investment limited liability company and calculation of the base price; |
| 6. | Matters concerning distribution of assets, etc. other than profits; |
| 7. | Outline of contracts for the entrustment of business affairs to be concluded with a collective investment business entity, a trust business entity, and a fund accounting and administration company (including matters concerning the method of calculating remuneration and other fees, the payment method and the time for payment); |
| 8. | Matters concerning change of the collective investment business entity and the trust investment business entity; |
| 9. | Matters concerning amendments to the articles of incorporation; |
| 10. | The fiscal term of the investment limited liability company; |
| 11. | The date of preparation of the articles of incorporation; |
| 12. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting partners. |
| 1. | The articles of incorporation; |
| 2. | Certificates issued by banks or other financial institutions responsible for receiving contributions in relation to receipt and escrow of contributions. |
| 2. | Timing for distribution of profits, etc.; |
| 3. | Terms and conditions of redemption of equity securities (a statement that it is not permitted to claim redemption, where the equity securities do not allow a claim for redemption); |
| 4. | The term of existence, if prescribed; |
| 5. | Name of the investment trader or investment broker who has sold the relevant equity securities. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
SECTION 3 Collective Investment Scheme in Form of Association
| Article 237 (Matters to be Stated in Partnership Agreements) |
| (1) | "Matters prescribed by Presidential Decree" in Article 218 (1) 9 of the Act means the following matters: <Amended by Presidential Decree No. 23924, Jun. 29, 2012; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | The type of the investment limited partnership (referring to the type classified under Article 229 of the Act); |
| 2. | Investable assets (major investable assets shall be stated separately, except for a mixed asset fund prescribed in subparagraph 4 of Article 229 of the Act); |
| 3. | Matters concerning additional issuance and retirement of equity securities; |
| 4. | Matters concerning appraisal of the property held by the investment limited partnership and calculation of the base price; |
| 5. | Matters concerning distribution of assets, etc., other than profits; |
| 6. | Outlines of contracts for the entrustment of business affairs to be concluded with a collective investment business entity, a trust business entity, and a fund accounting and administration company (including matters concerning the method of calculating remuneration and other fees, the payment method and the timing for payment); |
| 7. | Matters concerning change of the collective investment business entity and the trust business entity; |
| 8. | Matters concerning amendments to the partnership agreement; |
| 9. | The fiscal term of the investment limited partnership; |
| 10. | The date of preparation of the association agreement; |
| 11. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting partners. |
| (2) | "Documents prescribed by Presidential Decree" in Article 218 (4) of the Act means following: <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | The partnership agreement; |
| 2. | Certificates issued by banks or other financial institutions responsible for receiving contributions in relation to receipt and escrow of contributions. |
| Article 238 (Reporting, etc. on Dissolution) |
| (1) | A liquidator shall file a report on the following matters with the Financial Services Commission within 30 days from the date of dissolution pursuant to the latter part of Article 221 (1) of the Act: |
| 1. | Grounds for and the date of dissolution; |
| 2. | The name and resident registration number of the liquidator (or the trade name and business registration number of the liquidator if such liquidator is a corporation). |
| (2) | "Cases prescribed by Presidential Decree" in the proviso to Article 221 (1) 4 of the Act means the following cases: <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27556, Oct. 25, 2016> |
| 1. | Where the limited partner is any of the following: |
| (d) | The National Credit Union Federation of Korea established under the Credit Unions Act; |
| (h) | A corporation or an organization established under statutes, which is prescribed and publicly notified by the Financial Services Commission among the following entities: |
| (i) | A mutual-aid cooperative; |
| (ii) | A mutual-aid association; |
| (iii) | Any other similar corporation or organization, which is organized for the purposes of mutual aid, promotion of welfare, etc. of members working in the same workplace, engaging in the same occupational category or residing in the same area and provides mutual aid services; |
| 3. | Where one month has not elapsed from the date of establishment of an investment limited partnership; |
| 4. | Where one month has not elapsed from the date the total number of limited partners of an investment limited partnership became one. |
| Article 239 (Matters to be Stated in Undisclosed Association Agreements) |
"Matters prescribed by Presidential Decree" in Article 224 (1) 9 of the Act means the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> | 1. | The type of the undisclosed investment association (referring to the type classified under Article 229 of the Act); |
| 2. | Investable assets (major investable assets shall be stated separately, except for a mixed asset fund prescribed in subparagraph 4 of Article 229 of the Act); |
| 3. | Matters concerning additional issuance and retirement of equity securities; |
| 4. | Matters concerning appraisal of the property held by the undisclosed investment association and calculation of the base price; |
| 5. | Matters concerning distribution of assets, etc., other than profits; |
| 6. | Outlines of contracts for the entrustment of business affairs to be concluded with a collective investment business entity, a trust business entity, and a fund accounting and administration company (including matters concerning the method of calculating remuneration and other fees, the method and timing for payment); |
| 7. | Matters concerning change of the collective investment business entity and the trust business entity; |
| 8. | Matters concerning amendments to the undisclosed association agreement; |
| 9. | The fiscal term of the undisclosed investment association; |
| 10. | The date of preparation of the undisclosed association agreement; |
| 11. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting members of the undisclosed investment association. |
CHAPTER III TYPES, ETC. OF COLLECTIVE INVESTMENT SCHEMES
SECTION 1 Types of Collective Investment Schemes
| Article 240 (Minimum Investment Ratio, etc. by Type of Collective Investment Schemes) |
| (2) | "Securities prescribed by Presidential Decree" in subparagraph 1 of Article 229 of the Act means the following: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27115, Apr. 29, 2016; Presidential Decree No. 28040, May 8, 2017> |
| 1. | Beneficiary certificates, collective investment securities, or asset-backed securities where any of the following assets consists of not less than 50 percent of the trust property, collective investment property, or securitized assets: |
| (b) | 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; |
| 5. | 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 incorporated for performing a single social 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; |
| 6. | Securities referred to in Article 80 (1) 1 (d) through (g); |
| (4) | "Manner prescribed by Presidential Decree" in subparagraph 2 of Article 229 of the Act means any of the following: <Amended by Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27115, Apr. 29, 2016; Presidential Decree No. 28040, May 8, 2017> |
| 1. | Developing real estate; |
| 2. | Managing and ameliorating real estate; |
| 3. | Leasing and operating real estate; |
| 4. | Acquiring rights related to real estate, such as surface rights, easement, rights to lease on a deposit basis, rights to lease, rights to parcel sale; |
| 6. | Payment of money related to any manner prescribed in subparagraphs 1 through 5. |
| (5) | "Real estate-related securities prescribed by Presidential Decree" in subparagraph 2 of Article 229 of the Act means the following: |
| 1. | Securities referred to in paragraph (2) 1 (excluding item (d)); |
| 2. | Stocks referred to in paragraph (2) 2; |
| 3. | Securities referred to in paragraph (2) 6. |
| Article 241 (Money Market Funds) |
| (1) | "Short-term financial instruments prescribed by Presidential Decree" in subparagraph 5 of Article 229 of the Act means the following assets denominated in KRW: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24497, Apr. 5, 2013; Presidential Decree No. 25843, Dec. 9, 2014; Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Negotiable certificates of deposit with a remaining maturity of six months or less; |
| 2. | State bonds with a maturity of five years or less; or local government bonds, special purpose bonds, corporate bonds (excluding stock-related corporate bonds and corporate bonds issued through private placement), or commercial paper with a maturity of one year or less: Provided, That a purchase and resale agreement shall not be subject to restrictions on remaining maturity; |
| 3. | Bills or notes referred to in Article 79 (2) 5 with a remaining maturity of one year or less (excluding commercial paper); |
| 5. | A deposit in a financial institution referred to in any item of Article 79 (2) 5 or a postal service agency established under the Postal Savings and Insurance Act with a remaining maturity of six months or less; |
| 6. | Collective investment securities of another money market fund; |
| 7. | Short-term electronic bonds, etc. |
| (2) | "Manner prescribed by Presidential Decree" in subparagraph 5 of Article 229 of the Act means any of the following: <Amended by Presidential Decree No. 21611, Jul. 1, 2009> |
| 1. | Securities shall not be managed by lending or borrowing them; |
| 1-2. | Not more than five percent of the collective investment property within the limit prescribed and publicly notified by the Financial Services Commission shall be invested in state bonds with a maturity of one year or more; |
| 2. | A sale and repurchase agreement shall not exceed the limit prescribed and publicly notified by the Financial Services Commission; |
| 3. | The weighted average period of remaining maturities of the collective investment property held by each money market fund shall not exceed the limit prescribed and publicly notified by the Financial Services Commission; |
| 4. | Where the collective investment property held by a money market fund (excluding a money market fund, the sale of which is restricted pursuant to Article 76 (2) of the Act or the redemption of which has postponed pursuant to Article 237 of the Act) fails to meet the following criteria, no money market fund shall be created or established additionally, nor shall it accept entrustment of management of another money market fund: Provided, That the following criteria shall not apply where a money market fund for consolidating and managing surplus funds pursuant to Article 81 of the State Finance Act or a money market fund in which the aforesaid money market fund invests is created or established, or where the management of such money market fund is entrusted: |
| (a) | Where all investors in the money market fund are private individuals: 300 billion won or more; |
| (b) | Where all investors in the money market fund are corporations: 500 billion won or more; |
| 5. | To observe the rules prescribed and publicly notified by the Financial Services Commission with respect to credit rating of investable assets, investment limits based on each credit rating, the method of calculating the weighted average of remaining maturity, and other matters for maintaining stability in asset management. |
SECTION 2 Collective Investment Schemes in Extraordinary Form
| Article 242 (Closed-End Fund) |
| (1) | "As prescribed by Presidential Decree" in Article 230 (2) of the Act means any of the following cases where securities are issued at a price determined in consideration of the base price (where collective investment securities are listed on a securities market, referring to a price determined in consideration of the trading price in the securities market): <Amended by Presidential Decree No. 28040, May 8, 2017> |
| 1. | Where collective investment securities of a closed-end fund are additionally issued within the limit of profits distributed from the closed-end fund; |
| 2. | Where the relevant trust business entity confirms that there is no possibility to undermine existing investors' interests; |
| 3. | Where all existing investors consent; |
| 4. | Where existing investors are given a preferential opportunity to purchase collective investment securities to be additionally issued, in proportion to their holding ratios of the collective investment securities; |
| 5. | Other cases prescribed and publicly notified by the Financial Services Commission as unlikely to undermine existing investors' interests. |
| (2) | "Cases prescribed by Presidential Decree" in Article 230 (5) of the Act means any of the following cases: Provided, That in cases falling under subparagraphs 1 through 3, the creation or establishment of a collective investment scheme which does not invest in non-marketable assets prescribed and publicly notified by the Financial Services Commission shall be excluded: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| 1. | Where a real estate fund is created or established; |
| 2. | Where a special asset fund is created or established; |
| 4. | Where a collective investment scheme is created or established, which may invest in any non-marketable asset prescribed and publicly notified by the Financial Services Commission in excess of the ratio prescribed and publicly notified by the Financial Services Commission within 20 percent of the total assets of each collective investment scheme. |
| Article 243 (Multiple-Class Funds) |
| (1) | When a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. creates or establishes a multiple-class fund as provided in Article 231 of the Act (hereinafter referred to as "multiple-class fund"), it shall state the following matters in its application for registration referred to in Article 211 (1): |
| 1. | Matters concerning sales commission and sales remuneration for each class of collective investment securities; |
| 2. | Matters concerning conversion, if an investor is entitled to convert a class of collective investment securities into various classes; |
| 3. | Matters concerning expenses borne by each class of the collective investment property; |
| 4. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (2) | The conversion price applicable when securities are converted in accordance with paragraph (1) 2 shall be the base price of each class of collective investment securities. In such cases, the collective investment business entity of an investment trust or an undisclosed investment association, or the trust company, etc. shall not charge redemption fees against investors who claim the conversion of securities. |
| (3) | When selling collective investment securities of a multiple-class fund, each investment trader or broker shall provide investors with explanations on the fact that there are multiple classes of collective investment securities subject to different rates of sales commission or sales remuneration and the difference between various classes of collective investment securities. |
| (4) | When a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. seeks to change a collective investment scheme to a multiple-class fund, it shall file an application for revised registration, stating the matters referred to in the subparagraphs of paragraph (1) pursuant to Article 211 (3). |
| (5) | Except as specifically provided in paragraphs (1) through (4), matters necessary for protecting investors in multiple-class funds shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 244 (Umbrella Funds) |
| (1) | When a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. creates or establishes an umbrella fund as provided in Article 232 (1) of the Act (hereinafter referred to as "umbrella fund"), it shall state the matters concerning the convertible collective investment scheme in its application for registration referred to in Article 211 (1). |
| (2) | The conversion price applicable when collective investment securities of an umbrella fund are converted into collective investment securities of another collective investment scheme in accordance with Article 232 (1) of the Act shall be the base price of collective investment securities of each collective investment scheme. In such cases, the collective investment business entity of an investment trust or an undisclosed investment association, or the trust company, etc. shall not charge redemption fees against investors who claim the conversion of securities. |
| (3) | When a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. seeks to change a collective investment scheme to an umbrella fund, it shall file an application for revised registration, stating matters concerning the convertible collective investment scheme under paragraph (1) pursuant to Article 211 (3). |
| (4) | Except as specifically provided in paragraphs (1) through (3), matters necessary for protecting investors in umbrella funds shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 245 (Master-Feeder Funds) |
| (1) | When a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. creates or establishes a master-feeder fund as provided for in Article 233 (3) of the Act (hereinafter referred to as "master-feeder fund"), it shall state the matters concerning collective investment securities, etc. of a master fund as provided for in Article 233 (1) of the Act (hereinafter referred to as "master fund"), acquired by a feeder fund as provided for in Article 233 (1) of the Act (hereinafter referred to as "feeder fund"), in its application for registration referred to in Article 211 (1). |
| (2) | Neither investment trader nor broker may sell any collective investment securities of a master fund to any investor. |
| (3) | When a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. intends to change a collective investment scheme to a master-feeder fund, it shall file an application for revised registration, stating matters concerning the collective investment securities of the master fund, acquired by the feeder fund, pursuant to Article 211 (3). |
| (4) | When a collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. intends to make a change under paragraph (3), it shall transfer all collective investment property of the collective investment scheme to the master fund to be newly created or established, and shall deliver collective investment securities of the master fund, equivalent to the value of the transferred collective investment property, to the changed feeder fund. In such cases, it shall neither consolidate the collective investment property of two or more collective investment schemes to transfer them to a single master fund, nor separate the collective investment property of a single collective investment scheme to transfer them to two or more master funds. <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| (5) | Notwithstanding paragraph (4), when the collective investment scheme (limited to collective investment schemes permitted to make additional offers for investment during their existence; hereafter the same shall apply in this paragraph), which is not a privately placed fund, maintains the amount of principal, the balance of stock price, or the balance of price of other equity securities below five billion won, it may transfer its collective investment property by any of the following methods in compliance with the criteria prescribed and publicly notified by the Financial Services Commission in consideration of investable assets, etc.: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Transferring all of each collective investment property of at least two collective investment schemes that have similar investable assets, etc. to one master fund newly created or established; |
| 2. | Transferring all of the collective investment property of each collective investment scheme to a master fund (limited to a master fund that has similar investable assets, etc. to those of each collective investment scheme) already created or established. |
| (6) | Except as specifically provided for in paragraphs (1) through (5), necessary matters for protecting investors in master-feeder funds shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 22197, Jun. 11, 2010> |
| Article 246 (Requirements for Exchange-Traded Funds) |
"Requirements prescribed by Presidential Decree" in the latter part of Article 234 (1) 1 of the Act means meeting each of the following requirements: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> | 1. | The index shall be one that collectively indicates the prices of issues or the level of prices of a multiple number of issues traded on an exchange, a foreign exchange, or markets prescribed and publicly notified by the Financial Services Commission; |
| 2. | The prices or index referred to in subparagraph 1 shall be publicly announced to investors through the markets referred to in the aforesaid subparagraph; |
| 3. | The fund shall satisfy the requirements prescribed and publicly notified by the Financial Services Commission with respect to the requirements for prices of underlying assets, the issues comprising the index, the weight of each issue comprising the index, the method of management necessary for linkage to changes in the price and index, and other matters. |
| Article 247 (Designated Participating Company) |
"Person prescribed by Presidential Decree" in Article 234 (2) of the Act means a person who engages in both the investment trading business (excluding any underwriting business) and the investment brokerage business (limited to commissioned sale business) for securities and is designated by a collective investment business entity to perform the following business affairs (hereinafter referred to as "designated participating company"): <Amended by Presidential Decree No. 21291, Feb. 3, 2009> | 1. | Requesting a collective investment business entity for creation, additional creation, or establishment of an exchange-traded fund or issuance of new stocks for such exchange-traded fund; |
| 2. | Requesting a collective investment business entity for termination, partial termination, or dissolution of an exchange-traded fund or partial retirement of stocks; |
| 3. | Business affairs related to trading or commissioned trading of securities for changing money or securities paid by investors (hereafter referred to as "payments, etc." in this Section) to an asset amounting to a certain unit prescribed and publicly notified by the Financial Services Commission (hereinafter referred to as "creation unit"); |
| 4. | Facilitating trades of collective investment securities of an exchange-traded fund in the securities market and consequently converging the price of such collective investment securities on the net asset value of the collective investment securities per unit or per share (applicable only to a designated participating company prescribed and publicly notified by the Financial Services Commission). |
| Article 248 (Creation, Establishment, etc.) |
| (1) | Upon receipt of a request from a designated participating company to create, additionally create, or establish an exchange-traded fund or to issue new stocks for such exchange-traded fund, a collective investment business entity may create, additionally create, or establish an exchange-traded fund or issue new stocks for such exchange-traded fund as stipulated in the trust contract or the articles of incorporation of the investment company. |
| (2) | To make a request for creation, additional creation, or establishment of an exchange-traded fund or issuance of new stocks for such exchange-traded fund pursuant to subparagraph 1 of Article 247, a designated participating company shall convert the payments made by investors either directly or through an investment trader or broker to an asset amounting to the creation unit: Provided, That excluded herefrom is the case where it is impracticable to convert them to an asset, as prescribed and publicly notified by the Financial Services Commission. |
| (3) | Except as specifically provided in paragraphs (1) and (2), methods for making payments, creation, additional creation, or establishment of an exchange-traded fund or issuance of new stocks for such exchange-traded fund, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 249 (Redemption of Collective Investment Securities of Exchange-Traded Fund) |
| (1) | An investor in an exchange-traded fund may claim the investment trader or broker who sells the collective investment securities (excluding the designated participating company; hereafter the same shall apply in this Article) or the designated participating company for the collective investment securities (limited to where the designated participating company is the investment trader or broker who has sold the collective investment securities) to redeem the collective investment securities by creation unit: Provided, That if the investment trader or broker who sells the collective investment securities is unable to accept the claim for redemption due to dissolution, revocation of authorization, suspension of business, or any other event prescribed and publicly notified by the Financial Services Commission (hereafter referred to as "dissolution, etc." in this Chapter), the investor may file such claim for redemption with the designated participating company. |
| (2) | Upon receipt of a claim for redemption of collective investment securities of an exchange-traded fund under the main sentence of paragraph (1), the investment trader or broker shall demand the designated participating company to redeem them: Provided, That if the designated participating company is unable to conduct business affairs related to the redemption of the collective investment securities due to dissolution, etc., the investment trader or broker may demand the collective investment business entity directly to redeem the collective investment securities. |
| (3) | Where the designated participating company to whom an investor in an exchange-traded fund intends to claim the redemption of collective investment securities of the exchange-traded fund under the proviso to paragraph (1), is unable to conduct business affairs related to redemption of the collective investment securities due to dissolution, etc., the investor may claim the redemption of the collective investment securities directly to the collective investment business entity. |
| (4) | Upon receipt of a claim or demand for the redemption of collective investment securities of an exchange-traded fund under the main sentence of paragraph (1) or (2), a designated participating company shall demand the collective investment business entity of the exchange-traded investment trust or the exchange-traded investment company to redeem them without delay. |
| (5) | An investor in collective investment securities of an exchange-traded fund, the investment trader or broker or the designated participating company may, if he/she claims or demands the collective investment business entity to redeem the securities in accordance with the proviso to paragraph (2) or paragraph (3) or (4) (applicable only where redemption is demanded to the collective investment business entity of an exchange-traded investment trust), but if the collective investment business entity that shall accept such claim or demands for redemption is unable to redeem them due to dissolution, etc., file the claim directly with the relevant trust business entity. |
| (6) | Upon receipt of a demand for redemption under the proviso to paragraph (2) or any provision of paragraphs (3) through (5), the collective investment business entity of an exchange-traded investment trust and the trust business entity shall accept the demand for redemption without delay, and the collective investment business entity of the exchange-traded investment company and the trust business entity shall demand the exchange-traded investment company to accept such demand for redemption without delay. |
| (7) | A collective investment business entity, a trust business entity, or an exchange-traded investment company that is required to accept a claim for redemption under the proviso to paragraph (2) or any provision of paragraphs (3) through (6), shall redeem the relevant securities with the asset amounting to the creation unit by partially terminating the exchange-traded investment trust or retiring some of the stocks of the exchange-traded investment company (excluding cases prescribed and publicly notified by the Financial Services Commission), based on the collective investment property of the exchange-traded fund after management of the collective investment property is closed on the date such claim for redemption is filed. |
| (8) | If an investment trader or broker, a designated participating company, a collective investment business entity, or a trust business entity in receipt of a claim or demand for redemption under any provision of paragraphs (1) through (6) is unable to redeem collective investment securities by the date stipulated in the collective investment agreement due to dissolution, etc., it shall postpone the redemption in accordance with Article 237 of the Act and notify the investors of the fact without delay. |
| Article 250 (Listing and Delisting of Exchange-Traded Funds) |
| (1) | Collective investment securities of an exchange-traded fund shall be listed or delisted in accordance with the regulations on listing of securities under Article 390 (1) of the Act. <Amended by Presidential Decree No. 23924, Jun. 29, 2012> |
| (2) | Deleted. <by Presidential Decree No. 23924, Jun. 29, 2012> |
| (3) | A collective investment business entity of an exchange-traded investment trust and an exchange-traded investment company shall, when collective investment securities of the exchange-traded fund are delisted pursuant to paragraph (2), terminate or dissolve the exchange-traded fund within the period prescribed by Ordinance of the Prime Minister from the delisting date. In such cases, Article 192 (1) of the Act shall not apply to an exchange-traded investment trust. |
| (4) | A collective investment business entity shall, when an exchange-traded fund is terminated or dissolved pursuant to paragraph (3), report it to the Financial Services Commission within seven days of the termination date or dissolution date. |
| Article 251 (Public Notice of Assets, etc. Owned) |
| (1) | A collective investment business entity of an exchange-traded investment trust or an exchange-traded investment company shall issue daily public notice of the details of composition of assets paid in the exchange-traded fund (including the details of composition of assets in the creation unit for new creation, additional creation, new establishment, or issuance of new stocks) as of the day immediately before the date of public notice through the securities market. |
| (2) | An exchange shall issue public notice of the net asset value and tracking error (referring to the indicator comparing the floating rate of the net asset value per unit or per share of collective investment securities of an exchange-traded fund and the floating rate of a certain multiple rate of changes in the index at which the exchange-traded fund aims for a specific period, the rate of which is calculated by the formula prescribed and publicly notified by the Financial Services Commission) of an exchange-traded fund at least once daily. <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 23924, Jun. 29, 2012> |
| Article 252 (Special Cases concerning Management) |
| (1) | Notwithstanding Articles 80 (4) and 86 (1), each collective investment business entity may manage the collective investment property 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, etc. of investors) in any of the following manners pursuant to the proviso to Article 81 (1) of the Act and Article 234 (4) of the Act: <Amended by Presidential Decree No. 28040, May 8, 2017> |
| 1. | Investing up to 30 percent of the total asset of each exchange-traded fund in an identical issue of securities. In such cases, equity securities (including depositary receipts related to equity securities issued by a corporation, etc.; hereafter the same shall apply in this paragraph) and securities other than the equity securities among securities issued by a single corporation, etc. shall be deemed an identical issue, respectively; |
| 2. | Investing the total asset of each exchange-traded fund in up to 20 percent of the total number of equity securities issued by the same corporation, etc. |
| (2) | Notwithstanding the main sentence of Article 84 (1) of the Act, each collective investment business entity may trade securities with an interested party (referring to an interested party as prescribed in Article 84 (1) of the Act) or engage in any other transaction with an interested party for the purpose of creating, additionally creating, or establishing an exchange-traded fund or issuing new stocks for such exchange-traded fund. |
| Article 252-2 Deleted. <by Presidential Decree No. 24841, Nov. 13, 2013> |
CHAPTER IV REDEMPTION OF COLLECTIVE INVESTMENT SECURITIES
| Article 253 (Events Excusing Performance in Response to Claims for Redemption) |
"Reason prescribed by Presidential Decree" in the proviso to Article 235 (2) of the Act means an interruption of an electronic computer system due to natural disaster or any other similar event due to which the Financial Services Commission deems it difficult for an investment trader or broker who sold collective investment securities to carry on his/her own business under normal circumstances.
| Article 254 (Special Cases concerning Methods for Redemption) |
| (1) | "As otherwise provided for by Presidential Decree" in Article 235 (4) of the Act means any of the following cases where the collective investment agreement stipulates the redemption date in excess of 15 days from the date of filing of a claim for redemption: <Amended by Presidential Decree No. 28040, May 8, 2017> |
| 1. | Where the collective investment property of a collective investment scheme is invested in any non-marketable asset prescribed and publicly notified by the Financial Services Commission in excess of the ratio prescribed and publicly notified by the Financial Services Commission within ten percent of the total assets of the collective investment scheme; |
| 2. | Where the collective investment property of a collective investment scheme is invested in a foreign currency asset in excess of 50 percent of the total assets of the collective investment scheme; |
| 3. | In cases of a private equity fund of funds; |
| 4. | In cases of a real estate or special asset fund of funds. |
| 1. | Where an investment trader or broker who has sold collective investment securities of a money market fund purchases the collective investment securities from a private individual investor at the base price publicly notified on the date the private individual investor filed a claim for redemption within the limit of the greater of an amount equivalent to 5 percent of the sales volume of the collective investment securities of the money market fund, or an amount prescribed and publicly notified by the Financial Services Commission; |
| 2. | Where an investment trader or broker who has sold collective investment securities of a collective investment scheme (excluding collective investment securities of a money market fund) inevitably purchases some of the collective investment securities on the redemption date stipulated in the collective investment agreement of the collective investment scheme at the redemption price stipulated in the collective investment agreement in response to a claim filed by an investor for redemption on the basis of an amount. |
| Article 255 (Redemption Price and Fees) |
| (1) | "As prescribed by Presidential Decree" in the proviso to Article 236 (1) of the Act means any of the following cases where the collective investment agreements stipulate that securities will be redeemed on the date of filing of a claim for redemption at the base price publicly notified on the date of filing of the claim for redemption: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 27291, Jun. 28, 2016> |
| 1. | Where an investment trader or broker has sold collective investment securities of a money market fund, and where any of the following is applicable: |
| (a) | Where an investor has agreed in advance with the investment trader or broker to have collective investment securities of the money market fund redeemed to pay the price for purchase of financial investment instruments, etc.; |
| (b) | Where an investor has agreed in advance with the investment trader or broker to have collective investment securities of the money market fund redeemed to perform obligations arising on a regular basis, such as payment of public charges; |
| (c) | Where the collective investment securities of a money market fund referred to in Article 77 (1) 2 (c), are redeemed; |
| 2. | Where an investment trader or broker has sold collective investment securities of a money market fund to any of the following, and where the collective investment securities are redeemed: |
| (2) | Redemption fees shall be charged when collective investment securities are redeemed within the period stipulated in the collective investment agreement in accordance with Article 236 (2) of the Act. In such cases, the redemption fees may be charged based on the amount of redemption, profits, etc. |
| (3) | The base price calculated after the date of filing a claim for redemption under the main sentence of Article 236 (1) of the Act shall be the base price publicly notified after the second business day (referring to the third business day, where an investor claims redemption after the reference time set for determining the date of filing a claim for redemption of collective investment securities as stipulated in the collective investment agreement) beginning on the date of filing of the claim for redemption and stipulated in the collective investment agreement of the collective investment scheme. |
| (4) | Notwithstanding paragraph (3), where an investor redeems the collective investment securities for the purposes of changing the investment trader or broker who has sold such collective investment securities of the collective investment scheme without changing such collective investment scheme, the base price publicly notified on the day on which the change of the investment trader or broker stipulated in the collective investment agreement takes effect within 15 days from the date of filing of the claim for redemption of the collective investment securities shall be applied. <Newly Inserted by Presidential Decree No. 21898, Dec. 21, 2009> |
| (5) | Matters necessary for protecting investors in relation to paragraphs (2) through (4) shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 21898, Dec. 21, 2009> |
| Article 256 (Grounds for Postponement of Redemption) |
| 1. | Where it is substantially impracticable to redeem securities due to impossibility of disposition of collective investment property in any of the following cases: |
| (a) | Where it is impracticable to dispose of collective investment property due to a significant slump in transactions; |
| (b) | Where it is impracticable to dispose of collective investment property due to permanent closure, temporary closure, or business suspension of the securities market or a foreign securities market or any other similar event; |
| (c) | Where natural disasters or any other similar event occurs; |
| 2. | Where it is anticipated that equality in dealing with investors is feared to be undermined in any of the following cases: |
| (a) | Where it is anticipated that other investors' interests are feared to be undermined, if collective investment property is disposed of in order to accept a claim for redemption because such disposition is likely to lead to default on payments for checks and bills, etc.; |
| (b) | Where it is anticipated that other investors' interests are feared to be undermined, if a claim for redemption is accepted, because assets that belong to collective investment property has no market value; |
| (c) | Where it is anticipated that accepting a claim for redemption in a large volume are likely to undermine equality in dealing with investors; |
| 3. | Where it is impracticable to redeem collective investment securities because of dissolution, etc. of the investment trader or broker, the collective investment business entity, the trust business entity, the investment company, etc., to whom redemption is claimed or demanded; |
| 4. | Where any other cause equivalent to those under subparagraphs 1 through 3 exists and where the Financial Services Commission deems it necessary to postpone redemption. |
| Article 257 (Matters Subject to Resolution of General Meeting for Postponement of Redemption) |
| 1. | The timing and method for payment of redemption money, where it is intended to resume redemption; |
| 2. | The period for postponement of redemption and the timing and method for payment of redemption money when redemption is resumed, where it is intended to continue postponement of redemption; |
| 3. | The methods for disposition of assets causing postponement of redemption, where partial redemption is intended in accordance with Article 237 (5) of the Act. |
| 2. | The purport and scale of partial redemption, where partial redemption is intended. |
| 1. | The redemption price and the timing for payment of the redemption money, where redemption is resumed; |
| 2. | The purport and scale of partial redemption, where partial redemption is intended. |
| Article 258 (Redemption Methods When Redemption is Resumed) |
Each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. shall, when the cause for postponement of redemption is entirely or partially resolved after the general meeting of collective investors held for postponing redemption, redeem securities in accordance with the resolution adopted at the general meeting of collective investors in compliance with Article 237 (4) of the Act: Provided, That any collective investment business entity of an investment trust or an undisclosed investment association, or any investment company, etc. may redeem securities without holding a general meeting of collective investors, where the cause for postponement of redemption is resolved before holding the general meeting of collective investors for postponement of redemption.
| Article 259 (Partial Redemption) |
| (1) | Where it is resolved at the general meeting of collective investors for partial redemption or postponement of redemption to accept partial redemption, each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. shall separate the assets causing postponement of redemption from remaining assets (hereinafter referred to as "normal assets") in accordance with Article 237 (7) of the Act as of the day immediately before the date partial redemption is resolved. |
| (2) | With respect to normal assets, each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. shall pay redemption money in proportion to the share of collective investment securities held by each investor by calculating the base price for the normal assets in a formula stipulated in the collective investment agreement. |
| (3) | Any collective investment business entity of an investment trust or an undisclosed investment association, or any investment company, etc. may, when it has created or established a separate collective investment scheme in accordance with Article 237 (6) of the Act, continue issuing, selling, and redeeming the collective investment securities of the collective investment scheme comprised of normal assets. |
| (4) | Necessary matters concerning the method and procedure for partial redemption, and other matters shall be prescribed and publicly notified by the Financial Services Commission, in addition to the matters provided for in paragraphs (1) through (3). |
CHAPTER V ASSESSMENT AND ACCOUNTING
| Article 260 (Methods for Assessment of Collective Investment Property) |
| (1) | "Method prescribed by Presidential Decree" in the main sentence of Article 238 (1) of the Act means the closing market price at which the property was traded in the securities market (including an overseas securities market) or the price publicly announced by the derivatives market (including an overseas derivatives market) in which exchange-traded derivatives are traded: Provided, That securities may be assessed at a price prescribed in the corresponding subparagraph in any of the following cases: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 2. | The price based on price information furnished by two or more bond rating companies on the basis of the closing market price at which debt securities were traded in the securities market on the base date for assessment, in cases of debt securities, the market prices of which have been formed in the securities market for ten or more days each month for three consecutive months immediately preceding the month in which the base date for assessment falls; |
| 3. | The price based on price information furnished by two or more bond rating companies, in cases of debt securities, the market prices of which have been formed in an overseas securities market. |
| (2) | "Fair market value prescribed by Presidential Decree" in the main sentence of Article 238 (1) of the Act means the price assessed for each type of asset that belongs to collective investment property by the committee on assessment of collective investment property (referring to the managing member in cases of a private equity fund; hereafter the same shall apply in this paragraph), in consideration of the following matters, fulfilling a fiduciary duty under Article 79 (2) of the Act, and maintaining consistency in assessment. In such cases, the committee on assessment of collective investment property shall assess non-performing assets that belong to the collective investment property, including defaulted bonds, in compliance with the guidelines prescribed and publicly notified by the Financial Services Commission: <Amended by Presidential Decree No. 21765, Oct. 1, 2009; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 27472, Aug. 31, 2016> |
| 1. | Acquisition prices of investable assets; |
| 2. | Trading prices of investable assets; |
| 3. | Prices informed by the following persons with respect to investable assets: |
| (a) | A bond rating company; |
| (c) | A credit rating company; |
| (e) | An investment trader who engages in underwriting business; |
| (f) | An entity similar to those referred to in items (a) through (e), that holds permission, authorization, registration, etc. in accordance with relevant statutes; |
| (g) | A foreigner similar to those referred to in items (a) through (f); |
| 5. | Base prices of collective investment securities. |
| (3) | "As prescribed by Presidential Decree" in the proviso to Article 238 (1) of the Act means collective investment property of a money market fund and "value prescribed by Presidential Decree" in the aforesaid provision means a book price prescribed and publicly notified by the Financial Services Commission (hereafter in this paragraph referred to as "book price"). In such cases, the collective investment business entity shall monitor the difference between the base price assessed according to the book price and the base price assessed under paragraphs (1) and (2), and shall take a necessary measure as stipulated in the collective investment agreement, if the difference exceeds or is likely to exceed the rate prescribed and publicly notified by the Financial Services Commission. |
| Article 261 (Committee on Assessment of Collective Investment Property) |
| (1) | Each collective investment business entity shall include the following persons in a committee on assessment of collective investment property it organizes: <Amended by Presidential Decree No. 23924, Jun. 29, 2012> |
| 1. | The executive officer responsible for assessment of collective investment property; |
| 2. | The executive officer responsible for management of collective investment property; |
| 3. | The compliance officer; |
| 4. | Other persons deemed by the Financial Services Commission necessary for fair assessment of collective investment property. |
| (2) | The committee on assessment of collective investment property shall report on the matters concerning assessment of collective investment property, including whether the standards for assessment of collective investment property established under Article 238 (3) of the Act (hereinafter referred to as "standards for assessment of collective investment property") have been complied with, to the collective investment business entity's board of directors (referring to the committee on management of collective investment property established under Article 250 (2) of the Act, in cases of a bank concurrently running a collective investment business under Article 250 (1) of the Act) once every half year. |
| 1. | Matters concerning detailed guidelines applicable to classification and assessment of non-performing assets prescribed and publicly notified by the Financial Services Commission, including defaulted bonds; |
| 2. | Matters concerning correction of errors in assessment of collective investment property; |
| 3. | Matters concerning the guidelines for assessment of assets included in collective investment property by type; |
| Article 262 (Calculation and Public Notice of Base Prices) |
| (1) | "Method prescribed by Presidential Decree" in Article 238 (6) of the Act means the method of calculating the base price by subtracting total liabilities from total assets (referring to the value calculated by the method for assessment method under Article 238 (1) of the Act) recognized in the balance sheet as of the day immediately preceding the date of public notice or posting of the base price under Article 238 (7) of the Act and dividing the subtracted amount by the total number of collective investment securities as of the day immediately preceding the date of public notice or posting. In such cases, if an collective investment business entity of an investment trust or an undisclosed investment association, or an investment company, etc. discovers any miscalculated base price publicly notified and posted after correcting errors in assessment under Article 261 (3) 2, it shall promptly revise the base price and publicly notify and post the correct base price again (excluding where the difference between the base price publicly notified and posted initially and the revised base price does not exceed the following applicable limit according to the base price publicly notified and posted initially): <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 27291, Jun. 28, 2016> |
| 1. | Where the collective investment scheme provided for in Article 229 (1) of the Act, invests in the equity securities traded in a domestic securities market: 2/1,000; |
| 2. | Where the collective investment scheme provided for in Article 229 (1) of the Act, invests in any of the following securities: 3/1,000: |
| (a) | Equity securities traded on a foreign securities market; |
| (b) | Collective investment securities of a collective investment scheme that invests in equity securities traded on a foreign securities market; |
| 4. | In cases of any collective investment scheme, other than those referred to in subparagraphs 1 through 3: 1/1,000. |
| (2) | Each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. shall obtain verification of the compliance officer on the collective investment business entity and the trust business entity when it intends to revise the base price in accordance with the latter part of paragraph (1). |
| (3) | Upon revising the base price in accordance with the latter part of paragraph (1), each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. shall report the fact to the Financial Services Commission, as prescribed and publicly notified by the Financial Services Commission. |
| (4) | Further details necessary for procedures for the revision of base prices, reporting on revisions, and other similar matters shall be prescribed and publicly notified by the Financial Services Commission. |
| (5) | "Case as specified further by Presidential Decree" in the proviso to Article 238 (7) of the Act means any of the following cases where it is impracticable to publicly notify and post the base price on a daily basis: <Amended by Presidential Decree No. 28040, May 8, 2017> |
| 1. | Where the collective investment property is invested in a foreign currency asset; |
| 2. | In cases of a private equity fund of funds; |
| 3. | In cases of a real estate or special asset fund of funds. |
| Article 263 (Entrustment of Establishment of Accounting Principles) |
"Corporation or organization prescribed by Presidential Decree" in the former part of Article 240 (2) of the Act means the Korea Accounting Institute.
| Article 264 (Exemption from Accounting Audits) |
"As specified further by Presidential Decree" in the proviso to Article 240 (3) of the Act means any of the following cases as of the end of a fiscal term and the day falling under any subparagraph of the aforesaid paragraph: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> | 1. | Where the total assets of a collective investment scheme do not exceed 30 billion won; |
| 2. | Where the total assets of a collective investment scheme are more than 30 billion won but not more than 50 billion won, and where collective investment securities are not additionally issued for six months from the end of a fiscal term until the day falling under any subparagraph of Article 240 (3) of the Act. |
| Article 265 (Appointment of Accounting Auditor) |
| (1) | Pursuant to Article 240 (4) of the Act, each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. (excluding investment companies) shall, when it seeks to appoint or replace the accounting auditor of a collective investment scheme, obtain consent (referring to a resolution of the audit committee, if an audit committee is installed) of the auditor of the collective investment business entity that manages the collective investment property of the collective investment scheme, while an investment company shall, when it seeks to appoint or replace the accounting auditor, obtain consent of supervisory directors. |
| (2) | The guidelines for accounting audit of collective investment property shall be prescribed and publicly notified by the Financial Services Commission, subject to prior deliberation by the Securities and Futures Commission. |
| (4) | The accounting auditor shall, upon completion of accounting audit of collective investment property, prepare an accounting audit report describing the following matters, and shall submit it to each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. without delay: |
| 1. | A balance sheet of collective investment property; |
| 2. | An income statement of collective investment property; |
| 3. | A calculation sheet of the base prices of collective investment property; |
| 4. | Details of transactions between the collective investment business entity and its interested parties (referring to interested parties under Article 84 (1) of the Act). |
| (5) | Each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. shall, upon receiving an accounting audit report from the accounting auditor, submit it to the Financial Services Commission, the Association, the investment trader or broker who sells the collective investment securities, and the trust business entity responsible for escrow and management of collective investment property. |
| (6) | Each collective investment business entity of an investment trust or an undisclosed investment association, or each investment company, etc. shall make the accounting audit report available to the relevant investors for inspection as prescribed and publicly notified by the Financial Services Commission. |
| (7) | Expenses for accounting audits shall be borne by the collective investment scheme subject to the accounting audit. |
| Article 265-2 (Auditors’ Liability for Damage, etc.) |
Where an auditor shall be jointly liable for damage with a director and an auditor of the collective investment business entity or a supervisory director of the investment company under Article 241 (3) of the Act shall be limited only where the aggregate amount recognized as income of the claimant for the damage during the 12-month period immediately preceding the month in which the filing date of the claim falls does not exceed 150 million won. [This Article Newly Inserted by Presidential Decree No. 26135, Mar. 3, 2015]
| Article 266 (Distribution of Profits) |
| (1) | "Collective investment schemes prescribed by Presidential Decree" in the proviso to Article 242 (1) of the Act means collective investment schemes (excluding money market funds under Article 241). <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| (2) | The method and time for distribution of profits under Article 242 (1) of the Act shall be stipulated by collective investment agreement. |
| (3) | An investment company shall, when it seeks to distribute profits only by stocks newly issued, bring the matter to the board of directors for resolution on the number of stocks to be issued, the time to issue them, and other matters necessary for issuance of stocks. |
| (4) | The collective investment business entity of an investment trust or an undisclosed investment association, investment company, etc. shall, when it seeks to distribute dividends in cash in excess of profits, state such intent in the collective investment agreement and shall determine the method and time for distribution of profits and other necessary matters in advance. |
| Article 267 Deleted. <by Presidential Decree No. 26600, Oct. 23, 2015> |
CHAPTER VI ESCROW AND MANAGEMENT OF COLLECTIVE INVESTMENT PROPERTY
| Article 268 (Deposit, etc. of Securities) |
| (1) | "Instruments prescribed by Presidential Decree" in the main sentence of Article 246 (3) 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 prescribed and publicly notified by the Financial Services Commission. |
| (2) | "Cases prescribed by Presidential Decree" in the proviso to Article 246 (3) of the Act means the cases provided in the subparagraphs of Article 63 (2). <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (3) | Upon receipt of an instruction from a collective investment business entity about the acquisition, disposition, etc. of securities (including those referred to in the subparagraphs of paragraph (1); hereafter the same shall apply in this paragraph) or an instruction on the safekeeping, management, etc. of securities, a trust business entity shall execute the instruction by delivering the securities and making the payment therefor simultaneously in accordance with Article 246 (4) of the Act. |
| (4) | "Cases prescribed by Presidential Decree" in the proviso to Article 246 (5) of the Act means the following cases: Provided, That, if subparagraph 2 or 3 is applicable, the relevant amount shall not exceed ten percent of the total amount deposited to financial institutions or the total amount of short-term loans out of the collective investment property: <Newly Inserted by Presidential Decree No. 21291, Feb. 3, 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. | Where a trust business entity trades the cash remaining after the collective investment business entity invests its collective investment property in investable assets with its own property as stipulated in the collective investment agreement; |
| 2. | Depositing in financial institutions; |
| 4. | Purchasing or selling foreign currencies in accordance with the Foreign Exchange Transactions Act (including forward exchange transactions to hedge exchange risks); |
| 4-2. | 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) to trade over-the-counter derivatives to hedge exchange risks; |
| 5. | Any transaction made between a person who provides prime brokerage services and a hedge fund, etc. as part of such services; |
| 6. | The transaction prescribed in subparagraph 5-3 of Article 85. |
| Article 269 (Trust Business Entity's Duty to Monitor) |
| (1) | Pursuant to Article 247 (1) and (2) of the Act, every trust business entity shall ascertain whether any details of an instruction, including the following matters, violate the guidelines prescribed and publicly notified by the Financial Services Commission, after it performs acquisition, disposition, etc. of an asset or keeping in custody, management, etc. of an asset according to the instruction: |
| 1. | Matters provided in Articles 80 through 85 of the Act: Provided, That excluded herefrom are the matters in which it is impracticable to ascertain, only with information on the collective investment property that a specific trust business entity keeps in its custody and manages, whether there is any violation, because there are two or more trust business entities that keep in their custody and manage the collective investment property of all collective investment schemes managed by a collective investment business entity; |
| 2. | Investment limit of each item of investment asset stipulated in the collective investment agreement; |
| 3. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for monitoring management of assets. |
| (2) | Pursuant to the main sentence of Article 247 (3) of the Act, supervisory directors of a trust business entity or an investment company that keeps in its custody and manage collective investment property (excluding property of an investment company) shall post the following matters to be available for inspection by the investors at the head office, branch offices, and other business office of the investment trader or broker who sells the collective investment securities, or disclose them to the public on its website or by other means: |
| 1. | Details of instructions given by the collective investment business entity; |
| 2. | Violations of an Act, a statute, the collective investment agreement, the investment prospectus, etc. in relation to the details of instructions given by the collective investment business entity; |
| 3. | Details of an objection filed by the collective investment business entity and a decision made thereon by the Financial Services Commission, where the collective investment business entity filed an objection with the Financial Services Commission in accordance with Article 247 (4) of the Act. |
| 1. | A decision shall be made, within 30 days from the date a collective investment business entity files an objection with the Financial Services Commission, as to whether details of an instruction violated an Act, a statute, the collective investment agreement, the investment prospectus, etc.: Provided, That such decision shall be made within 60 days from the date such objection is filed, if it is impossible to make a decision within the aforesaid period due to unavoidable circumstances; |
| 2. | The method and time for correction of a violation and similar matters shall be decided and notified to the relevant collective investment business entity. |
| (4) | "Matters prescribed by Presidential Decree" in Article 247 (5) 7 of the Act means whether there is any possibility of undermining existing investors' interests when issuing collective investment securities additionally under Article 242 (1) 2. |
| Article 270 (Reports on Safekeeping and Management of Assets) |
| (1) | "As prescribed further by Presidential Decree" in the proviso to Article 248 (1) of the Act means any of the following cases: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| 1. | Where an investor has manifested his/her intent, in writing, to refuse to receive a report on safekeeping and management of assets; |
| 2. | Where a trust business entity discloses a report on safekeeping and management of assets of any of the following collective investment schemes in the manner prescribed and publicly notified by the Financial Services Commission: |
| (b) | A closed-end fund (limited to one whose collective investment securities are listed in accordance with Article 230 (3) of the Act); |
| (c) | An exchange-traded fund; |
| 3. | Where the assessed value of a collective investment security owned by an investor is not more than 100,000 won and where the collective investment agreement provides that no report on safekeeping and management of assets will be delivered to such investor. |
| 1. | Details of a review, where a review was conducted to ensure that transactions made with interested parties under Article 84 (1) of the Act are proper; |
| 2. | Matters concerning appointment, replacement, and dismissal of an auditor; |
| 3. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (3) | When a trust business entity furnishes investors with a report on safekeeping and management of assets, it shall deliver the report to them in person or by electronic mail via the investment trader or broker who sold the collective investment securities or the Securities Depository: Provided, That where an investor have no electronic mail address, the disclosure as provided in Article 89 (2) 1 and 3 of the Act may be substituted for the delivery of such report and where an investor wants to receive it by mail, it shall do, as requested by the investor. <Amended by Presidential Decree No. 21898, Dec. 21, 2009; Presidential Decree No. 23924, Jun. 29, 2012> |
| (4) | Expenses incurred in preparing and delivering reports on safekeeping and management of assets shall be borne by each trust business entity. <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| (5) | The form and method for preparation of the report on safekeeping and management of assets, and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
CHAPTER VII SPECIAL CASES CONCERNING PRIVATELY PLACED FUNDS, ETC.
| Article 271 (Investors in Hedge Funds) |
| (1) | "Investor prescribed by Presidential Decree" in subparagraph 1 of Article 249-2 of the Act means any of the following entities: |
| 3. | Any of the entities referred to in the subparagraphs of Article 10 (2); |
| 4. | Any stock-listed corporation; |
| 5. | Any of the entities referred to in Article 10 (3) 1 through 8 and 13 through 18. |
| (2) | "Amount prescribed by Presidential Decree" in subparagraph 2 of Article 249-2 of the Act means the amount classified as follows: |
| 1. | Where investing in a hedge fund in the case of which the aggregate of the amounts referred to in the subparagraphs of Article 249-7 (1) of the Act does not exceed 200 percent of the value calculated by subtracting the total amount of liabilities from the total amount of assets of the hedge fund: 100 million won; |
| 2. | Where investing in a hedge fund other than that prescribed in subparagraph 1: 300 million won. |
[This Article Wholly Amended by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-2 (Requirements for Registration, etc.) |
| 6. | Other finance companies prescribed and publicly notified by the Financial Services Commission as unlikely to undermine the protection of investors and sound trading practices. |
| (2) | A foreign collective investment business entity shall meet the requirements specified in subparagraph 4 (a), (d) and (e) of attached Table 2. In such cases, "date of filing of an application for authorization" shall be construed as "date of filing of an application for registration"; and "that intends to obtain authorization" as "that intends to be registered." |
| (4) | Human resources, electronic computer systems and other physical facilities referred to in Article 249-3 (2) 3 of the Act shall meet the following requirements: |
| 1. | There shall be at least three fund managers who are standing executive officers and/or full-time employees; |
| 2. | All of the following physical facilities, including electronic computer systems, shall be established: |
| (a) | Electronic computer systems and means of communications required to conduct the intended hedge fund investment business; |
| (b) | Adequate space for business and office equipment, including an office, etc.; |
| (c) | Security facilities for protecting physical facilities, including an electronic computer system, safely; |
| (d) | Supplementary facilities required to maintain the continuity of business in the event of power failure, fire, etc. |
| (5) | A major shareholder (referring to a major shareholder as prescribed in Article 12 (2) 6 (a) of the Act; hereafter the same shall apply in this Chapter) shall meet the following requirements: |
| 1. | If the major shareholder is any entity referred to in subparagraphs 1 through 3 or 5 (excluding item (d)) of attached Table 2, it shall meet the requirements set forth in subparagraph 1 (d) and (e) of the aforesaid Table; |
| 2. | If the major shareholder is any entity referred to in subparagraph 4 or 5 (e) of attached Table 2, it shall meet the requirements set forth in subparagraph 4 (a), (d), and (e) of the aforesaid Table. In such cases, "date of filing of an application for authorization" shall be construed as "date of filing of an application for registration," and "that intends to obtain authorization" as "that intends to be registered." |
| (6) | Notwithstanding paragraph (5), the Financial Services Commission may relax and publicly notify the requirements set forth in the subparagraphs of paragraph (5) in any of the following cases: <Amended by Presidential Decree No. 27414, Jul. 28, 2016> |
| 1. | Where any of the entities referred to in the subparagraphs of Article 8 (9) of the Act intends to register its hedge fund investment business; |
| 2. | Where a hedge fund investment business entity is merged with another company, splits off or is merged after a split-off. |
| (7) | "Good financial standing prescribed by Presidential Decree, such as the fulfillment of guidelines for management soundness" in Article 249-3 (2) 6 of the Act means the financial standing set forth in Article 16 (8) 1. |
| (8) | “Good social credibility prescribed by Presidential Decree, such as having no record of violations of the statutes" in Article 249-3 (2) 6 of the Act means the social credibility set forth in Article 16 (8) 2. |
| 1. | There shall be appropriate internal control guidelines for identifying, assessing and managing the likelihood of conflicts of interest in accordance with Article 44 of the Act; |
| (10) | Where a foreign collective investment business entity establishes a branch office or any other business office (hereafter in this paragraph referred to as "branch office, etc.") in Korea to conduct the hedge fund investment business, all of such branch office, etc. shall be deemed a single hedge fund investment business entity. In such cases, the foreign collective investment business entity, etc. intends to establish an additional branch office, etc. in Korea to conduct the hedge fund investment business, it shall submit related materials to the Financial Services Commission in the manner prescribed and publicly notified by the Financial Services Commission. |
| (11) | Specific criteria necessary in relation to the requirements for registration provided in paragraphs (4) through (10) shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Wholly Amended by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-3 (Relaxation, etc. of Requirements for Maintenance of Registration) |
"Relaxed requirements prescribed by Presidential Decree" in Article 249-3 (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 249-3 (2) 2 of the Act: Every registrant shall maintain at least 70 percent of the minimum equity capital for 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 hedge fund 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; |
| (a) | If 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 the aforesaid Table. In such cases, "for the preceding five years" in subparagraph 1 (e) (i) of the aforesaid Table shall be construed as "for the preceding five years for the largest shareholder"; and "fine" as "fine of 500 million won"; |
| (b) | If 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 the aforesaid Table. In such cases, "for the preceding five years" in subparagraph 1 (e) (i) of the aforesaid 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 aforesaid Table as "for the preceding 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 a fine" in the aforesaid item as "fact that it has ever been subject to the criminal punishment equivalent to or heavier than a sentence of a fine of 500 million won"; |
| (c) | If the registrant is a foreign collective investment business entity referred to in Article 249-3 (2) 5 of the Act, it shall continue to satisfy only the requirements prescribed in item (b) of this subparagraph. In such cases, "largest shareholder" shall be construed as "foreign collective investment business entity." |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-4 (Method, Procedures, etc. for Registration) |
| (1) | Each application for registration to be filed with the Financial Services Commission under Article 249-3 (3) of the Act shall contain the following: |
| 2. | Locations of the head office, branch offices, and other business offices; |
| 3. | Matters concerning executive officers; |
| 4. | Matters concerning the business unit requiring registration that the applicant intends to manage; |
| 5. | Matters concerning financing standing, including equity capital; |
| 6. | Matters concerning human resources and physical facilities, including electronic computer systems; |
| 7. | Matters concerning major shareholders or a foreign collective 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 the 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. | A document 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 years have not passed since its incorporation); |
| 6. | A document substantiating the status of human resources, physical facilities, etc.; |
| 7. | A document stating the names and trade names of shareholders who own not less than one percent of the total number of outstanding stocks 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); |
| 8. | A document substantiating that major shareholders or the foreign collective investment business entity meets the requirements set forth in the items of Article 249-3 (2) 5 of the Act; |
| 9. | A document 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 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. |
| (4) | Upon receipt of an application for registration filed under paragraph (1), the Financial Services Commission shall ascertain whether the contents of the application for registration of hedge fund investment business are true and examine whether the contents of application meet the requirements for registration prescribed in Article 249-3 (2) of the Act. |
| (5) | Except as specifically provided in paragraphs (1) through (4), filing an application for registration of hedge fund investment business; examinations 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. 26600, Oct. 23, 2015]
| Article 271-5 (Investment Recommendation, etc. of Hedge Funds) |
"Persons prescribed by Presidential Decree, such as ordinary investors, among qualified investors" in the proviso to Article 249-4 (2) of the Act means investors other than the following: | 1. | The entities referred to in the subparagraphs of Article 271 (1); |
| 2. | Funds established under the Act and corporations that manage and operate such funds; |
| 3. | Collective investment schemes. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-6 (Advertisements Soliciting Investment in Hedge Funds) |
| (1) | "Investors prescribed by Presidential Decree" in subparagraph 1 of Article 249-5 of the Act means ordinary investors each of whose balance of financial investment instruments (including the balance of each investor's deposit) as of the date preceding the date of placing an investment advertisement is not less than 100 million won. |
| (2) | Where a financial investment business entity that sells collective investment securities of a hedge fund under subparagraph 2 of Article 249-5 of the Act, places an investment advertisement on all or some of the matters referred to in Article 57 (3) of the Act or the subparagraphs of Article 60 (2) of this Decree, it shall individually give such information to professional investors or investors referred to in paragraph (1) in writing, or by telephone, electronic mail, or other means of communications prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-7 (Requirements for Creation or Establishment of Hedge Funds) |
"Requirements prescribed by Presidential Decree" in Article 249-6 (1) 4 of the Act means the requirements classified as follows: <Amended by Presidential Decree No. 27414, Jul. 28, 2016> | 1. | For an investment company: Both of the following requirements shall be satisfied: |
| (b) | Its capital as at the time of establishment shall not be less than the amount prescribed and publicly notified by the Financial Services Commission, which is at least 100 million won; |
| 2. | For an investment limited company, investment limited partnership company, investment limited liability company, investment limited partnership, or undisclosed investment association: Its capital or contribution as at the time of establishment shall not be less than the amount prescribed and publicly notified by the Financial Services Commission, which is at least 100 million won; |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-8 (Exemption from Reporting on Changes) |
| 1. | Where any matter reported is changed according to an amendment of the Act, this Decree or an order issued by the Financial Services Commission; |
| 2. | Where minor matters prescribed by publicly notified by the Financial Services Commission, such as a simple alteration of the wording, are changed. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-9 (Methods, Procedures, etc. for Reporting) |
| (1) | Every collective investment business entity of a hedge fund shall file a report stating the following with the Financial Services Commission under Article 249-6 (2) of the Act: |
| 1. | Name of the collective investment scheme; |
| 2. | Matters concerning the objectives, policies and strategies of investment; |
| 3. | Matters concerning investment risks; |
| 4. | Matters concerning the collective investment business entity (in the case of an investment company, including promoters and supervisory director (if any supervisory director is appointed)); |
| 5. | Matters concerning the management of the collective investment property; |
| 6. | Matters concerning the trust business entity; |
| 7. | Matters concerning the comprehensive financial investment business entity (limited to where the hedge fund is provided with prime brokerage business services from that relevant comprehensive financial investment business entity); |
| 8. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary to protect investors. |
| (2) | A report 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: |
| 1. | A 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 the corporation registration certificate, and excluding an investment trust, an investment limited partnership, and an undisclosed investment association); |
| 3. | A document substantiating the payment of contributions (excluding an investment trust); |
| 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 any of the following persons: 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 already submitted copy may substitute for the copy of the relevant contract for the entrustment of business affairs: |
| (a) | A collective investment business entity (excluding an investment trust and an undisclosed investment association); |
| (b) | A trust business entity; |
| (c) | A comprehensive financial investment business entity (limited to where a hedge fund receives prime brokerage services from the comprehensive financial investment business entity); |
| 5. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary to protect investors. |
| (3) | A report on a change filed under Article 249-6 (4) of the Act shall state the grounds for the change and the change by the methods prescribed and publicly notified by the Financial Services Commission and shall be accompanied by documents substantiating the change, such as the collective investment agreement, a certified copy of the registry, and copies of major contracts. |
| (4) | The Financial Services Commission shall verify whether the details of the report filed under Article 249-6 (2) of the Act and the report on changes filed under paragraph (4) of the same Article are true. |
| (5) | Except as specifically provided in paragraphs (1) through (4), the form of the report; method for preparing such reports; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-10 (Methods, etc. of Managing Collective Investment Property Held by Hedge Funds) |
| (3) | "Period prescribed by Presidential Decree" in the main sentence of Article 249-7 (2) 1 of the Act means one year: Provided, That where a collective investment scheme acquires unsold housing units (referring to housing units supplied by a project operator referred to in Article 54 of the Housing Act pursuant to the same Article on a first-come, first-served basis, because no contract for purchase in units has been concluded in the housing complex for which the deadline for the occupants' contracts specified in the announcement recruiting occupants has passed), the period specified in the collective investment agreement shall apply. <Amended by Presidential Decree No. 27444, Aug. 11, 2016> |
| (4) | “Cases prescribed by Presidential Decree" in the proviso to Article 249-7 (2) 1 of the Act means where a hedge fund merges with another hedge fund, is terminated or dissolved. |
| (5) | "Cases prescribed by Presidential Decree" in the proviso to Article 249 (2) 2 of the Act means where disposal of land acquired to conduct a real estate development project is inevitable because conducting the real estate development project is objectively identified as impracticable due to the apparent decrease in the feasibility of the project caused by the enactment, amendment, repeal, etc. of any related statute following acquisition. |
| (6) | Each hedge fund investment business entity shall file a report on the following matters by hedge fund pursuant to Article 249-7 (3) of the Act in the form and according to the procedures prescribed and publicly notified by the Financial Services Commission: |
| 1. | Status of derivatives trading; |
| 2. | Status of providing debt guarantees or offering assets as collateral; |
| (7) | The base date for filing a report under paragraph (6) is classified as follows: |
| 1. | A hedge fund, total amount of the collective investment property of which is not less than 10 billion won: June 30 and December 31 each year; |
| 2. | A hedge fund, total amount of the collective investment property of which is less than 10 billion won: December 31 each year. |
| 3. | Where a decision is made to postpone or resume redemption. |
| (9) | An investment trust, which is in the form of hedge fund, a collective investment business entity of an undisclosed investment association, or an investment company, etc., which is in the form of hedge fund shall use the form and follow the procedures prescribed and publicly notified by the Financial Services Commission to file a report with the Financial Services Commission under Article 249-7 (4) of the Act. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-11 (Special Cases concerning Hedge Funds) |
| 1. | To obtain consent from all other investors: Provided, That the same does not apply to any investment trust created for concluding a contract for a blind trust of stocks under the Public Service Ethics Act; |
| 2. | To make a payment at the price determined by the committee on assessment of collective investment property based on the price determined under Article 238 (1) of the Act. |
| 1. | The activity prescribed in Article 68 (5) 3 or 10; |
| 2. | The activity prescribed in Article 68 (5) 13: Provided, That the same does not apply where a collective investment security is sold to a comprehensive financial investment business entity and the comprehensive financial investment business entity purchases that collective investment security by making an investment as prescribed in Article 6-3 (3) 7; |
| 3. | Activities prescribed and publicly notified by the Financial Services Commission among those prescribed and publicly notified by the Financial Services Commission under Article 68 (5) 14. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-12 (Measures against Hedge Funds) |
| 1. | Where a hedge fund receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 2. | Where a hedge fund fails to correct the relevant condition within one month from the date of business suspension imposed under Article 253 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed) or conducts its business during the period of suspension; |
| 3. | Where a hedge fund commits identical or similar violations continuously or repeatedly. |
| 1. | Making a demand or recommendation for improving the business management or work process; |
| 2. | Demanding compensation; |
| 3. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 4. | Informing a related agency or investigation agency of a violation of the Act, if any; |
| 5. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree or any other related statutes. |
| (6) | "Event prescribed by Presidential Decree" in Article 249-9 (3) 2 of the Act means any of the events provided in subparagraphs 1 through 9, 13, 16 or 20 of attached Table 6. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
SECTION 2 Private Equity Funds
| Article 271-13 (Reporting, etc. on Establishment of Private Equity Funds) |
| (1) | A private equity fund shall file a report stating the following matters with the Financial Services Commission pursuant to the main sentence of Article 249-10 (4) of the Act: |
| 2. | Matters concerning the managing member; |
| 3. | Matters concerning the management of collective investment property of the private equity fund; |
| 4. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary to protect investors. |
| (2) | A report filed under paragraph (1) shall be accompanied by the following documents: |
| 2. | Following documents concerning the managing member: |
| (a) | Financial statements as of the end of the most recent business year; |
| (b) | Details of its major shareholder, such as the name and resident registration number of the major shareholder (where the major shareholder is a corporation, referring to its trade name or title, corporate registration number or business registration number) and the number of stocks owned by the major shareholder; |
| 3. | Where the business affairs of the private equity fund is entrusted to a third party, a copy of a contract for the entrustment of business affairs concluded with the third party: Provided, That if a copy of a contract for the entrustment of business affairs contains the same terms and conditions as contained in a copy of any 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; |
| 4. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary to protect interests of partners of the private equity fund. |
| (3) | Upon receipt of a report filed under paragraph (1), the Financial Services Commission shall verify the corporation registration certificates of the relevant private equity fund and its managing member by sharing administrative information under Article 36 (1) of the Electronic Government Act. |
| (4) | Upon receipt of a report filed under paragraph (1), the Financial Services Commission shall ascertain whether the contents of the report filed under Article 249-10 (4) of the Act are true. |
| 1. | Where the total equity shares of an affiliated company belonging to a single conglomerate subject to limitations on cross-holdings (referring to a conglomerate subject to limitations on cross-holdings prescribed in Article 9 (1) of the Monopoly Regulation and Fair Trade Act; hereinafter the same shall apply) is not less than the ratio prescribed by the Financial Services Commission, which shall be at least 30 percent of total investments in the private equity fund; |
| 2. | Where an affiliated company of the conglomerate subject to limitations on cross-holdings is the managing member; |
| 3. | Where any related party to the managing member has made an investment of not less than the ratio prescribed and publicly notified by the Financial Services Commission, which shall be at least 30 percent of the total investments in the private equity fund; |
| 4. | Cases equivalent to those prescribed in subparagraph 1 through 3, which are prescribed and publicly notified by the Financial Services Commission; |
| 5. | Where the total equity shares of any of the following entities is not less than the ratio prescribed and publicly notified by the Financial Services Commission, which shall be at least 30 percent of the total investments in the private equity fund. In such cases, the same shall apply only to where any of the entities referred to in subparagraphs 1 through 4 makes an investment of not less than the amount prescribed and publicly notified by the Financial Services Commission in the collective investment property or trust property managed by the following entities: |
| (a) | An investment trust or a collective investment business entity of an undisclosed association; |
| (b) | An investment company, etc.; |
| (c) | A trust business entity managing trust property. |
| (6) | "Cases prescribed by Presidential Decree" in the former part of Article 249-10 (6) of the Act means where any of the following matters is changed: |
| 2. | The matters prescribed in paragraph (2) 2 or 3; |
| 3. | Other matters prescribed and publicly notified by the Financial Services Commission in relation to the managing member of a private equity fund. |
| (7) | Where any matter referred to in the subparagraphs of paragraph (6) is changed, a private equity fund shall file a report thereon with the Financial Services Commission by not later than tenth day of the month following the quarter in which such change is made: Provided, That where any change is made to the financial statements referred to in paragraph (2) 2 (a), the private equity fund shall file a report thereon with the Financial Services Commission within one month from the end of the relevant business year in which the change is made. |
| (8) | Except as specifically provided for in paragraphs (1) through (7), the form of the report to be filed by a private equity fund; methods of preparation; and other necessary matters shall be prescribed by Presidential Decree. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-14 (Partners and Contributions) |
| 1. | Any of the persons referred to in the subparagraphs of Article 10 (1); |
| 2. | A person prescribed and publicly notified by the Financial Services Commission, from among persons referred to in Article 110 (3) 12 or 13. |
| 1. | Where an executive officer or operating personnel of the managing member of a private equity fund invest in the private equity fund: 100 million won; |
| 2. | Where any person other than the one referred to in subparagraph 1 invests in a private equity fund: 300 million won. |
| (5) | "Ratio prescribed by Presidential Decree" in Article 249-11 (8) of the Act means a ratio prescribed and publicly notified by the Financial Services Commission, which shall be at least 30 percent. |
| (6) | "Matters prescribed by Presidential Decree, such as information on the limited partner and its investment structure" in Article 249-11 (8) of the Act means the following: |
| 1. | Outline of partners, such as the history, purpose and status of business operations of partners, matters concerning the representative and executive officers (limited to where a partner is a corporation), and financial statements (in cases of an enterprise that prepares consolidated financial statements, including the consolidated financial statements); |
| 2. | Amount of investment by each partner; |
| 3. | Investment structure relating to the affairs set forth in the subparagraphs of Article 271-18 (3); |
| 4. | Outline of investable enterprises by the private equity fund (the history, purpose, and status of business operations, matters concerning the representative and executive officers, and financial statements (in cases an enterprise that prepares consolidated financial statements, including the consolidated financial statements)); |
| 5. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary to protect partners and to maintain sound trading practices. |
| (7) | "Period prescribed by Presidential Decree" in Article 249-11 (8) of the Act means three business days from the date on which the equity shares held by a limited partner, which is a related party to the managing member of a private equity fund, reach the ratio prescribed in paragraph (5) out of the total equity shares held by that private equity fund. |
| (8) | Where a finance company belonging to a single conglomerate subject to limitations on cross-holdings invests in a private equity fund, its investment shall not exceed 30 percent of the total amount invested in the private equity fund. |
| (9) | Notwithstanding paragraph (8), where an investable enterprise by a private equity fund is a company established solely under any foreign statute (including companies in the process of incorporation), the amount of investment therein may exceed 30 percent of the total amount invested in the private equity fund. |
| (10) | A partner may make an investment under an agreement to make the investment when requested by the managing member. |
| (11) | Except as specifically provided in paragraph (1) through (10), the methods and procedures for investment by partners and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission as necessary to protect investors. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-15 (Methods, etc. of Managing Collective Investment Property of Private Equity Funds) |
| (1) | "Manner prescribed by Presidential Decree" in Article 249-12 (1) of the Act means a manner by which a private equity fund agrees with another private equity fund to engage in any of the following acts: |
| 1. | Jointly acquiring or disposing of stock certificates, instruments representing a preemptive right, other similar instruments representing equity shares in or a right to acquire the equity shares, or stock-related corporate bonds (hereafter referred to as "equity securities, etc." in this paragraph); |
| 2. | Mutually transferring or acquiring equity securities, etc. after acquiring the equity securities, etc. solely or jointly; |
| 3. | Jointly exercising voting rights (including the power to give an instruction to exercise the voting rights). |
| (2) | "Company prescribed by Presidential Decree" in Article 249-12 (1) 1 of the Act means any of the following: <Amended by Presidential Decree No. 28040, May 8, 2017> |
| 5. | A foreign corporation if the aggregate amount of the following assets owned by a foreign corporation and its subsidiaries (referring to a foreign company corresponding to a subsidiary under subparagraph 1 of Article 1-3 of the Act on External Audit of Stock Companies) is not less than 30 percent of the total amount of assets owned by the foreign corporation, and its subsidiaries: |
| (a) | Securities issued by corporations incorporated in Korea; |
| (b) | Monetary claims against corporations incorporated in Korea; |
| (c) | Real estate or special assets located in Korea; |
| (d) | Derivatives-linked securities or derivatives, based on assets set forth in items (a) through (c) or an index based on such assets (limited to where the underlying assets can be acquired by exercising rights, etc.); |
| 6. | Any other company prescribed and publicly notified by the Financial Services Commission, similar to those prescribed in subparagraph 1 through 5. |
| (3) | "Investment prescribed by Presidential Decree" in Article 249-12 (1) 3 of the Act means any of the following investments made in the stock-related corporate bonds: |
| 1. | An investment through which the aggregate of outstanding voting stocks of any other company under Article 249-12 (1) 1 of the Act and the outstanding voting stocks (referring to outstanding stocks calculated in accordance with the standards and methods prescribed and publicly notified by the Financial Services Commission) that can be acquired by the exercising, etc. of a conversion right or preemptive right of the stock-related corporate bonds becomes at least ten percent of the total number of outstanding voting stocks of the company; |
| 2. | An investment which makes it possible to exercise de facto control over the major management affairs of the company in which the investment is made, such as appointment or dismissal of executive officers, under an investment agreement, etc. |
| (4) | "Exchange-traded derivatives or over-the-counter derivatives prescribed by Presidential Decree" in Article 249-12 (1) 4 of the Act means the contractual rights provided for in Article 5 (1) 1 through 3. |
| 2. | Investment in real estate (including rights and interests in real estate, such as a surface right, an easement, a right to lease on a deposit basis, leasehold, a right of residence in a housing unit), monetary claims, etc. owned by an investable enterprise; |
| 4. | Investment in any of the following facilities and equipment: |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-16 (Methods, etc. of Managing Surplus Fund) |
| (5) | "Method prescribed by Presidential Decree" in Article 249-12 (2) 4 of the Act means investing in any of the following: <Amended by Presidential Decree No. 28040, May 8, 2017> |
| 1. | Negotiable certificates of deposit denominated in KRW; |
| 2. | Bills referred to in Article 79 (2) 5 (excluding commercial paper); |
| 3. | Lending money to an investable enterprise. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-17 (Restrictions on Management, etc. of Collective Investment Property of Private Equity Funds) |
| (1) | "Period prescribed by Presidential Decree" and "ratio prescribed by Presidential Decree" in the main sentence of Article 249-12 (3) of the Act means two years and 50 percent, respectively. |
| 1. | Where the collective investment property held by a private equity fund is insufficient to acquire equity securities of an investable enterprise as provided in Article 249-12 (1) 1 or 2; |
| 2. | Where investing in any of the facilities or equipment referred to in the items of Article 271-15 (5) 4; |
| 3. | In extenuating circumstances prescribed and publicly notified by the Financial Services Commission under which it is necessary to protect investors and to maintain sound trading practices. |
| 1. | Where the business of an investable enterprise is suspended; |
| 2. | Where an investable enterprise has discontinued its operations for not less than three months; |
| 3. | In extenuating circumstances prescribed and publicly notified by the Financial Services Commission under which it is necessary to protect investors and to maintain sound trading practices. |
| (5) | "Cases prescribed by Presidential Decree" in the proviso to Article 249-12 (5) of the Act means the cases provided in the subparagraphs of paragraph (4); |
| 1. | Where the trading of equity securities of an investable enterprise is suspended or discontinued in the securities market or overseas securities market; |
| 2. | In extenuating circumstances prescribed and publicly notified by the Financial Services Commission under which it is necessary to protect investors and to maintain sound trading practices. |
| (8) | "Period prescribed by Presidential Decree" in the proviso to Article 249-12 (6) of the Act means the period by which disposal of equity securities of an investable enterprise becomes possible, as approved by the Financial Services Commission. |
| 1. | A private equity fund, the total amount of collective investment property of which is not less than 10 billion won: June 30 and December 31 each year; |
| 2. | A private equity fund, the total amount of collective investment property of which is less than 10 billion won: December 31 each year. |
| (10) | The form of the report and procedures for filing the report under paragraph (9) shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-18 (Methods, etc. for Calculation of Investment Ratios) |
| (2) | The investment ratios referred to in Article 249-12 (2) 3 of the Act and the main sentence of Article 249-12 (3) may be calculated respectively in any of the following methods, where any fund established under the Acts listed in attached Table 2 of the National Finance Act becomes a partner of a private equity fund and an investment is made under an agreement to make the investment when requested by the managing member as provided in under Article 271-14 (10): |
| 1. | For calculating the ratio referred to in Article 249-12 (2) 3 of the Act: Where securities are acquired within the limit of an investment by the fund, to calculate the ratio excluding the investment and the price for acquiring the securities, respectively; |
| 2. | For calculating the ratio referred to in the main sentence of Article 249-12 (2) 3 of the Act: To calculate the ratio excluding an investment by the fund from the collective investment property held by the private equity fund. |
| (3) | No managing member of any private equity fund shall entrust any of the following business affairs to a third party: |
| 1. | Business affairs related to the selection of an investable enterprise or the establishment or selection of a special-purpose company; |
| 2. | Business affairs related to determining the prices, timing, methods, etc. of equity securities of an investable enterprise or a special-purpose company to trade the equity securities; |
| 3. | Business affairs related to exercising voting rights in equity securities belonging to the collective investment property of an investable enterprise or the property of a special-purpose company; |
| 4. | Other business affairs prescribed and publicly notified by the Financial Services Commission as necessary to protect partners' interests and to maintain sound trading practices. |
| (4) | An application form for obtaining approval under the provisos to Article 249-12 (3), (4), (5) and (6) and procedures for filing such application form shall be prescribed and publicly notified respectively by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-19 (Special-Purpose Companies) |
| 2. | An entity that fulfills all of the following requirements: |
| (a) | None of the following entities: |
| (iii) | An entity referred to in any of Article 10 (2) 1 through 17; |
| (iv) | An entity referred to in any of Article 10 (3) 1 through 14; |
| (v) | An entity referred to in any of Article 10 (3) 18 (a) through (c); |
| (vi) | A foreigner equivalent to any of the entities referred to in subitem (iii) or (iv); |
| (vii) | A company or corporation established or substantially controlled by any of the entities referred to in subitems (i) through (vi) or a finance company belonging to a single conglomerate subject to limitations on cross-holdings; |
| (b) | To engage in directly such business as manufacturing business defined in the Korea Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea pursuant to the Statistics Act, in Korea with executive officers and/or employees, a place of business, and other human resources and physical facilities ordinarily required for such business; |
| (c) | To participate jointly in the management of an enterprise in which a special-purpose company invests under an agreement, a contract, etc. with the managing member of the private equity fund which has invested in that special-purpose company; |
| (d) | Other requirements prescribed and publicly notified by the Financial Services Commission as necessary to protect partners' interests and to maintain sound trading practices. |
| (3) | Where any of the following special-purpose companies obtains a loan or provides a debt guarantee under the latter part of Article 249-13 (3) of the Act, the aggregate amount thereof shall not exceed 300 percent of the equity capital of the special-purpose company referred to in subparagraph 1. In such cases, the method for calculating the equity capital and other matters shall be prescribed and publicly notified by the Financial Services Commission: |
| 1. | The special-purpose company in which a private equity fund becomes a shareholder or partner under paragraph (1) 3 (a) of the same Article; |
| 2. | The special-purpose company in which the special-purpose company referred to in subparagraph 1 becomes a shareholder or partner under paragraph (1) 3 (a) of the same Article. |
| (4) | The investment ratio of the property held by a special-purpose company may be calculated in the same manner as the investment ratio of the collective investment property held by a private equity fund is calculated as provided in Article 271-18 (1) and (2). |
| (5) | A special-purpose company shall entrust the management of its property to the managing member of a private equity fund who is its shareholder or partner. |
| (7) | Where a special-purpose company invests in equity securities under Article 249-12 (1) 1 or 2 of the Act, the equity securities may be appraised in the same manner as the collective investment property of a private equity fund is appraised under Article 260 (1) 1. |
| (8) | An application form for obtaining approval from the Financial Services Commission under the provisos to Article 249-12 (4) and (6) of the Act, which shall apply mutatis mutandis under Article 249-13 (5) of the Act, procedures for filing the application form and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-20 (Managing Members, etc.) |
| (1) | "Acts prescribed by Presidential Decree" in the former part of Article 249-14 (2) of the Act means the Act, this Decree and the following statutes: <Amended by Presidential Decree No. 27205, May 31, 2016> |
| 1. | Managing the collective investment property of a private equity fund, in violation of its articles of incorporation; |
| 2. | Trading under unfair terms and conditions which conflict with the general terms and conditions of transactions without good cause, in managing the collective investment property of a private equity fund; |
| 3. | Using information on the collective investment property of a private equity fund for managing the proprietary property of the managing member; |
| 4. | Pursuing one's own or a third party's interests, hurting the interest of a specific private equity fund or special-purpose company; |
| 5. | Any activity to circumvent the prohibition or restrictions prescribed in Articles 249-11 through 18 of the Act, through a transaction of over-the-counter derivatives, a trust contract, a linked-transaction, etc. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-21 (Requirements, etc. for Registration) |
| (1) | "Amount prescribed by Presidential Decree" in Article 249-15 (1) 1 of the Act means 100 million won. In such cases, the base date for the calculation of equity capital shall be the date of filing of the application for registration. |
| (2) | "Persons prescribed by Presidential Decree, such as a managing member of a limited partnership company" in Article 249-15 (1) 2 of the Act means the following: |
| 1. | The managing member of a limited partnership company; |
| 2. | The managing member of a limited liability company; |
| 3. | An executive director of a limited company or the managing member of an unlimited partnership company. |
| (4) | "Good financial standing and social creditability prescribed by Presidential Decree" in Article 249-15 (1) 5 of the Act means the status classified as follows: <Amended by Presidential Decree No. 27414, Jul. 28, 2016> |
| 2. | Social creditability: To meet all of the following requirements: Provided, That excluded herefrom are violations that are deemed minor: |
| (a) | It shall not have been subject to criminal punishment equivalent to or heavier than a fine of 500 million won for a violation of a finance-related statute, the Monopoly Regulation and Fair Trade Act, or the Punishment of Tax Evaders Act during the most recent three years: Provided, That excluded herefrom is where any punishment is imposed in accordance with joint penalty provisions under Article 448 of the Act or other relevant statutes; |
| (b) | It shall not have been designated as an insolvent financial institution in accordance with the Act on the Structural Improvement of the Financial Industry, or shall not have been subject to the revocation of permission, authorization, registration, etc. of business in accordance with the Act or other finance-related statutes, during the most recent three years. |
| 1. | Where a managing member of a private equity fund fails to correct the relevant condition within one month from the date of business suspension imposed under Article 249-21 (3) 1 (b) of the Act (or the period otherwise prescribed in excess of one month when such business suspension is imposed); |
| 2. | Where a managing member of a private equity fund receives money, etc. from a third person in connection with business affairs by any improper means or acquires money, etc. to deliver it to a third person; |
| 3. | Where a managing member of a private equity fund commits identical or similar violations continuously or repeatedly. |
| (6) | Article 22 (1) (excluding subparagraphs 4 and 7) shall apply mutatis mutandis to the matters to be stated in the application for registration of a managing member; Article 22 (2) (excluding subparagraphs 4 and 8) shall apply mutatis mutandis to the documents accompanying the application for registration; and Article 22 (3) and (4) shall apply mutatis mutandis to the methods and procedures for the examination of registration. In such cases, "investment advisors or fund managers" shall be construed as "operating personnel" and "financial statements and supplementary schedules" as "financial statements". |
| (7) | A managing member registered under Article 249-15 (1) of the Act may apply for revocation of his/her registration in accordance with the procedures prescribed and publicly notified by the Financial Services Commission, if there is no private equity fund managed by him/her. |
| (8) | Except as specifically provided in paragraphs (1) through (7), filing an application for registration of a managing member; the 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. 26600, Oct. 23, 2015]
| Article 271-22 (Restrictions on Transactions with Interested Parties, etc.) |
| 1. | Any executive officer and/or employee of a managing member, and his/her spouse; |
| 2. | Any major shareholder of a managing member and his/her spouse; |
| 3. | Any affiliated company of a managing member, excluding the following: |
| (a) | An investable enterprise or a special-purpose company in which a private equity fund, the collective investment property of which is managed by that managing member, has invested; |
| (b) | Another private equity fund or its managing member that has invested in an investable enterprise or a special-purpose company by jointly managing the investable enterprise or special purpose company referred to in item (a) through the method prescribed in Article 271-15 (1); |
| (c) | Other companies prescribed and publicly notified by the Financial Services Commission, as unlikely to undermine the interest of partners of the private equity fund and sound trading practices. |
| 1. | Any of the transactions provided for in the subparagraphs of Article 85; |
| 2. | A transaction to which all partners of the private equity fund have consented; |
| 3. | Other transactions prescribed and publicly notified by the Financial Services Commission, as unlikely to undermine the interests of partners of the private equity fund and sound trading practices: |
| (5) | The market prices of the securities to be acquired with collective investment property of a private equity fund under the latter part of Article 249-16 (4) of the Act shall be appraised as provided for in Article 260 (1) and (2). |
| (6) | "Entity prescribed by Presidential Decree" in Article 249-16 (4) 2 of the Act means a limited partner which owns not less than 30 percent of equity shares out of the total amount invested in the private equity fund. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-23 (Restrictions on Private Equity Funds, etc. Affiliated with Conglomerates subject to Limitations on Cross-Holdings) |
| (2) | "Manner prescribed by Presidential Decree" in the proviso to Article 249-18 (2) of the Act means filing an application for approval in the form prescribed and publicly notified by the Financial Services Commission, stating any of the following grounds for an extension of the period for disposition: |
| 1. | Changes in economic conditions, such as sharp changes in the prices of equity securities; |
| 2. | Significant losses from the business run by an investable enterprise; |
| 3. | Grounds equivalent to subparagraph 1 or 2, on which it is impracticable for the relevant private equity fund to dispose of equity securities of an investable enterprise. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-24 (Special Cases concerning Regulation on Holding Companies) |
| (1) | "Manner prescribed by Presidential Decree" in Article 249-19 (2) of the Act means submitting supporting materials in the forms prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-25 (Special Cases concerning Private Equity Funds) |
| 1. | Status of equity shares owned by limited partners of a private equity fund (limited to limited partners that do not belong to a single conglomerate subject to limitations on cross-holdings to which the private equity fund belongs) in the private equity fund; |
| 2. | A change in the holding ratio referred to in subparagraph 1, if it changes by not less than one percent of the total amount of investment in the relevant private equity fund; |
| 3. | Name of the limited partners referred to in subparagraph 1, details of business, financial standing, and other general status prescribed and publicly notified by the Financial Services Commission; |
| 4. | Other matters prescribed and publicly notified by the Financial Services Commission in relation to the status of the limited partners. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-26 (Measures against Private Equity Funds) |
| 1. | Where a private equity fund violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as provided in subparagraph 3 of attached Table 10; |
| 2. | Where a private equity fund violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as provided in subparagraph 4 of attached Table 10; |
| 3. | Where a private equity fund violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as provided in subparagraph 5 of attached Table 10. |
| 1. | Where a private equity fund receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 2. | Where a private equity fund fails to correct the relevant condition within one month from the date of business suspension imposed under Article 249-21 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed), or conducts its business during the period of suspension; |
| 3. | Where a private equity fund continuously or repeatedly violates an identical or a similar duty that private equity fund is required to fulfill under the Act, this Decree or related statutes; |
| 1. | Making a demand or recommendation for improving the work process; |
| 2. | Demanding compensation; |
| 3. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 4. | Informing a related agency or investigation agency of a violation of other Acts, if any; |
| 5. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree or any other related statutes. |
| 2. | Measures set forth in paragraph (5) 3 through 5. |
| 2. | Measures set forth in paragraph (5) 3 through 5. |
| (9) | "Case prescribed by Presidential Decree" in subparagraph 27 of attached Table 6 of the Act means any of the cases provided in the subparagraphs of attached Table 10 of this Decree. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-27 (Special Cases concerning Private Equity Funds for Corporate Financial Stability, etc.) |
| (1) | "Financial institution prescribed by Presidential Decree" in Article 249-22 (1) 4 of the Act means any of the financial institutions referred to in Article 10 (2) (excluding the financial institutions referred to in subparagraphs 9, 11 and 12 of the same paragraph) or any of the following financial institutions: <Amended by Presidential Decree No. 27037, Mar. 11, 2016; Presidential Decree No. 27205, May 31, 2016> |
| 1. | An investment company, a private equity fund or a special-purpose company; |
| 6. | The Korea Deposit Insurance Corporation and a finance company authorized to perform liquidation under the Depositor Protection Act; |
| 8. | A foreign financial institution equivalent to those referred to in subparagraphs 1 through 7. |
| (2) | “Agreement for improving its financial structure prescribed by Presidential Decree" in Article 249-22 (1) 4 of the Act means an agreement concluded between a company and a creditor financial institution which holds at least 50 percent of total amount of credit granted by creditor financial institutions either individually or jointly to improve the financial structure of the company. |
| (3) | "Company that intends to restructure or improve its financial structure, as prescribed by Presidential Decree, by such means as a merger, conversion, or liquidation of a corporation (including its affiliated companies)" in Article 249-22 (1) 5 of the Act means any of the following enterprises that intend to restructure or improve its financial structure by such means as a merger, split-off, merger after a split-off, stock exchange, stock transfer, transfer and acquisition of business (including partial transfer and acquisition), sale of assets, or transfer of sales: |
| 1. | An enterprise whose total capital on the financial statements defined in subparagraph 1 of Article 1-2 of the Act on External Audit of Stock Companies (limited to financial statements that have received at least a qualified opinion (referring to an auditor's opinion which indicates that the result of the audit conducted by him/her is not so bad as to express an adverse opinion or a disclaimer of opinion, although he/she is not in a position to express an unqualified opinion); hereafter the same shall apply in this Article) is less than the paid-in capital; |
| 2. | An enterprise whose ratio of total liabilities to the total capital on the financial statements (hereinafter referred to as "debt ratio") exceeds 1.5 times the average debt ratio of the relevant category of business (referring to the debt ratio of the relevant category of business (referring to the categories of businesses listed under a division of the Korean Standard Industrial Classification; hereinafter the same shall apply) specified in the business management analysis announced by the Bank of Korea, and the average debt ratio of overall category of business shall apply where no such debt ratio exists in the business management analysis); |
| 3. | An enterprise whose amount of loss caused by any of the following grounds is not less than five percent of the sales revenue of the immediately preceding business year: |
| (a) | Non-payment of a bill; |
| (b) | Failure to collect account receivables or export price; |
| (c) | Performance of a debt guarantee; |
| 4. | An enterprise whose corporate bonds are rated non-investment grade by at least two credit rating companies within the most recent six months; |
| 5. | An enterprise that has sustained the operating loss continuously for the most recent two years based on its financial statements as of the end of the business year; |
| 6. | An affiliated company of any of the enterprises provided for in subparagraphs 1 through 5. |
| (6) | A private equity fund for corporate financial stability may manage the remaining property in any of the following manner pursuant to Article 249-22 (2) of the Act: |
| 1. | Investing in securities; |
| 2. | Investing in exchange-traded derivatives or over-the-counter derivatives to hedge risks arising from investments in securities; |
| 3. | Lending money required to acquire or merge a company for financial restructuring or guaranteeing payment therefor; |
| 5. | Depositing in any of the finance companies referred to in the items of Article 79 (2) 5 (including foreign finance companies corresponding thereto); |
| 6. | Investing in negotiable certificates of denominated in KRW; |
| 7. | Investing in bills or notes (excluding commercial paper) referred to in Article 79 (2) 5. |
| (8) | "Methods prescribed by Presidential Decree" in the former part of Article 249-22 (3) of the Act means the methods provided for in the subparagraphs of paragraph (6). |
| 1. | Where the business of an investable enterprise is suspended; |
| 2. | Where an investable enterprise discontinues its business operations for at least three months; |
| 3. | Where a private equity fund for corporate financial stability or a special-purpose company accepts a tender offer to purchase stocks of an investable enterprise; |
| 4. | Where any ground for dissolution of a private equity fund for corporate financial stability occurs, such as expiration of its term of existence; |
| 5. | Where it is likely to undermine partners' interests due to a merger, etc. of an investable enterprise. |
[This Article Newly Inserted by Presidential Decree No. 26600, Oct. 23, 2015]
| Article 271-28 (Special Cases concerning Privately Placed Funds, etc. Specializing in Start-up or Venture Business) |
| (2) | “Period prescribed by Presidential Decree" in Article 249-23 (2) of the Act menas two years: Provided, That where it is difficult to achieve the ratio referred to in paragraph (2) within two years due to the difficulty in investment recovery or selection of an investable enterprise, the period may be extended within the extent of one year with prior approval from the Financial Services Commission. |
| 1. | Trading of loan receivables and other receivables, the debtor of which is a start-up, venture business, etc. under Article 249-23 (1) of the Act (hereafter referred to as "start-up, venture business, etc." in this Article), security rights incidental thereto, and other rights; |
| 2. | Investment in business of a start-up, venture business, etc. which is engaged in the development or manufacture, and operated in a manner to maintain accounting independence from any other business; |
| (5) | A private equity fund specializing in start-up or venture business under Article 249-23 (1) of the Act (hereinafter referred to as "private equity fund specializing in start-up or venture business") may manage its remaining property by any of the following methods pursuant to paragraph (2) of the same Article: |
| 1. | Investment in securities; |
| 3. | Depositing in a financial institution falling under any item of Article 79 (2) 5 (including any foreign financial institution corresponding thereto); |
| 4. | Investment in negotiable certificates of deposit denominated in Korean won; |
| 5. | Investment in bills prescribed in Article 79 (2) 5 (excluding corporate commercial papers); |
| 6. | Lending money to an investable start-up, venture business, etc. |
| (7) | "Method prescribed by Presidential Decree" in the former part of Article 249-23 (3) of the Act means a method falling under any subparagraph of paragraph (4). |
| 1. | Matters concerning contribution to a private equity fund specializing in start-up and venture business; |
| 2. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary to protect investors and to maintain sound trading practices. |
[This Article Newly Inserted by Presidential Decree No. 27861, Feb. 13, 2017]
SECTION 3 Special Provisions concerning Banks and Insurance Companies
| Article 272 (Special Provisions concerning Banks) |
| (1) | Each committee on management of collective investment property established under the former part of Article 250 (2) of the Act shall perform the following business affairs: Provided, That matters concerning management of the committee on management of collective investment property shall be prescribed and publicly notified by the Financial Services Commission, in addition to the matters referred to in subparagraphs 1 through 3: |
| 1. | Establishment of business plans and budgets for collective investment business; |
| 2. | Establishment of strategies for management of assets held by investment trusts; |
| 3. | Deliberation on the following matters: |
| (a) | Decisions on postponement of redemption; |
| (b) | Convening (excluding cases falling under Article 190 (3) of the Act) and postponement of the general meeting of beneficiaries; |
| (c) | Decisions on purchase of beneficiary certificates in response to the exercise of appraisal rights of beneficiary certificates; |
| (d) | Appointment and dismissal of members of the committee on assessment of collective investment property; |
| (e) | Establishment and amendment of the standards for assessment of collective investment property; |
| (f) | Merger of investment trusts. |
| (3) | Each bank shall establish a system for preventing conflicts of interest, including the following matters, pursuant to the main sentence of Article 250 (7) of the Act: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016> |
| 1. | Each department shall be separated independently to ensure that business affairs and reporting are performed independently; |
| 2. | Where executive officers and/or employees in charge of the business affairs provided for in the subparagraphs of Article 250 (7) of the Act hold meetings or communicate with each other, they shall keep records of such meetings or communications in accordance with the methods and procedures prescribed by the internal control guidelines and shall obtain approval from a compliance officer (referring to a compliance officer under the Banking Act); |
| 3. | Employees in charge of business affairs referred to in the subparagraphs of Article 250 (7) of the Act shall not be dispatched from one department to another; |
| 5. | The office space shall be separated by installing a separate entrance or by any other means sufficient to prevent sharing of information; |
| 6. | Electronic data of business affairs referred to in the subparagraphs of Article 250 (7) of the Act shall be stored, managed, and inspected independently to prevent sharing of such data; |
| 7. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for preventing conflicts of interest. |
| (4) | "Business affairs as prescribed further by Presidential Decree" in the proviso to Article 250 (7) of the Act means any of the following: <Amended by Presidential Decree No. 22493, Nov. 15, 2010; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27290, Jun. 28, 2016> |
| (5) | "Those prescribed by Presidential Decree" in Article 250 (7) 1 of the Act means any of the following business affairs: Provided, That business affairs referred to in subparagraphs 1 through 3 (hereafter referred to as "investment advisory business, etc." in this paragraph) shall be limited to where a bank concurrently runs a trust business (excluding business related to keeping in custody and managing collective investment property) and is equipped with a system for preventing conflicts of interest prescribed and publicly notified by the Financial Services Commission, such as prohibition against concurrent offices and use of an electronic computer system in common between the investment advisory business, etc. and trust business (excluding business related to keeping in custody and managing collective investment property) and the business affairs referred to in Article 250 (7) 2 through 4 of the Act (in cases falling under subparagraph 3, applicable only to business affairs related to keeping in custody and managing collective investment property): <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27290, Jun. 28, 2016> |
| Article 273 (Special Provisions concerning Insurance Companies) |
| (1) | "Manner prescribed by Presidential Decree" in the main sentence of Article 251 (3) of the Act means any of the following manners in which an insurance company manages assets held by the investment trusts it has created: |
| 1. | Entrusting all business affairs related to management and management instructions to another collective investment business entity; |
| 2. | Managing all assets held by the investment trusts using discretionary investment services; |
| 3. | Investing all assets held by the investment trusts in other collective investment securities. |
| (3) | Every insurance company shall have a system for preventing conflicts of interest, including the following matters, pursuant to the main sentence of Article 251 (3) of the Act: <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016> |
| 1. | Each department shall be separated independently to ensure that business affairs and reporting are performed independently; |
| 2. | Where executive officers and/or employees in charge of business affairs referred to in the subparagraphs of Article 251 (3) of the Act hold meetings or communicate with each other, they shall keep records of such meetings or communications in accordance with the methods and procedures prescribed by the internal control guidelines and shall obtain approval from a compliance officer (referring to a compliance officer under the Insurance Business Act); |
| 3. | Employees in charge of business affairs referred to in the subparagraphs of Article 251 (3) of the Act shall not be transferred from one department to another; |
| 5. | The office space shall be separated by installing a separate entrance or by any other means so as to prevent sharing of information; |
| 6. | Electronic data on business affairs referred to in subparagraphs of Article 251 (3) of the Act shall be stored, managed, and inspected independently to prevent sharing of such data; |
| 7. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for preventing conflicts of interest. |
| (4) | "Business affairs as prescribed further by Presidential Decree" in the proviso to Article 251 (3) of the Act means any of the following: <Amended by Presidential Decree No. 22637 Jan. 24, 2011; Presidential Decree No. 24697, Aug. 27, 2013> |
| (5) | "Manner prescribed by Presidential Decree" in Article 251 (5) of the Act means any of the manners provided for in the subparagraphs of paragraph (1). |
| (6) | "Those prescribed by Presidential Decree" in Article 251 (3) 1 of the Act means any of the following business affairs: Provided, That business affairs referred to in subparagraphs 4 through 6 (hereafter referred to as "investment advisory business, etc." in this paragraph) shall be limited to where an insurance company concurrently runs a trust business (excluding business related to keeping in custody and management of collective investment property) and is equipped with a system for preventing conflicts of interest as prescribed and publicly notified by the Financial Services Commission, such as prohibition against concurrent offices and sharing of an electronic computer system between the investment advisory business, etc. and trust business (excluding business related to keeping in custody and managing collective investment property) and the business affairs referred to in Article 251 (3) 2 through 4 of the Act (in cases falling under subparagraph 3, applicable only to business affairs related to keeping in custody and management of collective investment property): <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
CHAPTER VIII SUPERVISION AND INSPECTION
| Article 274 (Supervision over Investment Companies, etc.) |
| 1. | Matters concerning redemption of collective investment securities; |
| 2. | Matters concerning assessment and accounting of collective investment property; |
| 3. | Matters concerning dissolution and merger of collective investment schemes; |
| Article 275 (Measures against Investment Companies, etc.) |
| (1) | "Circumstances prescribed by Presidential Decree" in Article 253 (1) 7 of the Act means the following cases: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Where a collective investment scheme manages the collective investment property, in violation of Article 81 (1) or 84 (1) of the Act, as provided in subparagraph 2 of attached Table 2 of the Act; |
| 2. | Where a collective investment scheme engages in any of the activities referred to in the subparagraphs of Article 85 of the Act, in violation of the aforesaid Article (excluding subparagraph 8), as provided in subparagraph 4 of attached Table 4 of the Act; |
| 3. | Where a collective investment scheme exercises a voting right, in violation of any provision of Article 87 (2) through (5) of the Act (including the case to which any of the aforesaid provisions shall apply mutatis mutandis under Article 186 (2) of the Act), as provided in subparagraph 6 of attached Table 2 of the Act; |
| 4. | Where a collective investment scheme violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as provided in subparagraph 3 of attached Table 6; |
| 5. | Where a collective investment scheme violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as provided in subparagraph 4 of attached Table 6; |
| 6. | Where a collective investment scheme violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as provided in subparagraph 5 of attached Table 6. |
| 1. | Where the collective investment scheme fails to commence managing its collective investment property within six months from the date of registration; |
| 2. | Where the collective investment scheme receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 3. | Where the collective investment scheme fails to correct the relevant condition within one month from the date of business suspension imposed under Article 253 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed), or conducts its business during the period of suspension; |
| 4. | Where the collective investment scheme commits identical or similar violations continuously or repeatedly. |
| 1. | Making a demand or recommendation for improving the business management or work process; |
| 2. | Demanding compensation; |
| 3. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 4. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 5. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (6) | "Measure prescribed by Presidential Decree" in the main sentence of Article 253 (3) of the Act means any of the measures provided in paragraph (5) 3 through 5. |
| (7) | "Circumstances prescribed by Presidential Decree" in Article 253 (3) 5 of the Act means the cases provided in the subparagraphs of attached Table 6 hereof. |
| (8) | "Case prescribed by Presidential Decree" in subparagraph 89 of attached Table 2 of the Act means any of the cases provided in the subparagraphs of attached Table 6 hereof. |
CHAPTER IX COMPANIES RELATED TO COLLECTIVE INVESTMENT SCHEMES
| Article 276 (Requirements for Registration of Fund Accounting and Administration Company) |
| (3) | "Professionals that meet the criteria prescribed by Presidential Decree" in Article 254 (2) 3 of the Act means two or more professionals specializing in computing collective investment property, who have worked for any of the following institutions in charge of computing the values of assets, including securities, or keeping in custody and managing collective investment property for at least two years: |
| 2. | A foreign financial investment business entity; |
| 3. | A department established by a fund management entity referred to in Article 8 (1) of the State Finance Act to be solely in charge of asset management pursuant to Article 77 (1) of the aforesaid Act or a pension management corporation, etc. to which management and investment of a fund is entrusted pursuant to an Act that authorizes establishment of such fund pursuant to attached Table 2 of the aforesaid Act; |
| 4. | A fund accounting and administration company. |
| 1. | An electronic computer system, office space, and office equipment required for operation of a fund accounting and administration company; |
| 2. | Supplementary facilities required for maintaining continuity of business in the event of power failure, fire, etc. |
| (5) | "System for preventing conflicts of interest prescribed by Presidential Decree" in Article 254 (2) 6 of the Act means a system for ensuring compliance with the following: |
| 1. | The department responsible for business affairs of a fund accounting and administration company shall be separated from departments for other business affairs to ensure that business affairs and reporting are performed independently; |
| 2. | It shall be prohibited from assigning employees in charge of business affairs of a fund accounting and administration company to concurrently hold office for other business affairs or to dispatch such employees to take charge of other business affairs; |
| 3. | The office space for business affairs of a fund accounting and administration company shall be sufficiently separated from the office space for other business affairs to prevent sharing of information; |
| 4. | Electronic data concerning business affairs of a fund accounting and administration company shall be separated from data about other business affairs and shall be stored, managed, and inspected independently so to prevent sharing of such data. |
| 3. | Financial investment business; |
| 4. | Business affairs of merchant banks. |
| (7) | "Relaxed requirement prescribed by Presidential Decree" in Article 254 (8) of the Act means not less than 70 percent of the minimum equity capital. In such cases, the requirements for maintaining the registration shall apply as of the end of each fiscal year; and a fund accounting and administration company 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. |
| Article 277 (Method and Procedure for Registration) |
| 2. | The domicile of the head office; |
| 3. | Matters concerning financial standing, including equity capital; |
| 4. | Matters concerning executive officers; |
| 5. | Matters concerning professionals prescribed in Article 276 (3); |
| 6. | Matters concerning physical facilities prescribed in Article 276 (4); |
| 7. | Matters concerning the system for preventing conflicts of interest prescribed in Article 276 (5); |
| 8. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (2) | An application for registration filed under paragraph (1) shall be accompanied by the following documents: |
| 1. | Articles of incorporation; |
| 2. | A document stating names or trade names of shareholders and number of stocks held by each of them; |
| 3. | 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); |
| 4. | Resumes and certificates of work experience of executive officers; |
| 5. | Documents substantiating the status of professionals, physical facilities, etc.; |
| 6. | Documents substantiating that the system for preventing conflicts of interest prescribed in Article 276 (5) has been established; |
| 7. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining registration. |
| (3) | Upon receipt of an application 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. 22467, Nov. 2, 2010> |
| (4) | Upon receipt of an application filed under paragraph (1), the Financial Services Commission shall ascertain whether the contents of the application under Article 254 (1) of the Act are true, and examine whether the contents of the application meet the requirements for registration prescribed in paragraph (2) of the aforesaid Article. |
| (5) | Except as specifically provided in paragraphs (1) through (4), filing an application for registration of a fund accounting and administration company; 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 278 (Supervision over General Administration Companies) |
| 1. | Matters concerning prevention of conflicts of interest; |
| 2. | Matters concerning acceptance of entrustment of business affairs; |
| 3. | Matters concerning the rule that requires a general administration company, if it is not a member of the Association, to establish internal guidelines similar to self-regulation that the Association implements for maintaining good business order and protecting investors. |
| Article 279 (Measures against General Administration Companies) |
| (1) | "Measures prescribed by Presidential Decree" in Article 257 (2) 7 of the Act means measures falling under any of the following subparagraphs: |
| 1. | Closure of branch offices or other business offices or suspending their business completely or partially; |
| 2. | Demanding or recommending improvement of methods of business management or operation; |
| 3. | Demanding compensation for losses; |
| 4. | Filing criminal complaints or informing an investigative agency of violations of the Act, if any; |
| 5. | Informing a related agency or an investigative agency of violations of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (3) | "As prescribed by Presidential Decree" in subparagraph 19 of attached Table 3 of the Act means cases falling under any subparagraph of attached Table 7 of this Decree. |
| Article 280 (Requirements, etc. for Registration of Fund Rating Companies) |
| (2) | "Professionals that meet the criteria prescribed by Presidential Decree" in Article 258 (2) 4 of the Act means three or more professionals specializing in assessing collective investment schemes, who have worked for any of the institutions referred to in Article 276 (3) 1 through 3 or a fund rating company in charge of assessment and analysis of securities, collective investment schemes, etc. or corporate finance affairs (referring to corporate finance affairs prescribed in subparagraph 3 of Article 71 of the Act) for at least two years. |
| 1. | An electronic computer system, office space, and office equipment required for operation of a fund rating company; |
| 2. | Supplementary facilities required for maintaining continuity of business in the event of power failure, fire, etc. |
| (4) | "System for assessment of collective investment schemes prescribed by Presidential Decree" in Article 258 (2) 7 of the Act means a system for assessment of collective investment schemes that covers the following: |
| 1. | Matters concerning collective investment schemes subject to assessment; |
| 2. | Matters concerning guidelines for classification by type of collective investment scheme and the reference index for each type; |
| 3. | Matters concerning calculation of return on investment and risk indices; |
| 4. | Matters concerning determination of the grades of collective investment schemes; |
| 5. | Matters concerning provision, public disclosure, etc. of data. |
| (5) | "System for preventing conflicts of interest prescribed by Presidential Decree" in Article 258 (1) 8 of the Act means a system for ensuring compliance with the following: |
| 1. | The department responsible for business affairs of a fund rating company shall be separated from departments for other business affairs to ensure that business affairs and reporting are performed independently; |
| 2. | It shall be prohibited from assigning employees in charge of business affairs of a fund rating company to concurrently hold office for other business affairs or to dispatch such employees to take charge of other business affairs; |
| 3. | The office space for business affairs of a fund rating company shall be separated from the office space for other business affairs sufficient to prevent sharing of information; |
| 4. | Electronic data on business affairs of a fund rating company shall be separated from those on other business affairs and shall be stored, managed, and inspected independently so to prevent sharing of such data. |
| 3. | Financial investment business; |
| 4. | Business affairs of merchant banks. |
| (7) | "Relaxed requirement prescribed by Presidential Decree" in Article 258 (8) of the Act means not less than 70 percent of the minimum equity capital. In such cases, the requirements for maintaining the registration shall apply as of the end of each fiscal year; and a fund rating company 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. |
| Article 281 (Method, Procedures, etc. for Registration) |
| 2. | The domicile of the head office; |
| 3. | Matters concerning financial standing, including equity capital; |
| 4. | Matters concerning executive officers; |
| 5. | Matters concerning professionals prescribed in Article 280 (2); |
| 6. | Matters concerning physical facilities prescribed in Article 280 (3); |
| 7. | Matters concerning the system for preventing conflicts of interest prescribed in Article 280 (5); |
| 8. | Matters concerning the system for assessment of collective investment schemes; |
| 9. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (2) | The application for registration filed under paragraph (1) shall be accompanied by the following documents: |
| 1. | Articles of incorporation; |
| 2. | A document stating names or trade names of shareholders and number of stocks held by each of them; |
| 3. | 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); |
| 4. | Resumes and certificates of work experience of executive officers; |
| 5. | Documents substantiating the status of professionals, physical facilities, etc.; |
| 6. | A document substantiating that the system for preventing conflicts of interest prescribed in Article 280 (5) has been established; |
| 7. | A document substantiating matters concerning the system for assessment of collective investment schemes; |
| 8. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining registration. |
| (3) | Upon receipt an application 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 an application filed under paragraph (1), the Financial Services Commission shall ascertain that the contents of the application for registration under Article 258 (1) of the Act are true, and examine whether the contents of the application meets the requirements for registration provided in paragraph (2) of the aforesaid Article. |
| (5) | Except as specifically provided in paragraphs (1) through (4), filing an application for registration of a fund rating company; examination of the application; the application form; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 282 (Business Conduct Standards, etc.) |
| 1. | Matters for maintaining consistency in the assessment of collective investment schemes in accordance with universally reasonable and fair standards; |
| 2. | Matters for prohibiting the use of any nonpublic information; |
| 3. | Matters for preventing the use of any information acquired for assessment of a collective investment scheme for any other business. |
| (2) | Pursuant to Article 259 (2) of the Act, every collective investment business entity may furnish a fund rating company with details of collective investment property either directly or through the Association to the extent necessary for assessment of a collective investment scheme. |
| (3) | Every fund rating company shall disclose the standards for assessment of collective investment schemes to the public on the websites operated by the Association and the company. |
| (4) | To disclose to the public or provides comparative performance of management of collective investment schemes, collective investment business entities, and investment traders and brokers who sell collective investment securities, every fund rating company shall disclose or provide it together with the standards applied to such comparison. |
| (5) | Upon modifying any content disclosed or provided under paragraph (3) or (4), every fund rating company shall disclose or provide such modified content to the public without delay. |
| Article 283 (Supervision of Fund Rating Companies) |
| 1. | Matters concerning prevention of conflicts of interest; |
| 2. | Matters concerning the rule that requires a fund rating company that is not a member of the Association to establish internal guidelines similar to self-regulation that the Association implements for maintaining sound business practices and protecting investors. |
| Article 284 (Measures against Fund Rating Companies) |
| 1. | Closure of branch offices or other business offices or suspending their business completely or partially; |
| 2. | Making a demand or recommendation for improving methods of business management or work process; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (3) | "Case prescribed by Presidential Decree" in subparagraph 18 of attached Table 4 of the Act means any of the cases provided in attached Table 8 of this Decree. |
| Article 285 (Requirements for Registration of Bond Rating Companies) |
| (2) | "Financial institution prescribed by Presidential Decree" in Article 263 (2) 3 of the Act means any of the following financial institutions: <Amended by Presidential Decree No. 27205, May 31, 2016> |
| 7. | A financial investment business entity; |
| (3) | "Professionals that meet the criteria prescribed by Presidential Decree" in Article 263 (2) 4 of the Act means not less than ten professionals specializing in assessment of collective investment property who work full-time for the affairs related to the assessment and analysis of financial investment instruments, including not less than three of the following persons: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | A person who has passed an examination conducted by the Association to test the ability of analyzing financial investment instruments; |
| 2. | A person who has worked for any of the institutions referred to in Article 276 (3) 1 through 3 or a bond rating company in charge of the assessment and analysis of financial investment instruments for at least three years. |
| 1. | An electronic computer system, office space, and office equipment required for operation of a bond rating company; |
| 2. | Supplementary facilities required for maintaining continuity of business in the event of power failure, fire, etc. |
| (5) | "System for assessment of bonds, etc. as prescribed by Presidential Decree" in Article 263 (2) 5 of the Act means a price assessment system covering the following matters: |
| 1. | Matters concerning bonds, etc. subject to assessment; |
| 2. | Matters concerning standards for classification of bonds, etc.; |
| 3. | The method of calculating return on investment; |
| 4. | Matters concerning provision, public disclosure, etc. of data. |
| (6) | "System for preventing conflicts of interest prescribed by Presidential Decree" in Article 263 (2) 8 of the Act means a system for ensuring compliance with the following: |
| 1. | The department responsible for business affairs of a bond rating company shall be separated from departments for other business affairs to ensure that business affairs and reports are performed independently; |
| 2. | It shall be prohibited from assigning employees in charge of business affairs of a bond rating company to concurrently hold office for other business affairs or to dispatch such employees to take charge of other business affairs; |
| 3. | The office space for business affairs of a bond rating company shall be sufficiently separated from the office for other business affairs to prevent sharing of information; |
| 4. | Electronic data about business affairs of a bond rating company shall be separated from those about other business affairs and shall be stored, managed, and inspected independently so to prevent sharing of such data. |
| 3. | Financial investment business; |
| 4. | Business affairs of merchant banks. |
| (8) | "Relaxed requirement prescribed by Presidential Decree" in Article 263 (8) of the Act means not less than 70 percent of the minimum equity capital. In such cases, the requirements for maintaining the registration shall apply as of the end of each fiscal year; and a bond rating company 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. |
| Article 286 (Method, Procedures, etc. for Registration) |
| 2. | The domicile of the head office; |
| 3. | Matters concerning financial standing, including equity capital; |
| 4. | Matters concerning executive officers; |
| 5. | Matters concerning professionals prescribed in Article 285 (3); |
| 6. | Matters concerning physical facilities prescribed in Article 285 (4); |
| 7. | Matters concerning the system for preventing conflicts of interest prescribed in Article 285 (6); |
| 8. | Matters concerning the system for price assessment of bonds, etc.; |
| 9. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors. |
| (2) | Each application for registration referred to in paragraph (1) shall be accompanied by the following: |
| 1. | Articles of incorporation; |
| 2. | A document stating names or trade names of shareholders and number of stocks held by each of them; |
| 3. | 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); |
| 4. | Resumes and certificates of work experience of executive officers; |
| 5. | Documents substantiating the status of professionals, physical facilities, etc.; |
| 6. | A document substantiating that the system for preventing conflicts of interest under Article 285 (6) has been established; |
| 7. | A document substantiating the system for price assessment of bonds, etc.; |
| 8. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining registration. |
| (3) | Upon receipt of an application 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 filed under paragraph (1), the Financial Services Commission ascertain whether the contents of the application under Article 263 (1) of the Act are true, and examine whether the contents of the application meets the requirements for registration prescribed in paragraph (2) of the aforesaid Article. |
| (5) | Except as specifically provided in paragraphs (1) through (4), filing an application for registration; examination of the application; the application form; instructions to complete the form; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 287 (Working Rules, etc. on Business Conduct) |
| 1. | Matters for maintaining consistency in the rating of assets, including bonds, in accordance with universally reasonable and fair standards; |
| 2. | Matters for prohibiting the use of any nonpublic information; |
| 3. | Matters for preventing the use of any information acquired for price assessment of assets, such as bonds, for any other business. |
| (2) | Pursuant to Article 264 (2) of the Act, every bond rating company shall disclose standards for assessment to the public on the website operated by the Association and the company. |
| (3) | Every bond rating company shall, when it modifies any content disclosed in accordance with paragraph (2), disclose such modified content to the public without delay. |
| (4) | Every collective investment business entity may furnish a bond rating company with details of collective investment property directly or through the Association to the extent necessary for rating of collective investment property. |
| Article 288 (Supervision of Bond Rating Companies) |
| 1. | Matters concerning prevention of conflicts of interest; |
| 2. | Matters concerning the rule that requires a bond rating company that is not a member of the Association to establish internal guidelines equivalent to self-regulation that the Association implements for maintaining sound business practices and protecting investors. |
| Article 289 (Measures against Bond Rating Companies) |
| (1) | "Measures prescribed by Presidential Decree" in Article 267 (2) 7 of the Act means measures falling under any of the following subparagraphs: |
| 1. | Closure of branch offices or other business offices or suspending their business completely or partially; |
| 2. | Demanding or recommending improvement of methods of business management or operation; |
| 3. | Demanding compensation for losses; |
| 4. | Filing criminal complaints or informing an investigative agency of violations of the Act, if any; |
| 5. | Informing a related agency or an investigative agency of violations of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (3) | "As prescribed by Presidential Decree" in subparagraph 19 of attached Table 5 of the Act means cases falling under any subparagraph of attached Table 9 of this Decree. |
| Articles 290 through 297-2 Deleted. <by Presidential Decree No. 26600, Oct. 23, 2015> |
| Article 298 Deleted. <by Presidential Decree No. 25843, Dec. 9, 2014> |
| Articles 299 through 300-2 Deleted. <by Presidential Decree No. 26600, Oct. 23, 2015> |
CHAPTER XI SPECIAL CASES CONCERNING FOREIGN COLLECTIVE INVESTMENT SECURITIES
| Article 301 (Qualification Requirements for Foreign Collective Investment Business Entities) |
| (1) | "Requirements of qualification for a foreign collective investment business entity and the requirements of qualification for sale of foreign collective investment securities as prescribed by Presidential Decree" in the former part of Article 279 (2) of the Act means the following: <Amended by Presidential Decree No. 23924, Jun. 29, 2012> |
| 1. | Qualification requirements for a foreign collective investment business entity: |
| (a) | The scale of assets it manages (referring to those calculated by the formula prescribed and publicly notified by the Financial Services Commission) as of the end of the most recent business year shall be at least one trillion won. In such cases, if the foreign collective investment business entity has entrusted the business affairs of managing the assets completely to another foreign collective investment business entity, the scale of assets managed by the entrusted foreign collective investment business entity shall be at least one trillion won; |
| (b) | Its equity capital shall be at least the minimum equity capital prescribed for each authorized business unit of collective investment business referred to in attached Table 1 hereof according to the types (referring to the types provided for in Article 229 of the Act) of the foreign collective investment schemes that it seeks to sell in Korea; |
| (c) | It shall not have ever been subject to business suspension or heavier administrative disposition by the supervisory agency either in its home country or in Korea, or sentenced to a fine or heavier criminal punishment, in connection with its business equivalent to the finance business during the most recent three years; |
| (d) | It shall have a liaison office satisfying the requirements prescribed and publicly notified by the Financial Services Commission in Korea to protect the investors; |
| 2. | Qualification requirements for sale of foreign collective investment securities: |
| (a) | Such securities shall be issued or is to be issued by a member state (excluding its dependency) of the Organization for Economic Cooperation and Development, or under the laws of Hong Kong, Singapore or states prescribed by Ordinance of the Prime Minister in consideration of protection of investors, etc.; |
| (b) | Matters concerning expenses borne by investors, such as commission and fees, shall be clearly stated, and the amount thereof shall not be set excessively high in light of international practices; |
| (c) | It shall be possible to recover the amount invested, in a manner of direct or indirect redemption or similar, at the request of an investor; |
| (d) | Other requirements prescribed and publicly notified by the Financial Services Commission as necessary for protecting investors shall be met. |
| (2) | "Persons specifically enumerated by Presidential Decree" in the latter part of Article 279 (2) of the Act means the following professional investors: <Amended by Presidential Decree No. 28040, May 8, 2017> |
| 2-2. | Stock-listed corporations; |
| 3. | Any of the persons referred to in Article 10 (2) 1 through 17; |
| 4. | Any of the persons referred to in Article 10 (3) 1 through 17. |
| (3) | To sell foreign collective investment securities only to entities referred to in paragraph (2), the following requirements shall be met: <Amended by Presidential Decree No. 21611, Jul. 1, 2009> |
| 1. | In cases of a foreign collective investment business entity, it shall not have ever been subject to business suspension or heavier administrative disposition by the supervisory agency either in its home country or in Korea, or sentenced to a fine or heavier criminal punishment, in connection with its business equivalent to the finance business during the most recent three years; |
| 2. | In cases of foreign collective investment securities, matters concerning expenses borne by investors, such as commission and fees, shall be clearly stated. |
| Article 302 (Inspection, etc. of Account Books and Documents) |
| (1) | "Account books and documents, as specified further by Presidential Decree" in Article 280 (3) of the Act means the following account books and document: |
| 1. | A document equivalent to a list of collective investment property; |
| 2. | A document equivalent to a ledger of base prices of collective investment securities; |
| 3. | Financial statements and supplementary schedules; |
| 4. | A document equivalent to a full statement of management of collective investment property. |
| (2) | "Justifiable reason prescribed by Presidential Decree" in Article 280 (3) of the Act means any of the following cases. In such cases, a foreign investment trust, the foreign collective investment business entity of a foreign undisclosed investment association, a foreign investment company, etc., or an investment trader or broker who has sold foreign collective investment securities shall deliver, to investors, a written statement that inspection or delivery is impossible, describing the reasons therefor: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Where it is obvious that if an account book or a document containing details of trading orders of the collective investment property of a foreign collective investment scheme is furnished to a person, the person receiving such book or document will probably use information therein for a transaction or business or furnish another person with such information; |
| 2. | Where it is obviously foreseeable that if an account book or a document containing details of trading orders of the collective investment property of a foreign collective investment scheme is furnished to a person, losses will be inflicted on other investors; |
| 3. | Where an account book or a document is related to a foreign collective investment scheme already terminated or dissolved and thus it is impossible to accept a request from an investor for inspection or delivery because the preservation period prescribed in Article 239 (4) of the Act has elapsed or due to any other reason. |
| 1. | Where an investment is made in a foreign currency asset and it is impracticable to publicly notify or post the base price every day; |
| 2. | Where the relevant collective investment scheme is a foreign closed-end fund equivalent to a closed-end fund; |
| 3. | Where it is not required to publicly notify and post the base price every day pursuant to the statutes of the country in which a foreign collective investment scheme was created or established. |
| Article 303 (Sales Methods, etc. of Foreign Collective Investment Securities) |
| (1) | Any collective investment business entity of a foreign investment trust or a foreign undisclosed investment association, any foreign investment company, etc., or any investment trader or broker who sells foreign collective investment securities should not sell certain foreign collective investment securities in Korea or make an advertisement for sale before the relevant foreign collective investment scheme is registered in accordance with Article 279 (1) of the Act. |
| (2) | Article 57 (2) of the Act shall not apply to an advertisement for investment in foreign collective investment securities. |
| (3) | Article 57 (3) of the Act and Article 87 (4) 3 and 4 of this Decree shall apply to foreign collective investment securities and foreign collective investment business entities. In such cases, "collective investment business entity" under Article 87 (4) 3 shall be construed as "foreign collective investment business entity", "collective investment scheme" in the aforesaid provisions as "foreign collective investment scheme", "collective investment securities" in the aforesaid provisions as "foreign collective investment securities", "financial investment business entity" in Article 57 (3) of the Act as "financial investment business entity or a foreign collective investment business entity", "collective investment securities" in the aforesaid provisions as "foreign collective investment securities", and "collective investment scheme" in the aforesaid provisions as "foreign collective investment scheme". |
| (4) | Notwithstanding Article 88 of the Act, a foreign collective investment business entity may, when it prepares and furnishes an asset management report in accordance with Article 280 (2) of the Act, prepare and furnish the asset management report, as stipulated in the relevant foreign collective investment agreement (referring to one equivalent to a collective investment agreement; hereinafter the same shall apply). |
| (5) | An investment trader or broker shall observe the following subparagraphs in selling foreign collective investment securities: Provided, That where foreign collective investment securities sold by the investment trader or broker are the collective investment securities of the foreign collective investment scheme registered under the latter part of Article 279 (2) of the Act, the matters may be separately provided for in the collective investment agreement: <Amended by Presidential Decree No. 21898, Dec. 21, 2009> |
| 1. | He/she shall publicly notify and post the base price of foreign collective investment securities sold by him/her at the head office, a branch office, and other business office of the investment trader or broker, as stipulated in the foreign collective investment agreement of the foreign collective investment securities; |
| 2. | He/she shall keep all documents deemed necessary for investors' determination on investment, including an asset management report, at the head office, a branch office, and other business offices of the investment trader or broker; |
| 3. | He/she shall prepare all documents under subparagraph 2 in Korean language to furnish investors therewith: Provided, That in cases of a foreign exchange-traded fund similar to an exchange-traded fund and foreign collective investment securities of which are listed on the securities market, furnishing an asset management report by a foreign collective investment business entity may be substituted by publicly notifying details of composition of its paid-in assets and other matters each day through the securities market. |
| (6) | Matters concerning recommendations of investment in foreign collective investment securities, matters concerning reporting on the current status of domestic sales of foreign collective investment securities, and other matters necessary for protecting investors shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 304 (Deregistration of Foreign Collective Investment Schemes) |
"As prescribed further by Presidential Decree" in Article 282 (1) 7 of the Act means any of the following cases: <Amended by Presidential Decree No. 26135, Mar. 3, 2015> | 1. | Where a foreign collective investment scheme is terminated or dissolved; |
| 3. | Where it is intended to suspend domestic sale of a foreign collective investment scheme, in the case of which a foreign collective investment business entity or foreign investment company, etc. has filed an application for deregistration of a foreign collective investment scheme as prescribed and publicly notified by the Financial Services Commission. |
PART VI INSTITUTIONS RELATED TO FINANCIAL INVESTMENT BUSINESS
CHAPTER I KOREA FINANCIAL INVESTMENT ASSOCIATION
| Article 305 (Registration of Incorporation) |
| 3. | Domiciles of the central association and branch associations; |
| 4. | Names and addresses of executive officers; |
| 5. | Methods of public notification. |
| (2) | An application for registration of incorporation under paragraph (1) shall be accompanied by the following documents: |
| 1. | Articles of incorporation; |
| 6. | A written statement certifying a fact that the public notice and peremptory notice under Article 3 (6) of the Addenda of the Act were issued, a fact that obligations to creditors who have filed objections, if such creditors exist, have been fully performed, an asset has been provided as security for such obligations, or an asset has been placed in trust for such obligations, or a fact that such creditor will not possibly suffer any loss due to the merger; |
| 7. | A written statement certifying the value of net assets existing before the merger in the associations subject to the merger; |
| 8. | A written statement that executive officers of the Association have accepted appointment as executive officers. |
"Entity prescribed by Presidential Decree" in Article 285 (1) of the Act means any of the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> | 1. | A fund accounting and administration company; |
| 2. | A fund rating company; |
| 3. | A bond rating company; |
| 3-2. | A credit rating company; |
| 4. | Other entities specified as members by the Association's articles of incorporation. |
| Article 307 (Business Affairs, etc.) |
| (1) | "Persons conducting major tasks prescribed by Presidential Decree" in Article 286 (1) 3 (d) of the Act means the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Persons managing investment advisers (referring to persons who perform business affairs related to the management of investment advisers); |
| 2. | Professionals specializing in computation of collective investment property under Article 276 (3); |
| 3. | Professionals specializing in assessment of collective investment schemes under Article 280 (2); |
| 4. | Professionals specializing in assessment of collective investment property under Article 285 (3); |
| 5. | Professionals specializing in credit rating under Article 324-3 (4) 1; |
| 6. | Other persons prescribed and publicly notified by the Financial Services Commission as they need to be registered and managed for protecting investors or sound trading practices. |
| (2) | "Business affairs prescribed by Presidential Decree" in Article 286 (1) 10 of the Act means the following: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Business affairs concerning maintenance and management of records on disciplinary measures taken against executive officers and/or employees and persons conducting major tasks referred to in paragraph (1) of each financial investment business entity; |
| 2. | Business affairs concerning comparative public disclosure of net operating capital provided in Article 30 (1) of the Act (hereinafter referred to as "net operating capital") and gross risks provided in the same paragraph of each financial investment business entity; |
| 3. | Business affairs concerning management and public disclosure of information on trading of debt securities (limited to trades outside the securities market); |
| 4. | Business affairs concerning education of executive officers and/or employees of each financial investment business entity on their duties and ethics; |
| 5. | Business affairs concerning autonomous deliberation on investment-soliciting advertisements; |
| 6. | Other business affairs stipulated by the articles of incorporation. |
| Article 308 (Organization and Articles of Incorporation) |
| (1) | Pursuant to the latter part of Article 287 (1) 3 of the Act, organizations of the Association shall be separately operated in accordance with the following guidelines: |
| 1. | The organizations shall conform to the classification under the following according to the specific type of financial investment business: |
| (a) | Investment trading or brokerage business; |
| (b) | Collective investment business, investment advisory business, discretionary investment business, or trust business; |
| 2. | In cases of the investment trading or brokerage business under subparagraph 1 (a), the organizations shall conform to the classification under the following according to the scope of financial investment instruments: |
| (a) | Securities (excluding collective investment securities); |
| (b) | Collective investment securities; |
| 1. | Matters concerning assets; |
| 2. | Matters concerning executive officers; |
| 3. | Matters concerning the general meeting and the board of directors; |
| 4. | Matters concerning accounting; |
| 5. | Matters concerning entrustment of business affairs (including entrustment of business affairs related to a trust business entity that accepts only entrustment of the assets under Article 103 (1) 4 through 6 of the Act). |
| Article 309 (Measures against Association) |
| (1) | "Measures prescribed by Presidential Decree" in Article 293 (1) 7 of the Act means measures falling under any of the following subparagraphs: |
| 1. | Demanding or recommending improvement of methods of business management or operation; |
| 2. | Demanding compensation for losses; |
| 3. | Filing criminal complaints or informing an investigative agency of violations of the Act, if any; |
| 4. | Informing a related agency or an investigative agency of violations of other Acts, if any; |
| 5. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (3) | "As prescribed by Presidential Decree" in subparagraph 22 of attached Table 7 of the Act means cases falling under any subparagraph of attached Table 11 of this Decree. |
CHAPTER II KOREA SECURITIES DEPOSITORY
| Article 310 (Securities, etc. Subject to Deposit) |
| 1. | Negotiable certificates of deposit denominated in KRW; |
| 2. | Other instruments prescribed and publicly notified by the Financial Services Commission. |
| Article 311 (Registration of Incorporation) |
| (1) | Pursuant to Article 294 (3) of the Act, the register of incorporation of the Securities Depository shall describe the following matters: |
| 3. | Domiciles of the principal place of business and branches; |
| 5. | Names and addresses of executive officers; |
| 6. | Method of public notification. |
| (2) | An application for registration of incorporation under paragraph (1) shall be accompanied by the following documents: |
| 1. | Articles of incorporation; |
| 2. | A copy of a letter of approval on the articles of incorporation. |
| Article 312 (Special Interests) |
"Special interest prescribed by Presidential Decree" in Article 301 (5) of the Act means interests falling under any of the following subparagraphs: | 1. | Guarantee of performance of an obligation; |
| 2. | Offering assets as security; |
| 3. | Interests that cannot be regarded as necessary activity in the course of performing normal trading activities (referring to activities related to the business of the counterparty to a transaction or activities incidental in accomplishing a purpose of business, which can be regarded as ordinary trading activities in light of social norms and terms and conditions of the transaction). |
| Article 313 (Measures against the Securities Depository) |
| 1. | Demanding or recommending improvement of methods of business management or operation; |
| 2. | Demanding compensation for losses; |
| 3. | Filing criminal complaints or informing an investigative agency of violations of the Act, if any; |
| 4. | Informing a related agency or an investigative agency of violations of other Acts, if any; |
| 5. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (3) | "As prescribed by Presidential Decree" in subparagraph 29 of attached Table 8 of the Act means cases falling under any subparagraph of attached Table 12 of this Decree. |
| Article 314 (Restriction on Return of Securities Deposited by Investors) |
| 1. | Revocation of licence, permit, registration, etc. or suspension of business against a depositor; |
| 2. | Bankruptcy or dissolution of a depositor and cases similar to subparagraph 1. |
| Article 315 (Replenishment of Shortfall in Deposited Securities, etc.) |
| (1) | Deleted. <by Presidential Decree No. 21291, Feb. 3, 2009> |
| (2) | The Securities Depository and the relevant depositor shall jointly replenish shortage of deposited securities, etc. pursuant to Article 313 (10) of the Act. <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| Article 316 (Matters Notified by Issuers) |
"Matters prescribed by Presidential Decree" in Article 314 (6) of the Act means the following matters: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> | 1. | The type and issue time of securities, etc. under Article 294 (1) of the Act (hereafter referred to as "securities, etc." in this Article); |
| 2. | The type of rights to securities, etc., the ground under which such rights arise, details of the rights, and the schedule for exercising such rights; |
| 3. | Details of a change in terms and conditions of issuance of securities, etc., if such change has occurred; |
| 4. | Details of allocated rights, including preemptive rights to new stocks, where the number of stocks are summed up in accordance with Article 316 (3) of the Act; |
| 5. | Other matters deemed necessary and requested by the Securities Depository in relation to a change in a date for payment of principle and interest or the exercise of rights to securities, etc. |
| Article 317 Deleted. <by Presidential Decree No. 24697, Aug. 27, 2013> |
| Article 317-2 (Exercise, etc. of Rights of Contingent Capital Securities) |
| (1) | Where any ground for conversion to stocks under Article 176-12 (2) or any ground for debt adjustment under Article 176-13 (4) occurs pursuant to Article 314 (8) of the Act, the issuer of any contingent capital securities, etc., among depository receipts, shall notify the Securities Depository of such fact without delay. In such cases, the Securities Depository shall, if the matter notified is relevant to the occurrence of a ground for conversion to stocks under article 176-12 (2), promptly notify the relevant issuer or transfer agent of the following matters concerning the actual debenture holders (referring to co-owners of contingent capital securities, etc. among depository receipts; hereafter the same shall apply in this Article) as of the second business day from the date the ground for conversion to stocks occurs (hereafter referred to as "base date for conversion" in this Article): |
| 2. | Amount of contingent capital securities owned by each actual debenture holder. |
| (2) | The Securities Depository may request a depositor referred to in Article 310 (1) of the Act to notify the matters referred to in subparagraphs of paragraph (1) concerning the actual debenture holders as of the base date for conversion. In such cases, a depositor so requested shall notify the requested matters without delay. |
| (3) | Where the Securities Depository receives stock certificates from the issuer as a result of exercising the rights of the stock certificates in the name of Securities Depository, the entry of which has not been changed in the name of the investor after they were returned to the investor through the depositor, it may sell, among such stock certificates, those for which one year has passed from the date of receipt and manage the sale money in cash: Provided, That in cases prescribed and publicly notified by the Financial Services Commission, such as delisting of the corporation that has issued the relevant stock certificates, they may be sold through a stock market even if one year has not passed after the date the stocks were received. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 318 (Persons Included in Issuers of Stocks, etc.) |
| (1) | "Stocks, etc. prescribed by Presidential Decree" in the main sentence of Article 315 (5) of the Act means exchangeable bonds and derivative-combined securities. |
| 1. | The issuer of stocks, etc., which are underlying securities, in cases of security depository receipts; |
| 2. | The issuer of stocks, etc. subject to exchange, in cases of exchangeable bonds; |
| 3. | The issuer of stocks, etc., which are the underlying asset, in cases of derivative-combined securities. |
| (3) | "Where prescribed by Presidential Decree" in the main sentence of Article 315 (5) of the Act means following cases: <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| 2. | Where an issuer of stocks undergoes the listing examination (referring to the examination of the securities to be listed in a securities market in accordance with the listing regulations under Article 390 of the Act) and requests the Securities Depository to notify the matters concerning the actual shareholders fixing a date to probe the status of holding stocks, etc. |
CHAPTER II-2 KOREA SECURITIES DEPOSITORY
| Article 318-2 (Authorized Business Units for Clearing Business) |
The term "business units determined by Presidential Decree" in Article 323-3 (1) of the Act means units of business to be performed for a business entity subject to clearing as classified in subparagraphs of Article 14-2 (2). [This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 318-3 (Requirements for Authorization for Central Counterparty Clearing Business) |
| 1. | Where the trading referred to in Article 14-2 (2) 1 is a business unit: 100 billion won; |
| 2. | Where the trading referred to in the items of Article 14-2 (2) 2 is a business unit: 20 billion won; |
| 3. | Where the trading referred to in Article 14-2 (2) 3 is a business unit: 20 billion won. |
| 1. | Stable operation of central counterparty clearing business shall be ensured; |
| 2. | There shall be an internal control system adequate for risk management and prevention of financial incidents; |
| 3. | Methods of conducting business adequate for protecting investors shall be prepared; |
| 4. | It shall not be in contravention of any statute, 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 323-3 (2) 4 of the Act shall fulfill the following requirements: |
| 1. | The entity shall be adequately equipped with necessary human resources, including human resources with expertise and soundness in the central counterparty clearing business it intends to engage in, and computing personnel for conducting related tasks; |
| 2. | The entity shall be equipped with the following physical facilities including the electronic computer system: |
| (a) | The electronic computer system and means of communications necessary for the central counterparty clearing business it intends to engage in; |
| (b) | Sufficient business space, such as an office, and office equipment; |
| (c) | Security equipment to protect physical facilities, such as the electronic computer system; |
| (d) | Supplementary facilities necessary for maintaining continuity of business in the event of power failure, fire, etc. |
| (4) | Attached Table 2 shall apply mutatis mutandis to the requirements for major shareholders referred to in Article 323-3 (2) 7 of the Act: Provided, That the Financial Services Commission may relax and publicly notify such requirements with respect to an entity referred to in Article 323-10 (2) 2 of the Act. |
| (6) | A system for preventing conflicts of interest referred to in Article 323-3 (2) 9 of the Act shall be a system under which the likelihood of conflicts of interest between a central counterparty and a business entity subject to clearing in connection with the operation of central counterparty clearing business is identified, assessing, and managed appropriately in accordance with the methods and procedures specified by the internal control guidelines of the central counterparty. |
| (7) | Detailed standards necessary for the requirements for authorization 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. 24655, Jul. 5, 2013]
| Article 318-4 (Method, Procedures, etc. for Authorization for Central Counterparty) |
| (1) | Each application for authorization to be filed with the Financial Services Commission under Article 323-4 (1) of the Act shall contain the following: |
| 2. | Locations of the head office, branch offices, and other business offices; |
| 3. | Matters concerning executive officers; |
| 4. | Matters concerning business units to engage in (referring to the business units of a central counterparty clearing business under Article 318-2); |
| 5. | Matters concerning financial standing, such as equity capital; |
| 6. | Matters concerning the business plan; |
| 7. | Matters concerning human resources and physical facilities, such as the electronic computer system; |
| 8. | Matters concerning major shareholders; |
| 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; |
| 2. | Proposed clearing business regulations; |
| 3. | Documents evidencing the decision made to establish or file an application for authorization, such as minutes of a general meeting of promoters, the inaugural meeting of shareholders, or a meeting of board of directors; |
| 4. | A document stating the locations and names of the head office, branch offices, and other business offices; |
| 5. | Resumes and certificates of work experience of executive officers; |
| 6. | Types of business units requiring authorization; |
| 7. | Financial statements for the most recent three years and supplementary schedules (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); |
| 8. | A business plan for three business years from the commencement of the business; |
| 9. | Documents substantiating the status of human resources, organizational structure, physical facilities, etc.; |
| 10. | A document stating the names or trade names of shareholders holding not less than one percent of the total number of outstanding stocks as of the date of filing of the application for authorization (as of the end of the most recent business year, if an application for authorization for is filed to add a business unit requiring authorization or is filed by a business entity referred to in Article 323-10 (2) 2 of the Act), and the number of stocks held by each of them; |
| 12. | Documents substantiating that the system for preventing conflicts of interest has been established; |
| 13. | Other documents prescribed and publicly notified by the Financial Services Commission necessary for examining the requirements for authorization. |
| (3) | Where a business entity that intends to obtain authorization for central counterparty clearing business, has filed an application for preliminary authorization under Article 323-5 of the Act, and none of the contents of the application for preliminary authorization and the accompanying documents have been changed, the business entity may omit to state some of the matters required under paragraph (1) or omit to submit some of the accompanying documents among the documents referred to in paragraph (2), making a statement to refer to the specified relevant part. |
| (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. |
| (5) | Upon receipt of an application for authorization filed under paragraph (1), the Financial Services Commission shall ascertain whether the contents of the application for authorization for central counterparty clearing business are true, and examine whether the contents of the application meet the requirements for authorization prescribed in Article 323-3 (2) of the Act in consideration of the opinions collected from interested parties, etc. |
| (6) | The Financial Services Commission may conduct an on-site investigation by interviewing interested parties or other means, promoters or executive officers, etc. if necessary for ascertaining the contents of an application for authorization for central counterparty clearing business pursuant to paragraph (5). |
| (7) | The Financial Services Commission may hold a hearing if deemed necessary, such as where any authorization for central counterparty clearing business is likely to significantly affect the financial market. |
| (8) | An entity granted authorization for central counterparty clearing business under Article 323-4 (2) of the Act shall commence its business within six months from the date the authorization is granted: Provided, That where the Financial Services Commission otherwise determines the time limit or extends such time limit at the request of the business entity granted authorization for central counterparty clearing business, it may commence the authorized business within such time limit otherwise determined or extended. |
| (9) | Where the Financial Services Commission imposes any condition on authorization for central counterparty clearing business, it shall examine whether such conditions is fulfilled. |
| (10) | Except as specifically provided in paragraphs (1) through (9), filing an application for authorization of central counterparty clearing 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. |
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 318-5 (Preliminary Authorization) |
| (1) | A business entity who intends to apply for preliminary authorization under Article 323-5 (1) of the Act shall file an application for preliminary authorization stating the matters referred to in the subparagraphs of Article 318-4 (1). |
| (2) | Each application for preliminary authorization filed under paragraph (1) shall be accompanied by the following: |
| 1. | Articles of incorporation or proposed articles of incorporation; |
| 2. | Proposed clearing business regulations; |
| 3. | Documents evidencing the decision made to establish or to file an application for authorization, such as minutes of a general meeting of promoters, the inaugural meeting of shareholders, or a meeting of board of directors; |
| 4. | Resumes and certificates of work experience of executive officers (including electees as executive officers); |
| 5. | Types of business units requiring authorization; |
| 6. | Financial statements for the most recent three years and supplementary schedules (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. | A business plan for three business years from the commencement of the business; |
| 8. | Documents substantiating the status of human resources, physical facilities, etc. (including human resources, physical facilities, etc. that are scheduled to be employed, purchased, etc.); |
| 9. | A document stating the names or trade names of shareholders holding not less than one percent of the total number of outstanding stocks as of the date of filing of the application for preliminary authorization (as of the end of the most recent business year if an application for preliminary authorization is filed to add a business unit requiring authorization or is filed by a business entity referred to in Article 323-10 (2) 2 of the Act), and the number of stocks held by each of them; |
| 11. | Documents substantiating that the system has been or can be established for preventing conflicts of interest; |
| 12. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining the requirements for authorization. |
| (3) | Article 318-4 (4) through (7) shall apply mutatis mutandis to the method and procedures for examining applications for preliminary authorization filed under Article 323-5 (1) of the Act. In such cases, "authorization for central counterparty clearing business" shall be construed as "preliminary authorization." |
| (4) | An entity granted preliminary authorization under Article 323-5 (2) of the Act shall file an application for authorization for central counterparty clearing business under Article 323-3 of the Act (hereafter referred to as "final authorization" in this paragraph) after fulfilling the terms and conditions of the preliminary authorization within six months from the date the preliminary authorization was granted: Provided, That where the Financial Services Commission otherwise determines the time limit for applying for final authorization when it grants preliminary authorization or extends such time limit at the request of the entity granted preliminary authorization, it may apply for the final authorization within such time limit otherwise determined or extended. |
| (5) | Except as specifically 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. |
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 318-6 (Special Interest) |
| 2. | Provision of security; |
| 3. | An interest that cannot be construed as an act necessary in the course of performing a normal business activity (referring to an act related to the content of business of the other party to the business or incidental to achieving the purpose of the business, which can be acknowledged by social norms as a normal transaction activity in the light of transaction terms and conditions of business). |
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 318-7 (Financial Investment Institutions) |
The term "any other financial investment institution prescribed by Presidential Decree" in Article 323-10 (2) 2 of the Act means the Securities Depository or a financial securities company. [This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 318-8 (Accumulation, Management, etc. of Joint Compensation Fund) |
| (1) | The total amount of the Joint Compensation Fund to be accumulated under Article 323-14 (1) of the Act (hereinafter referred to as "Joint Compensation Fund"), the ratio and method of accumulation by each business entity subject to clearing shall be prescribed by rules on clearing business (referring to the rules on clearing business established under Article 323-11 of the Act; hereinafter the same shall apply) in consideration of payment risk by trade subject to clearing, payment risk by business entity subject to clearing, and any other circumstances. |
| (2) | A central counterparty shall compensate losses incurred from default arising from any trade subject to clearing with its property and the Joint Compensation Fund in the following order and manner pursuant to Article 323-14 (1): <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | It shall preferentially use the Joint Compensation Fund accumulated by a business entity subject to clearing that has defaulted on any debt; |
| 2. | If there remains a shortage after compensating losses as prescribed in subparagraph 1, it shall preferentially use the amount prescribed by the rules on clearing business among its property; |
| 3. | If there still remains a deficit after compensating losses as prescribed in subparagraphs 1 and 2, it shall use the Joint Compensation Fund accumulated by the business entities, other than the business entity subject to clearing that has defaulted on any debt, and its property in the order and manner prescribed by the rules on clearing business. |
| (3) | Where a central counterparty has made a claim for reimbursement against a business entity subject to clearing that caused a loss under Article 323-14 (4) of the Act, the central counterparty shall allocate the amount collected by making the claim for reimbursement to the Joint Compensation Fund and its property in the following order and manner: Provided, That where a business entity subject to clearing, other than the business entity subject to clearing that has defaulted on any debt, has compensated losses incurred from default arising from any trade subject to clearing with its property, in the order and manner different from those prescribed in the subparagraphs of paragraph (2), in accordance with the rules on clearing business, the central counterparty shall preferentially allocate the amount collected by making the claim for reimbursement to the property of such business entity subject to clearing: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Where any amount has been used as provided in paragraph (2) 3, it shall preferentially allocate the collected amount to the Joint Compensation Fund accumulated by the business entities, other than the business entity subject to clearing that has caused the losses, and its property, in the order and manner prescribed by rules on clearing business; |
| 2. | Where any amount has been used as provided in paragraph (2) 2, the amount remaining after the allocation under subparagraph 1 shall be allocated to its property; |
| 3. | Where any amount remaining after the allocation under subparagraphs 1 and 2 shall be allocated to cover the amount used as prescribed in paragraph (2) 1 and expenses incurred in relation to compensation, etc., as prescribed by the rules on clearing business. |
| (4) | Articles 362 (3) through (8) and 363 (1) shall apply mutatis mutandis to the administration, refund, management of the Joint Compensation Fund and making claims for reimbursement. In such cases, "member" shall be construed as "business entity subject to clearing" and "membership management regulation" as "rules on clearing business". |
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 318-9 (Transaction Information, etc. subject to Preservation and Management) |
| (3) | A central counterparty shall report the following matters to the Financial Services Commission every month in accordance with the forms and procedures prescribed and publicly notified by the Financial Services Commission: |
| 1. | Matters concerning trades subject to clearing referred to in Article 9 (25) of the Act and financial investment instruments which become the subjects thereof; |
| 2. | Matters concerning the fulfillment, etc. of obligation of business entities subject to clearing; |
| 3. | Current state of administration and management of guarantee money for clearing and the joint compensation fund; |
| 4. | Other matters prescribed by Ordinance of the Prime Minister taking internationally acknowledged standards for supervision, etc. into consideration. |
| (4) | Where a central counterparty is compensated for any damage from the joint compensation fund or where any matter prescribed by Ordinance of the Prime Minister with regards to the payment risk of business entities subject to clearing occurs, it shall promptly report thereon to the Financial Services Commission under Article 323-16 (3) of the Act, notwithstanding paragraph (3). |
| (5) | Methods and procedures for filing reports under paragraphs (3) and (4) and other necessary details shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 318-10 (Restrictions on Stockholding) |
In any of the following cases, stocks issued by a central counterparty may be held in excess of 20 percent of the total number of outstanding voting stocks of the central counterparty, with approval from the Financial Services Commission as provided in subparagraph 2 of Article 323-18 of the Act: | 1. | Where the stocks are held by a collective investment scheme (excluding where the stocks are held by a privately placed fund); |
| 2. | Where the stocks are held by a foreign central counterparty for partnership with the central counterparty; |
| 3. | Where the stocks are held by an exchange; |
| 4. | Where the stocks are held by a financial institution or an institution related to financial investment business prescribed by Ordinance of the Prime Minister and there is no risk of undermining the operation of the central counterparty; |
| 5. | Where the financial institution referred to in subparagraph 4 jointly own the stocks in excess of the stockholding ratio of any of the following persons against the central counterparty: |
| (b) | A non-finance company (referring to a company engaging in any type of business which is not the financial business prescribed and publicly notified by the Financial Services Commission). |
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
| Article 318-11 (Dispositions against Central Counterparty) |
| 1. | Where a central counterparty fails to commence its business within six months from the date of authorization or fails to continue the authorized business without good cause for not less than six months after commencing such business; |
| 2. | Where a central counterparty receives money, etc. from a third person in connection with its business by any improper means, or acquires money, etc. to deliver to a third person; |
| 3. | Where a central counterparty fails to correct the relevant condition within one month from the date of business suspension imposed under Article 323-20 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed); |
| 4. | Where a central counterparty commits identical or similar violations continuously or repeatedly. |
| 1. | Closing branch offices or other business offices or suspending their business completely or partially; |
| 2. | Making a demand or recommendation for improving the methods of business management or operation; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| 1. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 2. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 3. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
[This Article Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013]
CHAPTER III SECURITIES FINANCE COMPANIES
| Article 318-12 (Special Cases concerning Prohibition against Unauthorized Securities Finance Business) |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 319 (Authorization) |
| 1. | In applying the requirement provided in Article 324 (2) 2 of the Act, a securities finance company shall maintain its equity capital at not less than 70 percent of the minimum equity capital specified in paragraph (1). In such cases, the requirements for maintaining the authorization shall apply as of the end of each fiscal year; and a securities finance company that fails to meet the requirements for maintaining its 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; |
| (3) | Articles 16 (4), (5), (6) (excluding subparagraph 1), (9) 1, and (11), and 17 (excluding paragraphs (1) 4, (2) 5, and (3)) shall apply mutatis mutandis to the requirements for authorization of securities finance companies. <Amended by Presidential Decree No. 22197, Jun. 11, 2010> |
| Article 320 (Business Affairs) |
"Business affairs prescribed by Presidential Decree" in Article 326 (2) 1 (a) of the Act means the following business affairs: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> | 1. | Repurchase agreements; |
| 2. | Brokerage, intermediary, or agent services for repurchase agreements; |
| 3. | Investment trading or brokerage business of collective investment securities. |
| Article 321 (Special Interests) |
"Special interest prescribed by Presidential Decree" in Article 327 (3) of the Act means interests falling under any of the following subparagraphs: | 1. | Guarantee for performance of obligations; |
| 2. | Offering assets as security; |
| 3. | Interests that cannot be regarded as necessary activity in the course of performing normal trading activities (referring to activities related to the business of the counterparty to a transaction or activities incidental to accomplishing a purpose of business, which can be regarded as ordinary trading activities in light of social norms and terms and conditions of the transaction). |
| Article 322 (Issuance of Bonds) |
| (1) | Where a securities finance company states, in a bond subscription form or a registration statement, its intent to issue bonds even where the total amount of subscribed bonds does not reach the total amount of bonds described in the bond subscription form or the registration statement, the total amount of subscribed bonds shall be deemed to be the total amount of bonds issued. |
| (2) | Any securities finance company may issue bonds through public sale during a predetermined period, and in such cases, it may omit preparing a bond subscription form. |
| (3) | Each securities finance company shall describe the following matters in the bonds issued through public sale: |
| 1. | Trade name of the company; |
| 2. | Par value of the bonds; |
| 3. | Coupon rate of the bonds; |
| 4. | Method and deadline for payment of interest; |
| 5. | Method and deadline for repayment of bonds; |
| 6. | Serial number of bonds. |
| (4) | Any securities finance company may issue bonds at a discount. |
| (5) | Where a securities finance company issues bonds at a discount with a maturity of five years or longer, it may exclude the difference in the discounted issue price in applying the issue value of bonds under Article 329 of the Act. |
| Article 323 (Approval on Discontinuance of Business) |
Article 370 (2) through (6) shall apply mutatis mutandis to the approval of the Financial Services Commission on discontinuance of business or dissolution of a securities finance company under Article 332 (1) of the Act.
| Article 324 (Measures against Securities Finance Companies) |
| 1. | Where a securities finance company violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act as provided in subparagraph 3 of attached Table 13; |
| 2. | Where a securities finance company violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as provided in subparagraph 4 of attached Table 13; |
| 3. | Where a securities finance company violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as provided in subparagraph 5 of attached Table 13. |
| 1. | Where a securities finance company fails to commence its business within six months from the date of authorization or fails to continue the authorized business without good cause for not less than six months after commencing such business; |
| 2. | Where a securities finance company receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 3. | Where a securities finance company fails to correct the relevant condition within one month from the date of business suspension imposed under Article 335 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed); |
| 4. | Where a securities finance company commits identical or similar violations continuously or repeatedly. |
| 1. | Closure of branch offices or other business offices or suspension of their business completely or partially; |
| 2. | Making a demand or recommendation for improving the methods of business management or operation; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (7) | "Case prescribed by Presidential Decree" in subparagraph 26 of attached Table 9 of the Act means any of the cases provided in the subparagraphs of attached Table 13 of this Decree. |
CHAPTER III-2 CREDIT RATING COMPANIES
| Article 324-2 (Exceptions to Prohibition on Credit Assessment without Authorization) |
| 1. | The credit information on a company shall be provided only to the owner of the relevant credit information, the counterparty to the owner of credit information in a commercial transaction, etc. who have interest therein; |
| 2. | In providing credit information under subparagraph 1, it shall be notified that the information is provided as a credit inquiry service; |
| 3. | There shall be an internal control guidelines to separate an organization creating credit information and sales organization (referring to an organization similar to sales organization referred to in Article 335-8 (2) 1 of the Act). |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 324-3 (Requirements for Authorization, etc.) |
| (1) | "Financial institution prescribed by Presidential Decree" in Article 335-3 (2) 1 (b) of the Act means any of the following financial institutions: <Amended by Presidential Decree No. 26135, Mar. 3, 2015; Presidential Decree No. 27037, Mar. 11, 2016; Presidential Decree No. 27205, May 31, 2016; Presidential Decree No. 27556, Oct. 25, 2016> |
| 1. | An investment trader, an investment broker, a trust business entity, a collective investment business entity, a securities finance company, a merchant bank, a fund brokerage company or a transfer agent; |
| 6. | Deleted; <by Presidential Decree No. 25945, Dec. 30, 2014> |
| 10. | An agricultural cooperative, the National Agricultural Cooperative Federation and the NongHyup Bank established under the Agricultural Cooperatives Act; |
| 11. | A fisheries cooperative and the National Federation of Fisheries Cooperatives established under the Fisheries Cooperatives Act; |
| 12. | A forestry cooperative and the National Forestry Cooperatives Federation established under the Forestry Cooperatives Act; |
| 13. | A credit union and the National Credit Union Federation of Korea under the Credit Unions Act; |
| 21. | The Korea Deposit Insurance Corporation and a finance company authorized to perform liquidation under the Depositor Protection Act; |
| 22. | A financial institution that runs financial business similar to that of a financial institution referred to in subparagraphs 1 through 20 in a foreign country; |
| 1. | Forecast of earnings and expenses is valid and feasible; |
| 2. | The organizational structure and management and operation systems stated in the business plan are appropriate to prevent conflicts of interest and unfair conduct, etc.; |
| 3. | It shall not violate any statute nor be likely to undermine the sound operation of credit rating business. |
| (4) | The human resources, electronic computer systems and other physical facilities referred to in Article 335-3 (2) 4 shall comply with the following requirements: |
| 1. | The relevant entity shall have at least 20 regularly employed professionals in credit assessment, including at least five certified public accountants and five persons with work experience in analysis and assessment of securities, who meet the requirements prescribed and publicly notified by the Financial Services Commission: Provided, That where the number of business types (referring to the types of business listed under Sectors of the Korea Standard Industrial Classification publicly announced by the Commissioner of the Statistics Korea under Article 22 (1) of the Statistics Act) operated by an issuer of securities to be analyzed and assessed (referring to the securities other than asset-backed securities defined in subparagraph 4 of Article 2 of the Asset-Backed Securitization Act) are not more than three or where the entity intends to assess only asset-backed securities defined in subparagraph 4 of Article 2 of the Asset-Backed Securitization Act, it shall have regularly employed professionals in credit assessment, including at least five certified public accountants and at least five persons with work experience in analysis and assessment of securities; |
| 2. | It shall be equipped with the electronic computer system and database management system prescribed and publicly notified by the Financial Services Commission as necessary for assessing credit under Article 335-11 (2) of the Act. |
| (5) | The major shareholders referred to in Article 335-3 (2) 6 of the Act (hereafter referred to as "major shareholders" in this Chapter) shall meet the requirements prescribed in attached Table 13-2. |
| (6) | The system for preventing conflicts of interest referred to in Article 335-3 (2) 7 of the Act shall be appropriate for identifying and assessing the likelihood of conflicts of interest between the credit rating company and investors and issuers in connection with the operation of credit rating business and for appropriately managing it in accordance with the methods and procedures prescribed by the internal control guidelines of the credit rating company. |
| (7) | Detailed criteria necessary for the requirements for granting authorization prescribed in paragraphs (3) through (6) shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 324-4 (Method, Procedures, etc. for Authorization of Credit Rating Company) |
| (1) | Each application for authorization to be filed with the Financial Services Commission pursuant to Article 335-4 (1) of the Act shall state the following: |
| 2. | Locations of the head office, branch offices and other business offices; |
| 3. | Matters concerning executive officers; |
| 4. | Matters concerning financial standing, such as equity capital; |
| 5. | Matters concerning business plans; |
| 6. | Matters concerning human resources, electronic computer systems and other physical facilities; |
| 7. | Matters concerning major shareholders; |
| 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 the requirements for authorization. |
| (2) | The application for authorization referred to in paragraph (1) shall be accompanied by the following: |
| 1. | Articles of incorporation; |
| 2. | Documents evidencing a decision on incorporation or an application for authorization, such as minutes of the general meeting of promoters, the inaugural general meeting of shareholders or 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. | 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. | 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.; |
| 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 of filing of the application for authorization and the number of stocks held by each of such shareholders; |
| 10. | Documents substantiating that the system for preventing conflicts of interest has been prepared; |
| 11. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining the requirements for authorization. |
| (3) | Where a business entity that intends to obtain authorization for credit rating business has filed an application for preliminary authorization under Article 335-5 of the Act, and none of the contents of the application for preliminary authorization and the accompanying documents have been changed, the business entity may omit to state some of the matters required under paragraph (1) or omit to submit some of the accompanying documents among the documents referred to in paragraph (2), making a statement to refer to the specified relevant part. |
| (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. |
| (5) | Upon receipt of an application for authorization filed under paragraph (1), the Financial Services Commission shall ascertain whether the contents of the application for authorization for credit rating business are true, and examine whether the contents of the application meet the requirements for authorization prescribed in Article 335-3 (2) of the Act in consideration of the opinions collected from interested parties, etc. |
| (6) | The Financial Services Commission may conduct an on-site investigation, such as interviewing interested parties, promoters or executive officers, if necessary for ascertaining the contents of an application for authorization for credit rating business pursuant to paragraph (5) |
| (7) | The Financial Services Commission shall issue public notice of the applicant, date of filing of the application, contents of application, method and period for presenting opinions, etc. 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 credit rating business pursuant to paragraph (5). |
| (8) | The Financial Services Commission shall notify the applicant for authorization for credit rating business of an opinion considered unfavorable to him/her, if any, among the opinions presented under paragraph (7), and may require the applicant to vindicate himself/herself within a prescribed period. |
| (9) | The Financial Services Commission may hold a hearing, if deemed necessary, such as where any authorization for credit rating business is likely to significantly affect the financial market. |
| (10) | An entity granted authorization for credit rating business under Article 335-4 (2) of the Act shall commence its business within six months from the date the authorization is granted: Provided, That where the Financial Services Commission otherwise determines the time limit or extends such time limit at the request of the entity granted authorization for credit rating business, it may commence the authorized business within such time limit otherwise determined or extended. |
| (11) | Where any condition has been attached to authorization for credit rating business, the Financial Services Commission shall ascertain whether it is fulfilled. |
| (12) | Except as specifically provided in paragraphs (1) through (11), filing an application for authorization of credit rating 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. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 324-5 (Preliminary Authorization) |
| (1) | An entity that intends to apply for preliminary authorization under Article 335-5 (1) of the Act shall file an application for preliminary authorization stating the matters referred to in the subparagraphs of Article 324-4 (1), with the Financial Services Commission. |
| (2) | An application for preliminary authorization filed under paragraph (1) shall be accompanied by the following: |
| 1. | Articles of incorporation or proposed articles of incorporation (including similar documents); |
| 2. | Documents evidencing a decision 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. | 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); |
| 5. | Business plans (including estimated financial statements) and a statement of estimated revenue and expenditure for three business years after the commencement of business; |
| 6. | Documents substantiating the status of human resources, physical facilities, etc. (including human resources and physical facilities that will be employed or purchased); |
| 7. | 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 preliminary authorization and the number of stocks held by each of such shareholders; |
| 9. | Documents substantiating that the system has been or can be established for preventing conflicts of interest; |
| 10. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining the requirements for preliminary authorization. |
| (3) | Article 324-4 (4) through (9) shall apply mutatis mutandis to the methods and procedures for the examination of applications for preliminary filed under Article 335-5 (1) of the Act. In such cases, "authorization for credit rating business" shall be deemed "preliminary authorization." |
| (4) | Each entity granted preliminary authorization under Article 335-5 (2) of the Act shall file an application for authorization for credit rating business under Article 335-3 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 determines the time limit for filing an application for final authorization or extends such time limit at the request of the entity granted the preliminary authorization, the entity may file an application for final authorization within such time limit otherwise determined or extended. |
| (5) | Except as specifically provided for in paragraphs (1) through (4), filing an application for preliminary authorization; 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. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 324-6 (Internal Control Guidelines for Credit Assessment, etc.) |
| 1. | Matters concerning recording and escrow of materials related to credit assessment; |
| 2. | Matters concerning the preparation of internal procedures for examining the appropriateness of credit assessment; |
| 3. | Matters concerning whether executive officers and/or employees observe the internal control guidelines for credit assessment (referring to the internal control guidelines for credit assessment under Article 335-8 (2) hereinafter the same shall apply); |
| 4. | Other matters prescribed and publicly notified by the Financial Services Commission, as necessary for the internal control guidelines for credit assessment. |
| (2) | In establishing or modifying the internal control guidelines for credit assessment, a credit rating company shall undergo a resolution of its board of directors. |
| (3) | The Financial Services Commission may recommend a credit rating company which is found to have violated any statutes as a result of inspection to modify its internal control guidelines for credit assessment to prevent repetition of violations of the statutes. |
| (4) | "Credit rating company prescribed by Presidential Decree" in Article 335-8 (3) of the Act means a credit rating company, total assets of which as of the end of the latest business year is less than 10 billion won. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 324-7 (Incidental Business) |
| 1. | Evaluation of feasibility of a project, evaluation of values and management consultation; |
| 2. | Development and provision of credit assessment models and risk management models; |
| 3. | Other business prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 324-8 (Business Conduct Standards, etc. of Credit Rating Companies) |
| (1) | "Person prescribed by Presidential Decree" in Article 335-11 (3) 3 of the Act means any of the persons referred to in the subparagraphs of paragraph (3). |
| 1. | Contract documents for the implementation of credit assessment and the details of fees received in connection with the credit assessment; |
| 2. | Details of, and grounds for, the change of a credit rating, if changed; |
| 3. | Materials furnished to, or received from, a requester or his/her interested parties for the credit assessment. |
| 1. | A corporation that has invested in the relevant credit rating company in a ratio of at least five percent; |
| 2. | A corporation in which the relevant credit rating company has invested at a ratio of at least five percent; |
| 3. | A corporation that is an affiliated company of the relevant credit rating company; |
| 4. | A corporation in which a corporation related to the relevant credit rating company in any term prescribed in any of subparagraphs 1 through 3 has invested at a ratio of at least 40 percent; |
| 5. | Other entities prescribed and publicly notified by the Financial Services Commission among those likely to have conflicts of interest in connection with the credit rating business. |
| (4) | "Activities prescribed by Presidential Decree" in Article 335-11 (7) 3 of the Act means the following activities: <Amended by Presidential Decree No. 28564, Dec. 29, 2017> |
| 1. | Exchanging information that influences credit rating of an entity subject to credit assessment through interviewing, discussing or exchanging data, etc. with another credit rating company or by other means, in the course of credit assessment; |
| 2. | Offering any economic benefits to, or receiving such economic benefits from, a requester of credit assessment or his/her interested party in contravention of the criteria prescribed and publicly notified by the Financial Services Commission in connection with the credit assessment; |
| (a) | Conducting a cross credit assessment, between credit rating companies, of persons each of whom is related to a credit rating company as prescribed in any subparagraph of paragraph (3); |
| (b) | Conducting a transaction linked to purchase of goods or service of an affiliated company of a credit rating company; |
| 4. | Providing a requester or his/her interested parties with information on the likelihood of granting a specific credit rating or the expected credit rating (including the scope of the credit rating) before concluding a credit rating contract; |
| 5. | Using a credit rating to attract a credit rating contract; |
| 6. | Other activities prescribed and publicly notified by the Financial Services Commission as likely to undermine the protection of investors or the independence or fairness of credit assessment. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 324-9 (Submission, Public Notification, etc. of Credit Rating Statements) |
| (3) | The period for submission of documents referred to in paragraph (2) shall be as follows: |
| 1. | Documents under paragraph (2) 1: Within 10 days from the date of enactment or amendment; |
| 2. | Documents under paragraph (2) 2: Within 10 days from the date credit assessment ends; |
| 3. | Documents under paragraph (2) 3: Within a period prescribed and publicly notified by the Financial Services Commission for each document. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 324-10 (Dispositions in Relation to Credit Rating Companies) |
| (3) | "As prescribed further by Presidential Decree" in Article 335-15 (1) 7 of the Act means any of the following cases: <Amended by Presidential Decree No. 28564, Dec. 29, 2017> |
| 1. | Where a credit rating company fails to commence its business within six months from the date of authorization or fails to continue the authorized business without good cause for not less than six months after commencing such business; |
| 2. | Where a credit rating company fails to correct the relevant condition within one month from the date of business suspension imposed under Article 335-15 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed); |
| 2-2. | Where a credit rating company commits an act falling under any subparagraph (excluding subparagraph 6) of Article 324-8 (4); |
| 3. | Where a credit rating company receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 4. | Where a credit rating company disturbs market practices by violating or failing to fulfill a contract in the course of credit assessment; |
| 5. | Where a credit rating company commits identical or similar violations continuously or repeatedly. |
| 1. | Closure of branches or other business places or suspension of their business completely or partially; |
| 2. | Making a demand or recommendation for improving the methods of business management or operation; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| 1. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 2. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 3. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (7) | "Case prescribed by Presidential Decree" in subparagraph 14 of attached Table 9-2 of the Act means any of the cases provided in the subparagraphs of attached Table 13-3 of this Decree. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 325 (Business Affairs, etc. of Merchant Banks) |
| 1. | Business affairs related to cash management accounts (referring to accounts opened by a merchant bank for the purpose of consolidating funds deposited by customers, managing them by investing in bills, etc. referred to in Article 336 (1) 1 of the Act, and distributing profits from such investment to customers; hereafter the same shall apply in this Chapter); |
| 2. | Factoring (referring to the purchase and collection of receivables for sales proceeds of enterprises and business affairs related thereto); |
| 3. | Investment trading or brokerage for trading exchange-traded derivatives, the underlying asset of which is the stock price index among exchange-traded derivatives traded on the derivatives market; |
| 4. | Trading negotiable certificates of deposit and acting as a broker, an intermediary or an agent for such trading; |
| 5. | Trading securities eligible for manipulation in open markets pursuant to Article 68 of the Bank of Korea Act (hereafter referred to as "securities eligible for manipulation in open markets" in this Chapter) and acting as a broker, an intermediary or an agent for such trading; |
| 6. | Granting loans secured by bills issued by the relevant merchant bank or loans secured by bonds deposited by a private individual in a cash management account of the relevant merchant bank and granted to the private individual; |
| 7. | Business affairs related to pre-shipment trade bills (referring to business affairs of discounting, trading, brokerage, acceptance, and guarantee of trade bills prior to shipment and purchase of bills of exchange for exportation and collection request for such bills of exchange); |
| 1. | Investment trading or brokerage for exchange-traded derivatives (excluding those referred to in paragraph (2) 3); |
| 5. | Investment advisory business; |
| 6. | Business affairs related to electronic money transfer under the Electronic Financial Transaction Act (excluding the business affairs related to electronic money transfer through which it becomes a participant institution of the settlement relay system defined in subparagraph 6 of Article 2 of the aforesaid Act or related to electronic money transfer through the representative participant institution referred to in Article 15 (2) 2 of the Enforcement Decree of the aforesaid Act). |
| Article 326 (Issuance of Cover Bills) |
| (1) | Pursuant to Article 336 (3) of the Act, any merchant bank may issue new bills (hereafter referred to as "cover bills" in this Chapter) by integrating or dividing factoring bills or receivables purchased at discount and owned (referring to bills or receivables related to factoring business; hereafter the same shall apply in this Chapter) or trade bills (hereafter referred to as "real bills, etc." in this Chapter). |
| (2) | Every merchant bank shall, when it issues cover bills under paragraph (1), issue them within the limits of the balance of real bills, etc., owned and their final maturities, and shall not sell such real bills, etc., based on which cover bills were issued, offer such real bills, etc. as security, or include such real bills, etc. in a bill management account. |
| Article 327 (Selection, etc. of Eligible Business Entities) |
| (1) | Every merchant bank shall select eligible business entities to discount or trade bills; to act as a broker for the trading of bills; or to accept or guarantee bills: Provided, That where it discounts or trades a bill, acts as a broker for the trading of a bill, or accepts or guarantees a bill guaranteed by other financial institution (referring to institutions engaging in the business related to bills and subject to inspection referred to in Article 38 of the Act on the Establishment, etc. of Financial Services Commission) need not select an eligible business entity. |
| (2) | The method for selecting eligible business entities under paragraph (1), the discount ceiling of bills for each eligible business entity, and other necessary matters concerning eligible business entities, shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 328 (Dealing with Unsecured Bills, etc.) |
| (1) | No merchant bank may, when it sells an unsecured bill, guarantee or cause any third person to guarantee, directly or indirectly, the payment thereof: Provided, That it may guarantee the payment of a bill where it sells a bill issued by a small or medium enterprise provided in Article 2 of the Framework Act on Small and Medium Enterprises with a payment guarantee provided by any bank, the Korea Credit Guarantee Fund established under the Credit Guarantee Fund Act, the Technology Guarantee Fund established under the Korea Technology Finance Corporation Act, or another merchant bank. <Amended by Presidential Decree No. 27205, May 31, 2016> |
| (2) | Where a merchant bank sells an unsecured bill, the unsecured bill shall satisfy each of the following requirements: <Amended by Presidential Decree No. 21765, Oct. 1, 2009> |
| 1. | It shall be one that has been subject to credit assessment by two or more credit rating companies: Provided, That where all immediately former credit ratings reached the credit rating prescribed and publicly notified by the Financial Services Commission, the bill shall be one that has been subject to credit assessment by one or more credit rating companies; |
| 2. | The lowest credit rating among credit ratings assessed by credit rating companies shall reach or exceed the credit rating prescribed and publicly notified by the Financial Services Commission: Provided, That where a bill is applicable under the proviso to paragraph (1) or one issued by an enterprise prescribed and publicly notified by the Financial Services Commission, it may be exempt from the requirements for credit rating. |
| (3) | Any merchant bank may act as a broker, an intermediary, or an agent for trading unsecured bills, only where the lowest credit rating to which it is rated among credit ratings assigned by credit rating companies reaches or exceeds the credit rating prescribed and publicly notified by the Financial Services Commission: Provided, That where a bill is one issued by an enterprise prescribed and publicly notified by the Financial Services Commission, it may be exempt from the requirements for credit rating. <Amended by Presidential Decree No. 21765, Oct. 1, 2009> |
| (4) | The standards for credit assessment by credit rating companies, the valid term of credit ratings, the public disclosure of credit ratings, and other necessary matters concerning credit assessment of unsecured bills, shall be prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 21765, Oct. 1, 2009> |
| Article 329 (Cash Management Account) |
| (1) | Every merchant bank shall set the deposit term of a cash management account within one year. |
| (2) | Every merchant bank may invest the money deposited in a cash management account, except the reserve assets referred to in Article 346 of the Act, only in any of the following assets: |
| 1. | Discounted bills issued by enterprises that are the customers of the merchant bank; |
| 2. | Pre-shipment trade bills; |
| 3. | Factoring bills or receivables; |
| 5. | State bonds, local government bonds, or special purpose bonds; |
| 6. | Bonds for which the State guarantees the payment of principle and interest; |
| 8. | Bonds listed on the securities market; |
| 9. | Negotiable certificates of deposit. |
| (3) | Every merchant bank shall invest not less than 50 percent of the total manageable assets out of the money deposited in a cash management account in the assets referred to in paragraph (2) 1 through 3 in managing such deposited money: Provided, That where it fails to meet the criteria for management of the money deposited in a cash management account due to an unavoidable cause or event, such as deposit of a large amount of funds at once, the merchant bank shall be deemed to meet the criteria until the following day. |
| (4) | Every merchant bank shall separate manageable asset of the money deposited in a cash management account from its proprietary property in managing such deposited money. |
| (5) | The transaction method of a cash management account, the management method of deposited money, and other necessary matters concerning the cash management account shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 330 (Working Rules on Business Conduct) |
| (1) | No merchant bank shall grant any loan to any third person to cause him/her to acquire stocks issued by the merchant bank directly or indirectly. |
| (2) | No merchant bank shall provide funds to any lender of hybrid capital instruments, such as subordinated bonds and subordinated borrowings, by such means as granting a loan, directly or indirectly or issuing a payment guarantee letter or in any other way. |
| (3) | No merchant bank shall conduct any of the following acts in relation to credit affairs: |
| 1. | Placing any restrictions on a borrower's use of a loan or coercing a customer to open a deposit account, increasing the borrower's burden of financing costs, in violation of the criteria prescribed and publicly notified by the Financial Services Commission; |
| 2. | Shifting the credit risk, etc. borne by the merchant bank unfairly to a customer directly or indirectly; |
| 3. | Acquiring benefits otherwise or undermining a customer's interests, taking advantage of the merchant bank's dominant position. |
| (4) | A merchant bank shall allocate, for small or medium enterprises, not less than 25 percent of the aggregate of bills held, factoring finance, payment guarantee for bills, and medium and long-term loans to enterprises (excluding the public institutions referred to in the Act on the Management of Public Institutions and non-profit organizations). |
| (5) | The Financial Services Commission may prescribe and publicly notify other matters necessary for protecting customers and sound trading practices. |
| Article 331 (Authorization for Branches) |
| (1) | The Financial Services Commission shall, when it seeks to authorize establishment of a branch office, etc. (referring to branch offices, etc. under Article 337 of the Act; hereafter the same shall apply in this Article) pursuant to Article 337 of the Act, examine the following requirements that: |
| 2. | The relevant merchant bank has realized net income during at least one business year out of the latest two business years; |
| 3. | The relevant merchant bank has never been subject to any measure, equivalent to or heavier than a warning to the institution as a whole, taken by the Financial Services Commission during the latest two years preceding the date an application for authorization for establishment of a branch office, etc. is filed. |
| (2) | Paragraph (1) 2 and 3 shall not apply to merchant banks that seek to obtain authorization for establishment of a branch office, etc. in a Metropolitan City/Do in which the merchant bank has neither head office nor a branch office. |
| (3) | Further specific matters concerning the application for and examination on authorization for a branch office, etc., the form and method of preparation of the application, and other matters shall be prescribed and publicly notified by the Financial Services Commission, in addition to the matters provided for in paragraphs (1) and (2). |
| Article 332 (Issuance of Bonds) |
| (1) | Where a merchant bank states, in a bond subscription form or a registration statement, its intent to issue bonds even where the total amount of subscribed bonds does not reach the total amount of bonds described in the bond subscription form or the registration statement, the total amount of subscribed bonds shall be deemed the total amount of bonds issued. |
| (2) | A merchant bank shall, if it has issued bonds in excess of the limit in accordance with Article 340 (2) of the Act, meet the limit under paragraph (1) of the aforesaid Article within one month after issuing such bonds. |
| (3) | Any merchant bank company may issue bonds through public sale during a predetermined period, and in such cases, it may omit preparing a bond subscription form. |
| (4) | Every merchant bank shall describe the following matters in the bonds issued through public sale: |
| 1. | Trade name of the company; |
| 2. | Par value of the bonds; |
| 3. | Coupon rate of the bonds; |
| 4. | Method and deadline for payment of interest; |
| 5. | Method and deadline for repayment of bonds; |
| 6. | Serial number of bonds. |
| (5) | Any merchant bank may issue bonds at a discount. |
| (6) | Where a merchant bank issues bonds at a discount with a maturity of five years or longer, it may exclude the difference in the discounted issue price in applying the issue value of bonds under Article 340 of the Act. |
| Article 333 (Special Cases concerning Collective Investment Business) |
| (2) | Every merchant bank shall have a system for preventing conflicts of interest, which covers the following, in accordance with the main sentence of Article 341 (2) of the Act: |
| 1. | Each department shall be separated independently to ensure that business affairs and reporting are performed independently; |
| 2. | Whenever executive officers and/or employees in charge of the business affairs referred to in the subparagraphs of Article 341 (2) of the Act hold meetings or communicate with each other, they shall keep records of such meetings or communications and shall obtain verification on the records from the compliance officer at least once a month; |
| 3. | Employees in charge of business affairs referred to in the subparagraphs of Article 341 (2) of the Act shall not be dispatched from one department to another, nor shall employees in charge of business affairs referred to in Article 341 (2) 2 of the Act be assigned to any other business affairs within the period prescribed and publicly notified by the Financial Services Commission; |
| 4. | No employee in charge of selling collective investment securities shall concurrently hold office for the business affairs referred to in Article 341 (2) 2 of the Act; |
| 5. | The office space shall be separated by installing a separate entrance or by any other method to prevent sharing of information; |
| 6. | Electronic data on the business affairs referred to in the subparagraphs of Article 341 (2) of the Act shall be stored, managed, and inspected sufficiently independently to prevent sharing of such data; |
| 7. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for preventing conflicts of interest. |
| Article 334 (Limits on Credit Granting to Same Borrower) |
| (1) | "Limit prescribed by Presidential Decree" in Article 342 (2) of the Act means 15 percent of the equity capital of a merchant bank. |
| (2) | "Cases prescribed by Presidential Decree" in Article 342 (5) of the Act means any of the following: <Amended by Presidential Decree No. 27115, Apr. 29, 2016> |
| (a) | Where credit is granted as provided for in Article 342 (1) of the Act (hereafter referred to as "credit granting" in this Chapter) is to the State, a local government, or a corporation, etc. directly established under an Act and prescribed and publicly notified by the Financial Services Commission; |
| (b) | Where a merchant bank grants a loan to another financial institution with its surplus operating fund within a prescribed period not exceeding three business days, through a fund brokerage company; |
| (d) | Where a merchant bank grants additional credit to a person who has acquired a company referred to in item (c) in accordance with terms and conditions of the acquisition agreement; |
| (a) | Where the equity capital of the relevant merchant bank has been reduced; |
| (b) | Where there is a change in the composition of the same borrower due to a merger or transfer of business between enterprises to which credit was granted, or other event; |
| (c) | Where the amount converted into KRW has been increased due to fluctuation in exchange rates; |
| (d) | In circumstances recognized by the Financial Services Commission where the relevant merchant bank is not liable for the excess of the limit on credit granting but the excess is caused by other unavoidable events, such as a rapid change in economic conditions. |
| (3) | Where a merchant bank seeks to grant credit in excess of the limits prescribed in Article 342 (1) through (4) of the Act on any of the grounds referred to in paragraph (2) 1, the merchant bank shall obtain approval from the Financial Services Commission that the case falls under any of the grounds referred to in paragraph (2) 1. In such cases, the merchant bank shall file an application for approval with the Financial Services Commission by not later than seven days before the date it plans to grant credit. |
| (4) | Where a merchant bank has exceeded the limit on credit granting on any of the grounds provided for in paragraph (2) 2, the merchant bank shall submit a plan required for correction of the excess to the Financial Services Commission within one month from the date such ground occurred. |
| (5) | "Inevitable case prescribed by Presidential Decree" in the proviso to Article 342 (6) of the Act means any of the following cases due to which ceasing to exceed the limit will undermine the soundness of assets of the relevant merchant bank: |
| 1. | Where it is impracticable to recover credit granted because the maturity of credit already granted has not yet arrived; |
| 2. | Where recovering credit granted will seriously undermine the stability of business of the person to whom credit was granted. |
| (6) | Except as specifically provided for in paragraphs (1) through (5), filing an application for approval for excess of the limit on credit granting; approval 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 335 (Scope of Equity Capital) |
The equity capital under Article 342 (1) of the Act shall be divided into core (Tier 1) capital and supplementary (Tier 2) capital, and shall be prescribed and publicly notified by the Financial Services Commission in accordance with the following guidelines: | 1. | The core capital consists of real net assets of a merchant bank, such as capital and reserves, which can be characterized as permanent; |
| 2. | The supplementary capital consists of subordinated bonds and others, which can be characterized as similar to those under subparagraph 1 and with which it is possible to set off losses incurred in the course of business activities of the relevant merchant bank; |
| 3. | Treasury stocks owned by the relevant merchant bank and others that do not actually contribute to capital adequacy shall not be included in core capital or supplementary capital. |
| Article 336 (Scope of Credit Granting) |
The credit granting referred to in Article 342 (1) of the Act shall consist of the following, and specific scope of such credit granting shall be prescribed and publicly notified by the Financial Services Commission: <Amended by Presidential Decree No. 27291, Jun. 28, 2016> | 4. | Purchase of securities that can be characterized as financial support; |
| 6. | Subrogated payment following payment guarantee; |
| 7. | Leasing of facilities; |
| 8. | Other transaction that may incur a loss to a merchant bank if the other party to the transaction becomes insolvent; |
| 9. | A transaction that may substantially lead to any of subparagraphs 1 through 7, although the relevant merchant bank was not involved directly in the transaction. |
| Article 337 (Scope of Same Borrower and Related Persons) |
| (1) | The specific scope of the same borrower referred to in Article 342 (1) of the Act is a person who is in any of the following relationships with the same private individual or corporation: |
| 2. | Another private individual or corporation that is deemed highly likely to become insolvent in the absence of special circumstances if a private individual or corporation becomes insolvent. |
| 1. | Executive officers of the relevant merchant bank; |
| 2. | Subsidiary companies (referring to subsidiary companies not less than 15 percent of whose outstanding voting stocks are held by the relevant merchant bank; hereafter the same shall apply in this Chapter) of the relevant merchant bank; |
| 3. | Related persons to executive officers of the relevant merchant bank; |
| 4. | Persons who are in any of the relationships provided in the subparagraphs of paragraph (1) with a subsidiary company of the relevant merchant bank. |
| Article 338 (Restriction on Transactions with Major Shareholders) |
| (1) | "Limit prescribed by Presidential Decree" in Article 343 (1) of the Act means the smaller of an amount equivalent to 15 percent of equity capital, or an amount calculated by dividing the number of voting stocks of the merchant bank held by the relevant major shareholder (including affiliated persons to the major shareholder; hereafter the same shall apply in this Article) by the total number of outstanding voting stocks of the merchant bank and multiplying the equity capital of the merchant bank by the ratio computed by the division. |
| (2) | "Amount prescribed by Presidential Decree" in the former part of Article 343 (2) and (3) of the Act means the smaller of an amount of a single transaction prescribed and publicly notified by the Financial Services Commission, equivalent to 0.1 percent of equity capital, or one billion won: Provided, That excluded herefrom is the amount of a single ordinary transaction made by the relevant merchant bank under the terms and conditions defined in Article 2 of the Act on the Regulation of Terms and Conditions. |
| (3) | "Transaction prescribed by Presidential Decree" in the former part of Article 343 (2) of the Act means a transaction for acquiring corporate bonds issued by a major shareholder through public offering or sale. |
| (a) | Amount of credit granted as of the end of each quarter; |
| (b) | Increase or decrease of credit granted during each quarter; |
| (c) | Terms and conditions of credit granting; |
| (d) | Other matters prescribed and publicly notified by the Financial Services Commission; |
| (a) | Amount of stocks acquired as of the end of each quarter; |
| (b) | Details of increase and decrease during each quarter; |
| (c) | Acquisition price or disposition price; |
| (d) | Other matters prescribed and publicly notified by the Financial Services Commission. |
| (6) | "Cases prescribed by Presidential Decree" in Article 343 (9) of the Act means where a major shareholder falls under any of the following: <Amended by Presidential Decree No. 21765, Oct. 1, 2009> |
| 1. | Where liabilities of the major shareholder (limited to a company, but including affiliated persons that are companies; hereafter the same shall apply in this Article) exceed its assets; |
| 2. | Where the major shareholder is rated non-investment grade by at least two credit rating companies. |
| (7) | "Measures prescribed by Presidential Decree" in Article 343 (9) 3 of the Act means prohibition on the new acquisition of any of the following financial investment instruments: |
| 1. | Depositary receipts related to securities issued by a major shareholder; |
| 2. | Exchangeable bonds issued by any person, other than a major shareholder, that entitles the holder to claim exchange with securities issued by a major shareholder or depositary receipts referred to in subparagraph 1; |
| 3. | Financial investment instruments (limited to where an underlying asset can be acquired by exercising rights) based on an underlying asset that consists only of securities issued by a major shareholder or depositary receipts or exchangeable bonds referred to in subparagraph 1 or 2. |
| Article 339 (Limits on Investment in Securities) |
| 1. | Where a merchant bank holds securities while conducting the business affairs provided for in Article 336 (1) 1 or 3 or (2) 2 or 3 of the Act and engaging in investment trading or brokerage business for collective investment securities; |
| 2. | Where a merchant bank holds bonds for which the State guarantees the payment of principal and interest; |
| 3. | Where a merchant bank holds securities by exercising shareholders' rights, security rights, etc. (excluding those held for more than one year); |
| 4. | Where a merchant bank holds corporate bonds with a remaining maturity of less than three years; |
| 5. | Where a merchant bank holds stocks (including convertible bonds) acquired by converting the existing credit granted into investment, as prescribed and publicly notified by the Financial Services Commission; |
| 7. | Where a merchant bank holds collective investment securities prescribed and publicly notified by the Financial Services Commission. |
| (2) | "Method prescribed by Presidential Decree" in Article 344 (2) of the Act means the method by which different limits on investment is prescribed separately for the following: |
| 1. | Stocks issued by each company (including depositary receipts related to such stocks); |
| 2. | Stocks (including depositary receipts related to such stocks) issued by a major shareholder of a merchant bank and its affiliated persons; |
| 3. | Unlisted securities (including depositary receipts related to such stocks) sold by a major shareholder of a merchant bank and its affiliated persons; |
| 4. | Derivatives-linked securities and other securities prescribed and publicly notified by the Financial Services Commission. |
| Article 340 (Prohibited Acts regarding Funding) |
| Article 341 (Holding Reserve Assets) |
| (1) | Pursuant to Article 346 of the Act, a merchant bank shall hold reserve assets equivalent to or more than five percent of the aggregate of the following: |
| 1. | Amount of outstanding bills (referring to outstanding bills issued by the merchant bank at the request of an investor, representing the merchant bank as the issuer and the payer) and outstanding debt securities; |
| 2. | Amount of deposits in cash management accounts; |
| 3. | Par value of commercial paper sold, undertaking the surety's liability. |
| (2) | The reserve assets referred to in paragraph (1) shall consist of the following assets, which have not been provided as collateral for any third person: |
| 2. | State bonds, local government bonds, or special purpose bonds; |
| 3. | Bonds for which the State guarantees the payment of principal and interest. |
| (3) | Matters concerning the method for calculating the reserve assets shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 342 (Restrictions, etc. on Acquisition of Real Estate) |
| Article 343 Deleted. <by Presidential Decree No. 27414, Jul. 28, 2016> |
| Article 344 (Measures against Merchant Banks) |
| 1. | Where a merchant bank grants credit to a major shareholder, in violation of Article 343 (1) of the Act, as provided in subparagraph 10 of attached Table 10 of the Act; |
| 2. | Where a merchant bank conducts any of the acts provided in the subparagraphs of Article 35 of the Act, in violation of the aforesaid Article, which shall apply mutatis mutandis under Article 350 of the Act, as provided in subparagraph 21 of attached Table 10 of the Act; |
| 3. | Where a merchant bank violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as provided in subparagraph 3 of attached Table 14; |
| 4. | Where a merchant bank violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as provided in subparagraph 4 of attached Table 14; |
| 5. | Where a merchant bank violates the duty to refrain from any unfair trade or any similar act under Article 178 of the Act, as provided in subparagraph 5 of attached Table 14. |
| (2) | "Finance-related statutes, etc. prescribed by Presidential Decree" in Article 354 (1) 5 of the Act means the statutes referred to in the subparagraphs of Article 373 (2). |
| 1. | Where a merchant bank fails to continue the authorized business for not less than six months without good cause; |
| 2. | Where a merchant bank receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 3. | Where a merchant bank fails to correct the relevant condition within one month from the date of business suspension imposed under Article 354 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed); |
| 4. | Where a merchant bank commits identical or similar violations continuously or repeatedly. |
| 1. | Closure of branch offices or other business offices or suspension of their business completely or partially; |
| 2. | Making a demand or recommendation for improving the methods of business management or operation; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (7) | "Case prescribed by Presidential Decree" in subparagraph 32 of attached Table 10 of the Act means any of the cases provided in the subparagraphs of attached Table 14 of this Decree. |
CHAPTER V FUND BROKERAGE COMPANY
| Article 345 (Authorization for Fund Brokerage Companies) |
| (1) | "Financial institutions, etc. prescribed by Presidential Decree" in Article 355 (1) of the Act means the following: <Amended by Presidential Decree No. 21898, Dec. 21, 2009> |
| 1. | Entities referred to in under Article 10 (2) 1 through 7, 9 through 11, 13, 14, 16, and 17; |
| 2. | Entities referred to in Article 10 (3) 2 and 4-2; |
| 3. | Entities equivalent to subparagraph 1 or 2, which are prescribed and publicly by the Financial Services Commission. |
| 1. | In applying the requirements provided in Article 355 (2) 2 of the Act, a fund brokerage company shall maintain its equity capital at not less than 70 percent of the minimum equity capital prescribed in paragraph (2). In such cases, the requirements for maintaining the authorization shall apply as of the end of each fiscal year; and a fund brokerage company that fails to meet the requirements for maintaining such 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; |
| (4) | Articles 16 (4), (5), (6) (excluding subparagraph 1), and (11), and 17 (excluding paragraphs (1) 4 and 9, (2) 5 and 11, and (3)) shall apply mutatis mutandis to the requirements for authorization of fund brokerage companies. <Amended by Presidential Decree No. 22197, Jun. 11, 2010> |
| Article 346 (Restrictions on Activities of Fund Brokerage Companies) |
| 1. | Brokerage, intermediary or agent services for negotiable certificates of deposit denominated in foreign currency; |
| 2. | Brokerage, intermediary or agent services for repurchase agreements; |
| 3. | Brokerage, intermediary or agent services for commercial paper; |
| 4. | Brokerage, intermediary or agent services for over-the-counter derivatives, the underlying asset of which is a foreign currency or interest rate; |
| 5. | Investment brokerage business referred to in 2i-11-2i among the authorized business units in attached Table 1 hereof. |
| (2) | No fund brokerage company shall act as a broker, an intermediary or an agent for any call transaction (referring to short-term transactions between financial institutions, etc. for a period not exceeding 90 days; hereafter the same shall apply in this Chapter) with any entity other than the following: <Amended by Presidential Decree No. 26135, Mar. 3, 2015> |
| 5. | Other entities prescribed and publicly notified by the Financial Services Commission as deemed necessary for efficient financial transactions among financial institutions, etc. |
| (3) | A fund brokerage company acting as a broker for a loan shall simply engage in the brokerage of the loan (referring to only interconnecting a provide and a receiver of a loan, charging certain fees): Provided, That when a fund brokerage company becomes involved in call transactions as a broker, it may engage in trading brokerage (referring to brokerage in the form of trading prescribed and publicly notified by the Financial Services Commission for efficient trading) within the minimum extent prescribed and publicly notified by the Financial Services Commission. |
| (4) | Every fund brokerage company shall report the details of its brokerage business activities each month to the Financial Services Commission in the manner prescribed and publicly notified by the Financial Services Commission. |
| (5) | "Profit-making corporation prescribed by Presidential Decree" in Article 357 (4) of the Act means any of the entities referred to in the subparagraphs of Article 345 (1). <Newly Inserted by Presidential Decree No. 27414, Jul. 28, 2016> |
| Article 347 (Measures against Fund Brokerage Companies) |
| 1. | Where a fund brokerage company engages in financial investment business, in violation of Article 357 (1) of the Act, as provided in subparagraph 1 of attached Table 11 of the Act; |
| 2. | Where a fund brokerage company violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as provided in subparagraph 3 of attached Table 15; |
| 3. | Where a fund brokerage company violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as provided in subparagraph 4 of attached Table 15; |
| 4. | Where a fund brokerage company violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as provided in subparagraph 5 of attached Table 15. |
| 1. | Where a fund brokerage company fails to commence its business within six months from the date of authorization or fails to continue the authorized business without good cause for not less than six months after commencing such business; |
| 2. | Where a fund brokerage company receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 3. | Where a fund brokerage company fails to correct the relevant condition within one month from the date of business suspension imposed under Article 359 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when the business suspension is imposed); |
| 4. | Where a fund brokerage company commits identical or similar violations continuously or repeatedly. |
| 1. | Closure of branch offices or other business offices or suspension of their business completely or partially; |
| 2. | Making a demand or recommendation for improving the methods of business management or operation; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (7) | "Case prescribed by Presidential Decree" in subparagraph 22 of attached Table 11 of the Act means any of the cases referred to in the subparagraphs of attached Table 15 of this Decree. |
CHAPTER VI SHORT-TERM FINANCIAL COMPANY
| Article 348 (Business Affairs, etc. of Short-Term Finance Companies) |
| (2) | "Business affairs prescribed by Presidential Decree" in Article 360 (1) of the Act means business affairs of providing loans secured by bill. |
| (3) | "Financial institution prescribed by Presidential Decree" in Article 360 (2) 1 of the Act means any of the following: <Amended by Presidential Decree No. 28040, May 8, 2017> |
| 4. | A comprehensive financial investment business entity. |
| 1. | In applying the requirements provided for in Article 360 (2) 2 of the Act, a short-term finance company shall maintain its equity capital at not less than 70 percent of the minimum equity capital prescribed in paragraph (4). In such cases, the requirements for maintaining the authorization shall apply as of the end of each fiscal year; and a short-term finance company 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. | In applying the requirements provided in Article 360 (2) 5 of the Act, a short-term finance company shall continue to satisfy the requirements provided for in Article 19 (1) 2 (a) through (c). In such cases, Article 19 (2) shall apply mutatis mutandis. |
| (6) | Articles 16 (4), (5), (6), and (11), and 17 (excluding paragraphs (1) 4 and 9, (2) 5 and 11, and (3)) shall apply mutatis mutandis to the requirements for authorization of short-term finance companies. <Amended by Presidential Decree No. 22197, Jun. 11, 2010> |
| Article 349 (Measures against Short-Term Finance Companies) |
| 1. | Where a short-term finance company violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as provided in subparagraph 3 of attached Table 16; |
| 2. | Where a short-term finance company violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as provided in subparagraph 4 of attached Table 16; |
| 3. | Where a short-term finance company violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as provided in subparagraph 5 of attached Table 16. |
| 1. | Where a short-term finance company fails to commence its business within six months from the date of authorization or fails to continue the authorized business without good cause for not less than six months after commencing such business; |
| 2. | Where a short-term finance company receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 3. | Where a short-term finance company fails to correct the relevant condition within one month from the date of business suspension imposed under Article 364 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when the business suspension is imposed); |
| 4. | Where a short-term finance company commits identical or similar violations continuously or repeatedly. |
| 1. | Closure of branch offices or other business offices or suspension of their business completely or partially; |
| 2. | Making a demand or recommendation for improving the methods of business management or operation; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (7) | "Case prescribed by Presidential Decree" in subparagraph 19 of attached Table 12 of the Act means any of the cases referred to in the subparagraphs of attached Table 16 of this Decree. |
CHAPTER VII TRANSFER AGENCY COMPANY
| Article 350 (Prerequisites for Registration) |
| 1. | An electronic computer system, office space, and office equipment required for operation of a transfer agency for securities; |
| 2. | Supplementary facilities required for maintaining continuity of business in preparation for occurrence of accidents, such as power failure and fire. |
| (2) | "System for preventing conflicts of interest as prescribed by Presidential Decree" in Article 365 (2) 3 of the Act means a system for ensuring compliance with the following subparagraphs: <Amended by Presidential Decree No. 21611, Jul. 1, 2009> |
| 1. | The department responsible for business affairs of a transfer agency for securities shall be separated from departments for other business affairs to ensure that business affairs and reports are performed independently; |
| 2. | The office space for business affairs of a transfer agency for securities shall be sufficiently separated from office space for other business affairs to prevent sharing of information; |
| 3. | Electronic data concerning business affairs of a transfer agency for securities shall be separated from those concerning other business affairs and shall be stored, managed, and inspected independently to prevent sharing of such data. |
| Article 351 (Procedures for Registration, etc.) |
| 1. | Name and location of the company; |
| 2. | Matters concerning capital; |
| 3. | Matters concerning executive officers; |
| 4. | Method of performing business affairs; |
| 5. | Matters concerning the physical facilities referred to in Article 350 (1); |
| 6. | Matters concerning the system to prevent conflicts of interest referred to in Article 350 (2); |
| 7. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for examining registration. |
| (2) | Each application for registration 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. | Articles of incorporation; |
| 2. | A document stating names or trade names of shareholders and the number of stocks held by each of them; |
| 3. | 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); |
| 4. | A document substantiating the status of physical facilities; |
| 5. | A document substantiating that the system to prevent conflicts of interest referred to in Article 350 (2) has been established; |
| 6. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining registration. |
| (3) | Upon receipt of an application filed under paragraph (1), the Financial Services Commission shall ascertain that the contents of the application under Article 365 (3) of the Act are true, and examine whether the contents of the application meet the requirements for registration provided in Article 365 (2) of the Act. |
| (4) | Except as specifically provided for in paragraphs (1) through (3), filing an application for the registration of a transfer agent; 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 352 (Measures against Transfer Agents) |
| 1. | Where a transfer agent violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as provided in subparagraph 3 of attached Table 17; |
| 2. | Where a transfer agent violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as provided in subparagraph 4 of attached Table 17; |
| 3. | Where a transfer agent violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as provided in subparagraph 5 of attached Table 17. |
| 1. | Where a transfer agent fails to commence its business within six months from the date of registration or fails to continue the registered business without good cause for not less than six months after commencing its business; |
| 2. | Where a transfer agent receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 3. | Where a transfer agent fails to correct the relevant condition within one month from the date of business suspension imposed under Article 369 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when the business suspension is imposed); |
| 4. | Where a transfer agent commits identical or similar violations continuously or repeatedly. |
| 1. | Closure of branch offices or other business offices or suspension of their business completely or partially; |
| 2. | Make a demand or recommendation for improving the methods of business management or operation; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (7) | "Case prescribed by Presidential Decree" in subparagraph 18 of attached Table 13 of the Act means any of the cases referred to in the subparagraphs of attached Table 17 of this Decree. |
CHAPTER VIII ORGANIZATIONS RELATED TO FINANCIAL INVESTMENT
| Article 353 (Establishment of Organizations Related to Financial Investment) |
| (1) | "Person prescribed by Presidential Decree" in Article 370 (1) of the Act means persons falling under any of the following subparagraphs: |
| 1. | An investment solicitor; |
| 2. | A person performing an important duty. |
| (2) | A person who intends to obtain a permit for establishment of an organization related to financial investment under Article 370 (3) of the Act shall file an application describing the following matters with the Financial Services Commission: |
| 2. | Purposes of establishment; |
| 3. | Domicile of place of business; |
| 4. | Matters concerning the status of property and estimates on revenue and expenditure; |
| 5. | Matters concerning promoters and executive officers. |
| (3) | An application under paragraph (2) shall be accompanied by the following documents. In such cases, the Financial Services Commission shall verify the promoter's abridged copy of resident registration card including his/her resident registration number by sharing administrative information under Article 36 (1) or (2) of the Electronic Government Act, but shall require the applicant to submit the certified transcript, if the applicant does not consent to verification in such manner: <Amended by Presidential Decree No. 22151, May 4, 2010; Presidential Decree No. 28564, Dec. 29, 2017> |
| 1. | Articles of association or agreement; |
| 2. | Business plan and statement of estimated revenue and expenditure for two years; |
| 3. | Resumes and certificates of personal identification of promoters; |
| 4. | A document describing the type and method of business. |
| Article 354 (Measures against Organizations Related to Financial Investment) |
| 1. | If an organization has breached the duty to refrain from using any material, nonpublic information under Article 174 of the Act; |
| 2. | If an organization has breached the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act; |
| 3. | If an organization has breached the duty to refrain from unfair trade or any similar act under Article 178 of the Act; |
| Article 354-2 (Exception to Prohibition against Establishment of Markets without Permission) |
"Cases prescribed by Presidential Decree" in subparagraph 3 of Article 373 of the Act means the following: <Amended by Presidential Decree No. 27291, Jun. 28, 2016; Presidential Decree No. 28040, May 8, 2017> | 1. | Where an investment trader or investment broker sells the certificates of preemptive rights or acts as a broker, intermediary or agent for the sale of such certificates under Article 176-8 (4) 2; |
| 2. | Where an inter-dealer broker acts as a broker for the trading of debt securities outside a securities market under Article 179; |
| 3. | Where a comprehensive financial investment business entity engages in over-the-counter transactions of financial investment instruments or provides the brokerage, intermediary or agent services for such transactions under Article 77-6 (1) 1. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 354-3 (Requirements, etc. for Permission for Exchange) |
| (1) | "Units for market establishment defined by Presidential Decree" in Article 373-2 (1) of the Act means the units for market establishment prescribed in attached Table 17-2. |
| 2. | Equity securities (referring to equity securities other than stock certificates); |
| 3. | Beneficiary certificates; |
| 4. | Derivatives-linked securities; |
| (3) | "Amount prescribed by Presidential Decree" in Article 373-2 (2) 2 of the Act means the minimum amount of equity capital for each unit for market establishment prescribed in attached Table 17-2. |
| (4) | The business plan referred to in Article 373-2 (2) 3 shall comply with the following requirements: |
| 1. | It shall be appropriate for forming fair prices of financial investment instruments and enhancing the stability and efficiency of the trading of such financial investment instruments; |
| 2. | The entity shall have established an internal control system appropriate for risk management and prevention, etc. of financial events; |
| 3. | The entity shall have the appropriate work process for protecting investors; |
| 4. | There shall be no likelihood of violating any statute or undermining sound practices in financial transactions; |
| (5) | The human resources, electronic computer systems and other physical facilities referred to in Article 373-2 (2) 4 of the Act shall meet the following requirements: |
| 1. | The entity shall have human resources who have expertise and soundness in the intended exchange business and adequate human resources required for performing its business, including operators of the electronic computer systems; |
| 2. | The entity shall have the following physical facilities, including electronic computer systems: |
| (a) | The electronic computer systems and means of communications required for performing the intended exchange business; |
| (b) | Adequate space for business and office equipment, including an office; |
| (c) | Security facilities for protecting the safety of physical facilities, including electronic computer systems; |
| (d) | Supplementary facilities required for maintaining the continuity of business in the event of power failure, fire, etc. |
| (6) | Attached Table 2 shall apply mutatis mutandis to the requirements for major shareholders referred to in Article 373-2 (2) 7 of the Act (hereafter referred to as "major shareholders" in this Part). |
| 1. | The entity shall have established appropriate internal control guidelines for identifying, assessing and managing the possibility of conflicts of interest; |
| 2. | The entity shall have a system for blocking information exchanges in accordance with the guidelines and methods prescribed and publicly notified by the Financial Services Commission in relation to providing information, holding concurrent offices and using electronic computer systems, etc. among the following business affairs: |
| (c) | Other business affairs related to trade contracts in the exchange market. |
| (9) | Detailed criteria in relation to the requirements for permission provided for in paragraphs (4) through (8) shall be prescribed and publicly notified by the Financial Services Commission. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 354-4 (Method, Procedures, etc. for Permission for Exchange) |
| (1) | Each application for permission to be filed with the Financial Services Commission pursuant to Article 373-3 (1) of the Act shall contain the following: |
| 2. | Locations of the head office, branch offices and other business offices; |
| 3. | Matters concerning executive officers; |
| 4. | Matters concerning the intended unit for market establishment (referring to the units for market establishment prescribed in Article 373-2 (1) of the Act; hereinafter the same shall apply); |
| 5. | Matters concerning financial standing, such as equity capital; |
| 6. | Matters concerning business plans; |
| 7. | Matters concerning human resources, electronic computer systems and other physical facilities; |
| 8. | Matters concerning major shareholders; |
| 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 permission referred to in paragraph (1) shall be accompanied by the following: |
| 1. | Articles of incorporation; |
| 2. | Documents evidencing the decision made on incorporation or filing an application for permission, such as minutes of the general meeting of promoters, the inaugural general meeting of shareholders or a directors' meeting; |
| 3. | A document 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 unit for market establishment; |
| 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 the date of its incorporation); |
| 7. | Business plans (including estimated financial statements) for three business years after the commencement of business; |
| 8. | Documents substantiating the status of human resources, physical facilities, etc.; |
| 9. | Documents stating 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 an application for permission (or as of the end of the most recent business year if the application for permission is filed to add a unit for market establishment) and the number of stocks held by each of such shareholders; |
| 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 an entity that intends to obtain permission for an exchange has filed an application for preliminary permission under Article 373-4 of the Act, and none of the contents of the application for preliminary authorization and the accompanying documents have been changed, the business entity may omit to state some of the matters required under paragraph (1) or omit to submit some of the accompanying documents among the documents referred to in paragraph (2), making a statement to refer to the specified relevant part. |
| (4) | Upon receipt of an application for permission 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. |
| (5) | Upon receipt of an application for permission filed under paragraph (1), the Financial Services Commission shall ascertain whether the contents of the application for permission for an exchange are true, and examine whether the contents of the application meet the requirements for permission prescribed in Article 373-2 (2) of the Act, in consideration of the opinions collected from interested parties, etc. |
| (6) | The Financial Services Commission may conduct an on-site investigation, such as interviewing interested parties, promoters or executive officers, etc., if necessary for ascertaining the contents of an application for permission for an exchange pursuant to paragraph (5). |
| (7) | The Financial Services Commission shall issue public notice of the applicant, date of filing of the application, contents of the application, method and period for presenting opinions, etc. on its website or by other means to collect opinions on the contents of the application for permission for an exchange under paragraph (5) from interested parties, etc. |
| (8) | The Financial Services Commission shall notify the applicant for permission for an exchange of an opinion deemed unfavorable to him/her, if any, among the opinions presented under paragraph (7), and may require the applicant to vindicate himself/herself within a prescribed period. |
| (9) | The Financial Services Commission may hold a hearing, if deemed necessary for examining permission for an exchange. |
| (10) | An entity granted permission for an exchange under Article 373-3 (2) of the Act shall commence its business within six months from the date of the permission: Provided, That where the Financial Services Commission determines a deadline or where the deadline is extended at the request of the entity granted permission for an exchange, it may commence the authorized business within such extended deadline. |
| (11) | Where the Financial Services Commission imposed any condition to permission for an exchange, it shall ascertain whether it is fulfilled. |
| (12) | Except as specifically provided in paragraphs (1) through (11), filing an application for permission for an exchange; 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. |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 354-5 (Preliminary Authorization) |
| (1) | A person who intends to apply for preliminary permission under Article 373-4 (1) of the Act shall file an application for preliminary permission, which shall contain the matters referred to in the subparagraphs of Article 354-4 (1), with the Financial Services Commission. |
| (2) | Each application for preliminary permission to be filed under paragraph (1) shall be accompanied by the following: |
| 1. | Articles of incorporation or proposed articles of incorporation; |
| 2. | Documents evidencing the decision made on incorporation or filing the application for permission, 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 unit for market establishment; |
| 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. | Business plans (including estimated financial statements) 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 names or trade names of shareholders who hold one percent or more of the total number of outstanding stocks as of the date of filing of an application for preliminary permission (or as of the end of the most recent business year, if the application for preliminary permission is filed to add a unit for market establishment) and the number of stocks held by each of such shareholders; |
| 10. | Documents substantiating that the system has been or can be established for preventing conflicts of interest; |
| 11. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining the requirements for preliminary permission. |
| (3) | Article 354-4 (4) through (9) shall apply mutatis mutandis to the methods and procedures for examining the applications for preliminary permission filed under Article 373-4 (1) of the Act. In such cases, "permission for an exchange" shall be construed as "preliminary permission." |
| (4) | Each person granted preliminary permission under Article 373-4 (2) of the Act shall file an application for permission for an exchange under Article 373-2 of the Act (hereafter referred to as "final permission" in this paragraph) upon fulfilling the terms and conditions of the preliminary permission within six months from the date the preliminary permission was granted: Provided, That if a different deadline is set for application for final permission by the Financial Services Commission, or the aforesaid deadline for application for final permission is extended at the request of the person granted the preliminary permission, the person may file an application for final permission within such deadline specially set or extended. |
| (5) | Except as specifically provided for in paragraphs (1) through (4), filing an application for preliminary permission; examination of the application; the form of the application for preliminary permission; 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. 24697, Aug. 27, 2013]
| Article 354-6 (Responsibilities of Exchange) |
[This Article Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 355 (Abnormal Transactions) |
"Abnormalities in trading prescribed by Presidential Decree" in Article 377 (1) 8 of the Act means transactions or activities that are likely to violate Article 174, 176, 178, 178-2 or 180 of the Act in the securities market (including trades of securities via an alternative trading system; hereafter the same shall apply in this Article) or the derivatives market and that fall under any of the following. In such cases, transactions or activities discovered in the course of examination or supervision of abnormal transactions under Article 404 of the Act that are likely to violate Article 147, 172, 173 or 173-2 (2) of the Act shall be presumed to be abnormal transactions: <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26374, Jun. 30, 2015> | 1. | Where there is a substantial change in the prices or volume of traded securities or exchange-traded derivatives; |
| 2. | Where there is a public disclosure, rumor, news report, etc. that may affect the prices or volume of traded securities or exchange-traded derivatives; |
| 3. | Where fair trading practices in the securities market or the derivatives market are likely to be undermined otherwise. |
| Article 356 (Qualifications for Executive Officers) |
| (1) | "Persons who have experience and knowledge in finance as prescribed by Presidential Decree and who are unlikely to undermine the sound management of an exchange and fair trading practices" in Article 380 (3) of the Act means a person who meets any of the following requirements: |
| 2. | A person who has been a member of the Senior Executive Service, or who has served as a Grade II or higher public official, in a field related to the finance or economy; |
| 3. | A person who has served in a local or foreign university, college, or research institute as an adjunct professor or higher faculty member, or in a position equivalent to such position in a field related to the finance or economy for not less than 15 years in total; |
| 4. | A person recognized as having experience and knowledge equivalent to those referred to in subparagraphs 1 through 3. |
| (2) | "Circumstances prescribed by Presidential Decree" in the former part of Article 380 (4) of the Act means where a person is determined unfit to perform his/her duty as a result of examination of qualification, in comprehensive consideration of his/her ability to perform the duty, expertise, experience, etc. |
| 1. | A person who holds stocks on account of the largest shareholder or any affiliated person to the largest shareholder (limited to stocks held on the account of the largest shareholder or any affiliated person to the largest shareholder); |
| 2. | A person who has delegated voting rights (including the power to give instructions to exercise voting rights) to the largest shareholder or any affiliated person to the largest shareholder (applicable only to the rights so delegated). |
| Article 357 (Special Interests) |
"Special interests prescribed by Presidential Decree" in Article 383 (2) of the Act means interests falling under any of the following subparagraphs: | 1. | Guarantee for performance of obligations; |
| 2. | Offering assets as security; |
| 3. | Interests that cannot be regarded as necessary activity in the course of performing normal trading activities (referring to activities related to the business of the counterparty to a transaction or activities incidental in accomplishing purposes of business, which can be regarded as ordinary trading activities in light of social norms and terms and conditions of the transaction). |
| Article 357-2 (Audit Committee) |
[This Article Newly Inserted by Presidential Decree No. 27414, Jul. 28, 2016]
| Article 358 (Members of Director Nomination Committee) |
"Stock-listed corporations prescribed by Presidential Decree" in Article 385 (2) 3 of the Act means corporations recommended by an organization established by and consisting of stock-listed corporations for each securities market prescribed and publicly notified by the Financial Services Commission among securities markets established and operated by the exchange. [This Article Wholly Amended by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 359 (Categories of Members) |
"Member prescribed by Presidential Decree" in Article 387 (2) 3 of the Act means a member falling under any one of the following subparagraphs: | 3. | A member who participates in settlement or trading limitedly in a certain market sector of the securities market or for certain items; |
| 4. | A member who participates in settlement or trading limitedly in a certain market sector of the derivatives market or for certain items; |
| 5. | Other member stipulated in the membership management regulations under Article 387 (1) of the Act (hereinafter referred to as "membership management regulations"). |
| Article 360 (Securities Subject to Public Disclosure Regulations) |
"Other securities prescribed by Presidential Decree" in the former part of Article 391 (1) of the Act means any of the following securities: | 2. | Derivative-combined securities; |
| 3. | Security depository receipts; |
| Article 361 (Requests for Information, etc.) |
An exchange may request necessary information from an administrative agency and other related institutions in writing (including an electronic document) or by facsimile in accordance with the following guidelines pursuant to Article 392 (2) of the Act. In such cases, the written request shall state the reasons for requesting such information: | 2. | A competent court with respect to an application for, or a decision on, rehabilitation proceedings under the Debtor Rehabilitation and Bankruptcy Act, filing lawsuits that may substantially affect any listed stocks, or occurrence of a cause for dissolution; |
| 3. | A creditor bank with respect to commencement of administration of the relevant corporation by the creditor bank; |
| 4. | An administrative agency or any other related institution that has relevant information with respect to matters requiring reporting or confirmation under Article 391 (2) 1 or 3 of the Act. |
| Article 362 (Accumulation, Management, etc. of Joint Compensation Fund) |
| (1) | The total amount of the Joint Compensation Fund to be accumulated under Article 394 (1) of the Act (hereinafter referred to as "Joint Fund"), the ratio and method of accumulation by each member shall be prescribed by the membership management regulations in consideration of payment risk in each securities market and derivatives market, payment risk for each member, and any other circumstances. |
| (2) | An exchange shall compensate for damage caused by any breach of trade contracts in a securities market or derivatives market with its own property and the Joint Fund in the following order and manner pursuant to Article 399 (2) of the Act: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | It shall preferentially use the Joint Fund accumulated by the breaching member; |
| 2. | If there remains a shortage after compensating the damage, as prescribed in subparagraph 1, it shall preferentially use the amount prescribed by the membership management regulations among the property of the exchange; |
| 3. | If there still remains a shortage after compensating the damage, as prescribed in subparagraphs 1 and 2, it shall use the Joint Fund accumulated by the members other than the breaching member and the property of the exchange, in the order and manner prescribed by the membership management regulations. |
| (3) | An exchange shall separately manage the Joint Fund accumulated by each member and shall keep its account separately from other property. <Amended by Presidential Decree No. 27291, Jun. 28, 2016> |
| (4) | An exchange shall refund the Joint Fund accumulated by a withdrawing member to that member as prescribed by the membership management regulations. |
| (5) | An exchange shall manage the Joint Fund in any of the following manners: |
| 2. | Purchasing guaranteed corporate bonds; |
| 3. | Lending to, or depositing in, securities finance companies or purchasing bonds issued by the securities finance companies; |
| (6) | An exchange shall add yields from the management of the Joint Fund in accordance with paragraph (5) to the principal of the Joint Fund as prescribed by the membership management regulations. |
| (7) | Except as specifically provided in paragraphs (1) through (6), matters necessary for the accumulation, administration, management, etc. of the Joint Fund shall be prescribed by the membership management regulations. |
| (8) | "Guaranteed corporate bonds" in paragraph (5) 2 means corporate bonds for which any of the following financial institutions, etc. guarantees the payment of principal and interest: <Amended by Presidential Decree No. 27205, May 31, 2016> |
| 6. | A securities finance company; |
| Article 363 (Making Claims, etc. for Reimbursement) |
| (1) | Where an exchange compensates for any damage pursuant to Article 339 (1) of the Act, it shall report it to the Financial Services Commission, and shall make a claim for reimbursement against a breaching member in such a manner that the Joint Fund can be promptly replenished. |
| (2) | Where an exchange has made a claim for reimbursement against a breaching member under Article 399 (3) of the Act, the exchange shall allocate the amount collected by making the claim for reimbursement to the Joint Compensation Fund and its property in the following order and manner: <Amended by Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Where any amount has been used as provided in Article 362 (2) 3, the exchange shall preferentially allocate the collected amount to the Joint Fund accumulated by members, other than the breaching member, and its property in the order and manner prescribed by the membership management regulations; |
| 2. | Where any amount has been used as provided in Article 362 (2) 2, the exchange shall allocate the amount remaining after the allocation under subparagraph 1 to its property; |
| 3. | Where any balance remains after the allocation under subparagraphs 1 and 2, the exchange shall allocate it to cover the amount used as provided in Article 362 (2) 1 and the expenses incurred in relation to the compensation, etc., as prescribed by the membership management regulations. |
| Article 364 (Publication of Quotations) |
| (1) | "Methods prescribed by Presidential Decree" in Article 401 of the Act means publishing quotations by means of an electronic system or on a periodical that mainly carries information of the securities market and the derivatives market, including quotations of securities and exchange-traded derivatives. |
| (2) | An exchange may prescribe detailed matters necessary for publishing quotations Article 401 of the Act and managing such information efficiently. |
| Article 365 (Qualifications, etc. for Chairperson of Market Oversight Commission) |
| (1) | "Persons who have experience and knowledge in finance prescribed by Presidential Decree and who are unlikely to undermine the sound management of an exchange and fair trading practices" in Article 402 (4) of the Act means a person who meets any of the following requirements: |
| 2. | A person who has been a member of the Senior Executive Service, or who has served as a Grade II or higher public official, in a field related to the finance or economy; |
| 3. | A person who has served in a local or foreign university, college, or research institute as an adjunct professor or higher faculty member, or in a position equivalent to such position in a field related to the finance or economy for not less than 15 years in total; |
| 4. | A person recognized as having experience and knowledge equivalent to those referred to in subparagraphs 1 through 3. |
| (2) | "Circumstances prescribed by Presidential Decree" in the former part of Article 402 (5) of the Act means where a person is deemed unfit to perform his/her duty as a result of examination of qualification, in comprehensive consideration of his/her ability to perform the duty, expertise, experience, etc. |
| (3) | "Cases prescribed by Presidential Decree" in Article 402 (8) 2 of the Act means the following cases: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| 1. | Where a member of the Market Oversight Commission fails to obey an order to file a report or data under Article 426 (1) of the Act or refuses, interferes with, or evades an inspection, as prescribed in subparagraph 23 of attached Table 14 of the Act; |
| 2. | Where a member of the Market Oversight Commission fails to obey a demand made under Article 426 (2) of the Act, as prescribed in subparagraph 24 of attached Table 14 of the Act; |
| 3. | Where a member of the Market Oversight Commission fails to take a measure ordered under Article 426 (3) of the Act, as prescribed in subparagraph 25 of attached Table 14 of the Act; |
| 4. | Where a member of the Market Oversight Commission fails to obey a demand to submit data under Article 426 (4) of the Act, as prescribed in subparagraph 26 of attached Table 14 of the Act; |
| 5. | Where a member of the Market Oversight Commission fails to comply with an interrogation, seizure, or search under Article 427 (1) of the Act, as prescribed in subparagraph 28 of attached Table 14 of the Act; |
| 6. | Where a member of the Market Oversight Commission holds stocks, in violation of Article 167 (1) of the Act, as prescribed in subparagraph 5 of attached Table 18 hereof; |
| 7. | Where a member of the Market Oversight Commission exercises a voting right, in violation of Article 167 (3) of the Act or fails to obey a corrective order issued under the aforesaid paragraph, as prescribed in subparagraph 6 of attached Table 18 hereof; |
| 8. | Where a member of the Market Oversight Commission violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as prescribed in subparagraph 8 of attached Table 18 hereof; |
| 9. | Where a member of the Market Oversight Commission violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as prescribed in subparagraph 9 of attached Table 18 hereof; |
| 10. | Where a member of the Market Oversight Commission violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as prescribed in subparagraph 10 of attached Table 18; |
| 11. | Where a member of the Market Oversight Commission makes a short sale or entrusts a short sale to a third person or accepts entrustment of a short sale from a third person, in violation of Article 180 of the Act, as prescribed in subparagraph 11 of attached Table 18 hereof; |
| 12. | Where a member of the Market Oversight Commission holds stocks of an exchange, in violation of Article 406 (1) of the Act, as prescribed in subparagraph 13 of attached Table 18 hereof; |
| 13. | Where a member of the Market Oversight Commission exercises a voting right, in violation of Article 406 (3) of the Act, as prescribed in subparagraph 14 of attached Table 18 hereof; |
| 14. | Where a member of the Market Oversight Commission fails to obey an order to dispose of stocks under Article 406 (4) of the Act, as prescribed in subparagraph 15 of attached Table 18 hereof; |
| 15. | Where a member of the Market Oversight Commission violates any provision of the Membership Management Regulations, Securities Market Business Regulations, the Derivatives Market Business Regulations, the Listing Regulations, the Disclosure Regulations, the Market Oversight Regulations, the Dispute Mediation Regulations, and other regulations on business referred to in Article 412 (1) of the Act, as prescribed in subparagraph 17 of attached Table 18 hereof; |
| 16. | Where a member of the Market Oversight Commission fails to obey a demand made under the main sentence of Article 384 (7), as prescribed in subparagraph 23 of attached Table 18 hereof; |
| 17. | Where a member of the Market Oversight Commission receives money, etc. from a third person in connection with the business by any improper means or acquires money, etc. to deliver it to a third person, as prescribed in subparagraph 24 of attached Table 18 hereof; |
| 18. | Where a member of the Market Oversight Commission commits any violation provided for in subparagraphs 1 through 3 of attached Table 21 hereof, as prescribed in subparagraph 25 of attached Table 18 hereof. |
| Article 366 (Restriction on Holding of Stocks) |
| (1) | "Others prescribed by Presidential Decree" in Article 406 (1) 4 of the Act means cases where a corporation which is a shareholder of an exchange merges with another corporation which is a shareholder of the exchange, or acquires such corporation for the purpose of merger, which is recognized by the Financial Services Commission on condition that it shall not exercise its voting rights of stocks that exceed five percent of the total number of outstanding stocks issued by the exchange. <Newly Inserted by Presidential Decree No. 28040, May 8, 2017> |
| (2) | "Person having a special relationship as prescribed by Presidential Decree" in Article 406 (2) 2 of the Act means a specially related person or joint holder under Article 141 (2). In such cases, Article 141 (3) shall apply mutatis mutandis in determining whether a person is an affiliated person. |
| (3) | "As prescribed by Presidential Decree" in Article 406 (2) 3 of the Act means cases falling under any subparagraph (excluding subparagraph 3) of Article 142. |
| (4) | Necessary matters concerning the procedures, etc. for recognition under paragraph (1) shall be prescribed and publicly notified by the Financial Services Commission. <Newly Inserted by Presidential Decree No. 28040, May 8, 2017> |
| Article 367 (Measures against Exchange) |
| (1) | "As prescribed further by Presidential Decree" in Article 411 (1) 6 of the Act means any of the following: |
| 1. | Where an exchange amends its articles of incorporation without approval required under Article 376 (2) of the Act, as provided in subparagraph 1-2 of attached Table 14 of the Act; |
| 2. | Where an exchange fails to set aside the Joint Fund separately, in violation of Article 394 (2) of the Act, as provided in subparagraph 12 of attached Table 14 of the Act; |
| 3. | Where an exchange fails to take any of the measures referred to in Article 413 of the Act, as provided in subparagraph 21 of attached Table 14 of the Act; |
| 4. | Where an exchange violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as provided in subparagraph 8 of attached Table 18 of this Decree, which are the circumstances provided in subparagraph 30 of attached Table 14 of the Act; |
| 5. | Where an exchange violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as provided in subparagraph 9 of attached Table 18 of this Decree, which are the circumstances provided in subparagraph 30 of attached Table 14 of the Act; |
| 6. | Where an exchange violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as provided in subparagraph 10 of attached Table 18 of this Decree, which are the circumstances provided in subparagraph 30 of attached Table 14 of the Act. |
| (2) | "Finance-related statute, etc. prescribed by Presidential Decree" in Article 411 (1) 7 of the Act means the statutes referred to in the subparagraphs of Article 373 (2). |
| (3) | "As prescribed further by Presidential Decree" in 411 (1) 7 of the Act means any of the cases referred to in the subparagraphs of Article 373 (3). |
| (4) | "As prescribed further by Presidential Decree" in Article 411 (1) 8 of the Act means any of the following: |
| 1. | Where an exchange fails to commence its business within six months from the date of permission or fails to continue the permitted business for not less than six months without good cause after commencing such business; |
| 2. | Where an exchange fails to correct the relevant condition within one month from the date of business suspension imposed under Article 411 (2) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed); |
| 3. | Where an exchange receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 4. | Where an exchange commits identical or similar violations continuously or repeatedly. |
| (5) | "Measures prescribed by Presidential Decree" in Article 411 (2) 7 of the Act means the following measures: |
| 1. | Making a demand or recommendation for improving the methods of business management or operation; |
| 2. | Demanding compensation; |
| 3. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 4. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 5. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (6) | "Measures prescribed by Presidential Decree" in Article 411 (3) 6 and (4) 7 of the Act means the following: |
| 1. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 2. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 3. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (7) | "Cases prescribed by Presidential Decree" in subparagraph 30 of attached Table 14 of the Act means the cases referred to in the subparagraphs of attached Table 18 hereof. |
[This Article Wholly Amended by Presidential Decree No. 24697, Aug. 27, 2013]
| Article 368 (Market Efficiency Promotion Committee) |
| (1) | "Organization prescribed by Presidential Decree" in Article 414 (2) of the Act means the following organizations: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 2. | A corporation in which the Korea Exchange has invested to entrust the development, operation, etc. of an electronic computer system for operating the securities market or the derivatives market. |
| (2) | "Case where it is intended to invest an amount equivalent to or more than the amount prescribed by Presidential Decree in an electronic computer system" in Article 414 (2) of the Act means cases where it is intended to invest ten billion won or more in the cost and expenses required for an electronic computer system and its ancillary facilities, including software and hardware, in order to improve the operation or infrastructure of a market. |
| (3) | The market efficiency promotion committee under Article 414 (1) of the Act (hereafter referred to as the "committee" in this Article) shall be comprised of seven or less members commissioned by the chairperson of the Financial Services Commission among non-governmental professionals for major tasks specializing in finance, law, accounting, and electronic computation. |
| (4) | The chairperson of the committee shall be elected by vote among committee members. |
| (5) | Matters necessary for management, deliberation, etc. of the committee shall be determined by the chairperson of the committee, subject to deliberation of the committee, in addition to the matters provided for in paragraphs (3) and (4). |
PART VIII SUPERVISION AND DISPOSITIONS
CHAPTER I ORDERS, APPROVAL, ETC.
| Article 369 (Orders to Financial Investment Business Entities to Take Measures) |
| (1) | "Others prescribed by Presidential Decree" in subparagraph 8 of Article 416 of the Act means the following matters: <Amended by Presidential Decree No. 22197, Jun. 11, 2010; Presidential Decree No. 23285, Nov. 4, 2011> |
| 1. | Matters concerning the system for preventing conflicts of interest under Articles 16 (9) and 21 (8); |
| 2. | Matters concerning registration, reporting, etc. necessary for supervision where a financial investment business entity runs business equivalent to financial investment business in a foreign country; |
| 5. | Matters concerning trading or brokerage of corporate commercial paper; |
| 6. | Matters concerning management of instruments handled by a financial investment business entity; |
| 7. | Matters concerning business, financial affairs, and risk of a financial investment business entity; |
| 8. | Matters concerning reporting on business affairs of a financial investment business entity; |
| 9. | Matters concerning the rule that requires a financial investment business entity, if it is not a member of the Association, to establish internal guidelines similar to self-regulation that the Association implements for maintaining good business order and protecting investors; |
| 10. | Matters concerning submission by a financial investment business entity conducting derivatives of information about persons who have traded derivatives amounting to a certain level or persons who hold an open interest; |
| 11. | Deposit of the property related to liquidation of a collective investment scheme (excluding an investment trust) in a depository office and other necessary matters. |
| (2) | The Financial Services Commission shall prescribe and publicly notify detailed guidelines necessary for issuing orders pursuant to Article 416 of the Act to a financial investment business entity to take measures. |
| Article 370 (Matters, etc. subject to Approval) |
| (2) | The Financial Services Commission shall examine whether the following guidelines have been met before granting approval under Article 417 (1) of the Act: <Amended by Presidential Decree No. 27414, Jul. 28, 2016> |
| 2. | A financial investment business entity shall not hinder the protection of investors; |
| 3. | A financial investment business entity shall not undermine the stability of financial markets; |
| 4. | A financial investment business entity shall not undermine sound practices in financial transactions; |
| 6. | Each activity referred to in each subparagraph of Article 417 (1) of the Act shall meet the guidelines prescribed and publicly notified by the Financial Services Commission for protecting investors. |
| (3) | A financial investment business entity that intends to obtain approval under Article 417 (1) of the Act shall file an application for approval stating the following with the Financial Services Commission: |
| 2. | Location of the head office; |
| 3. | Matters concerning executives; |
| 4. | Matters concerning grounds, substance, time, etc. for which approval is applied; |
| 5. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for examining approval. |
| (4) | Each application for approval to be filed under paragraph (3) shall be accompanied by the following: |
| 1. | Articles of incorporation; |
| 2. | Minutes of directors’ meeting or general meeting of shareholders, if a resolution has been adopted by the board of directors or general meeting of shareholders concerning the grounds for applying for the approval; |
| 3. | A copy of a contract related to the grounds for applying for the approval, if such contract exists; |
| 4. | Other documents prescribed and publicly notified by the Financial Services Commission as necessary for examining approval. |
| (5) | Upon receipt of an application for approval and accompanying documents under paragraphs (3) and (4), the Financial Services Commission shall examine the contents of the application; decide whether to grant approval within two months; and notify the applicant of the decision and grounds therefor in writing without delay. In such cases, the Commission may demand the applicant to correct his/her application for approval, if such application is incomplete. |
| (6) | The duration for correcting an incomplete application for approval or any other duration prescribed and publicly notified by the Financial Services Commission shall be disregarded for the purposes of calculating the period for examination specified in paragraph (5). |
| (7) | The Financial Services Commission may impose conditions necessary for ensuring soundness in business management and protecting investors when it grants approval under paragraph (5). |
| (8) | Except as specifically provided in paragraphs (1) through (7), filing an application for approval; 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 371 (Matters, etc. subject to Reporting) |
| (1) | When any of the events referred to in the subparagraphs of Article 418 of the Act occurs, every financial investment business entity shall report the fact to the Financial Services Commission without delay: Provided, That the Financial Services Commission may otherwise prescribe and publicly notify the reporting deadline in consideration of the importance of the relevant facts. |
| (2) | "Material matter prescribed by Presidential Decree" in subparagraph 2 of Article 418 of the Act means any of the following: |
| 1. | Matters concerning business objectives; |
| 2. | Matters concerning general meetings of shareholders and board of directors, and other matters concerning governance of the company; |
| 3. | Matters concerning stocks issued by the company; |
| 4. | Other matters prescribed and publicly notified by the Financial Services Commission as related to protection of investors. |
| (3) | "Others prescribed by Presidential Decree" in subparagraph 13 of Article 418 of the Act means any of the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 27291, Jun. 28, 2016> |
| 1. | Where capital is increased; |
| 3. | Where a financial investment business entity becomes a party to a lawsuit that may significantly affect its business; |
| 4. | Where an application for bankruptcy has been filed or any cause for dissolution occurs in relation to a financial investment business entity; |
| 5. | Where an application for commencement of rehabilitation proceedings under the Debtor Rehabilitation and Bankruptcy Act is filed, a decision on commencement of rehabilitation proceedings is made, or a decision on commencement of rehabilitation proceedings becomes ineffective; |
| 6. | Where a financial investment business entity has been subject to a disposition for its default on tax payment or has been punished for its violation of any tax-related statutes; |
| 7. | Where a financial investment business entity has made a direct overseas investment under the Foreign Exchange Transactions Act or established a business office or other office overseas; |
| 8. | Where a financial investment business entity has established or closed a office in Korea (applicable only to an office of a foreign financial investment business entity located in Korea); |
| 9. | Where a financial investment business entity defaults on payment for cheques or bills issued by it or current account transactions with a bank are suspended or banned; |
| 10. | Where any cause or event prescribed and publicly notified by the Financial Services Commission has occurred in relation to an overseas local corporation, overseas branch, overseas office, etc. of a financial investment business entity; |
| 11. | Where any cause or event prescribed and publicly notified by the Financial Services Commission has occurred in relation to the head office of a foreign financial investment business entity (applicable only to a foreign financial investment business entity that has established a branch or other business office in Korea); |
| 12. | Deleted; <by Presidential Decree No. 27414, Jul. 28, 2016> |
| 13. | Where there has occurred any other cause or event prescribed and publicly notified by the Financial Services Commission that could significantly affect the business management, property, etc. of a financial investment business entity. |
CHAPTER II INSPECTION AND MEASURES
| Article 372 (Entrustment of Inspection) |
| (1) | The inspection that the Governor of the Financial Supervisory Service may entrust to the Association pursuant to Article 419 (8) of the Act shall be limited to an inspection for the following matters: |
| 1. | Matters concerning business activities of professionals for major jobs and investment solicitors; |
| 2. | Matters concerning underwriting of securities (limited to the matters related to the business affairs under Article 286 (1) 1 of the Act); |
| 3. | Matters concerning whether terms and conditions of standardized contracts are complied with. |
| (2) | The Association shall, when it performs an inspection entrusted pursuant to paragraph (1), observe the guidelines prescribed by the Governor of the Financial Supervisory Service for the method, procedure, etc. for the inspection, and shall report the results thereof to the Governor of the Financial Supervisory Service, without delay, upon completion of the inspection. |
| Article 373 (Measures against Financial Investment Business Entities) |
| (1) | "Cases prescribed by Presidential Decree" in Article 420 (1) 6 of the Act means the following: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | Where a financial investment business entity runs a financial investment business (excluding an investment advisory business and a discretionary investment business) without authorization for the financial investment business (including a revised authorization) in violation of Article 11 of the Act, as prescribed in subparagraph 1 of attached Table 1 of the Act; |
| 2. | Where a financial investment business entity violates its duty related to restrictions on trading, etc. with a major shareholder, in violation of Article 34 (1) (excluding subparagraph 3) or (2) of the Act, as prescribed in subparagraph 21 of attached Table 1 of the Act; |
| 3. | Where a financial investment business entity engages in any of the acts prescribed in the subparagraphs of Article 35 of the Act, in violation of the aforesaid Article, as prescribed in subparagraph 23 of attached Table 1 of the Act; |
| 4. | Where a financial investment business entity trades a financial investment instrument with property deposited by investors, in violation of Article 70 of the Act, as prescribed in subparagraph 78 of attached Table 1 of the Ac; |
| 5. | Where a financial investment business entity engages in any of the acts prescribed in the subparagraphs of Article 71 of the Act (excluding subparagraph 7) in violation of the aforesaid Article, as prescribed in subparagraph 79 of attached Table 1 of the Act; |
| 5-2. | Where a financial investment business entity fails to comply with the business guidelines referred to in Article 78 (1) of the Act, as prescribed in subparagraph 87 of attached Table 1 of the Act; |
| 5-3. | Where a financial investment business entity fails to take the measures, in violation of Article 78 (7) of the Act, as prescribed in subparagraph 88-5 of attached Table 1 of the Act; |
| 6. | Where a financial investment business entity manages collective investment property, in violation of Article 81 (1) or 84 (1) of the Act, as prescribed in subparagraph 90 of attached Table 1 of the Act; |
| 7. | Where a financial investment business entity conducts any of the acts prescribed in the subparagraphs of Article 85 of the Act (excluding subparagraph 8), in violation of the aforesaid Article, as prescribed in subparagraph 92 of attached Table 1 of the Act; |
| 8. | Where a financial investment business entity exercises its voting right in violation of any provision of Article 87 (2) through (5) of the Act, as prescribed in subparagraph 94 of attached Table 1 of the Act; |
| 9. | Where a financial investment business entity conducts any of the acts prescribed in the subparagraphs of Article 98 (1) of the Act (including the case to which the aforesaid paragraph shall apply mutatis mutandis under Article 101 (4) of the Act), in violation of the aforesaid paragraph, as prescribed in subparagraph 113 of attached Table 1 of the Act; |
| 10. | Where a financial investment business entity conducts any of the acts prescribed in the subparagraphs of Article 98 (2) of the Act (excluding subparagraph 10), in violation of the aforesaid paragraph, as prescribed in subparagraph 114 of attached Table 1 of the Act; |
| 11. | Where a financial investment business entity conducts any of the acts prescribed in the subparagraphs of Article 108 of the Act (excluding subparagraph 9), in violation of the aforesaid Article, as prescribed in subparagraph 125 of attached Table 1 of the Act; |
| 12. | Where a financial investment business entity exercises its voting right, in violation of any provision of Article 112 (2) through (5) of the Act, as prescribed in subparagraph 130 of attached Table 1 of the Act; |
| 13. | Where a financial investment business entity makes a false statement or indication of any material fact or omits to state or indicate any material fact in any public notice or document referred to in the items of subparagraph 139 of attached Table 1 of the Act (excluding items (d) and (h)), as prescribed in subparagraph 139 of attached Table 1 of the Act; |
| 14. | Where a financial investment business entity fails to submit any document referred to in the items of subparagraph 140 of attached Table 1 of the Act (applicable only to items (a), (b), and (e)), as prescribed in subparagraph 140 of attached Table 1 of the Act; |
| 15. | Where a financial investment business entity publicly offers or sells securities, in violation of Article 119 (3), (4), or (7) of the Act, as prescribed in subparagraph 141 of attached Table 1 of the Act; |
| 16. | Where a financial investment business entity fails to give public notice, in violation of Article 134 (1) or 136 (5) of the Act, as prescribed in subparagraph 153 of attached Table 1 of the Act; |
| 17. | Where a financial investment business entity makes a false statement or indication of any of the matters referred to in the subparagraphs of Article 157 (hereafter referred to as "material fact" in this subparagraph) or omits to state or indicate any material fact in any document to be filed under Article 147 of the Act or a corrective report under Article 151 (2) of the Act, as prescribed in subparagraph 163 of attached Table 1 of the Act; |
| 18. | Where a financial investment business entity makes a false statement or indication of any fact that may significantly affect a solicited voting right-holder’s judgment as to whether to delegate his/her voting right (hereafter referred to as "material fact related to the delegation of the voting right" in this subparagraph) or omits to state or indicate any material fact related to the delegation of the voting right in a proxy form and reference documents referred to in Article 154 of the Act or corrective documents referred to in Article 156 of the Act, as prescribed in subparagraph 166 of attached Table 1 of the Act; |
| 19. | Where a financial investment business entity violates the duty to refrain from using any material, nonpublic information under Article 174 of the Act, as prescribed in subparagraph 174 of attached Table 1 of the Act; |
| 20. | Where a financial investment business entity violates the duty to refrain from manipulating a market price or any similar act under Article 176 of the Act, as prescribed in subparagraph 175 of attached Table 1 of the Act; |
| 21. | Where a financial investment business entity violates the duty to refrain from engaging in any unfair trade or any similar act under Article 178 of the Act, as prescribed in subparagraph 176 of attached Table 1 of the Act; |
| 22. | Where a financial investment business entity runs a collective investment business, in violation of Article 250 (1) or 251 (1) of the Act, as prescribed in subparagraph 261 of attached Table 1 of the Act; |
| 23. | Where a financial investment business entity sells foreign collective investment securities in Korea without involving an investment trader or broker, in violation of Article 280 (1) of the Act, as prescribed in subparagraph 273 of attached Table 1 of the Act; |
| 23-2. | Where a financial investment business entity establishes or operates a financial investment instruments market without permission for an exchange, in violation of Article 373 of the Act, as prescribed in subparagraph 292-2 of attached Table 1 of the Act; |
| 24. | Where a financial investment business entity conducts business without authorization, in violation of Article 324 (1), 355 (1), or 360 (1) of the Act, as prescribed in subparagraph 293 of attached Table 1 of the Act; |
| 25. | Deleted. <by Presidential Decree No. 24697, Aug. 27, 2013> |
| (2) | "Finance-related statutes prescribed by Presidential Decree" in Article 420 (1) 7 of the Act means the following statutes: |
| (3) | "Cases prescribed by Presidential Decree" in Article 420 (1) 7 of the Act means the following cases: |
| 3. | Where a financial investment business entity provides or divulges to a third person information, etc. on trading known to it; uses such information, etc. for any purpose other than the contemplated purpose; or demands such information, etc., in violation of the main sentence of Article 4 (4) of the Act on Real Name Financial Transactions and Confidentiality, as prescribed in subparagraph 1 (d) of attached Table 21; |
| (4) | "Cases prescribed by Presidential Decree" in Article 420 (1) 8 of the Act means the following cases: <Amended by Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Where a financial investment business entity fails to commence its business within six months from the date of authorization or registration or fails to continue the authorized or registered business without good cause for not less than six months (or one year in the case of a person authorized to conduct the collective investment business referred to in 3-12-1 or 3-13-1 of attached Table 1, or a person authorized to conduct the trust business referred to in 4-121-1 or 4-121-2 of the same Table, or a person registered to engage in the hedge fund investment business referred to in 3-14-1 of attached Table 3; hereafter the same shall apply in this subparagraph) after commencing such business. In such cases, the activities construed as business activities by financial investment business are classified as follows: |
| (a) | An investment trader or investment broker: Entering into contracts on any of the following activities, or inviting offers, or offering or accepting an offer for such activities: |
| (ii) | Underwriting securities; |
| (iii) | Selling or purchasing financial investment instruments; |
| (b) | A collective investment business entity: Managing collective investment property; |
| (c) | An investment advisory business entity (excluding concurrently-run financial investment business entities, and investment advisory business entity and offshore investment advisory business entities that run financial investment business other than discretionary investment business): Providing investment advisory services after entering into an investment advisory contract; |
| (d) | A discretionary investment business entity (excluding concurrently-run financial investment business entities, and investment advisory business entity and offshore investment advisory business entities that run financial investment business other than investment advisory business): Managing discretionary investment property after entering into a discretionary investment contract; |
| (e) | A trust business entity (excluding concurrently-run financial investment business entities and trust business entity that runs another financial investment business): Administering, disposing of, managing, developing trust property, etc. after entering into a trust contract; |
| 2. | Where a financial investment business entity receives money, etc. from a third person in connection with its business by any improper means or acquires money, etc. to deliver it to a third person; |
| 3. | Where a financial investment business entity fails to correct the relevant condition within one month from the date of business suspension imposed under Article 420 (3) 1 of the Act (or a period for correction otherwise prescribed in excess of one month when such business suspension is imposed); |
| 4. | Where a financial investment business entity violates a contract for trading or any other transaction on the securities market (including trading via an alternative trading system) or the derivatives market or fails to make a payment in such market (applicable only to investment traders or brokers that are members of an exchange or participants in trading via an alternative trading system); |
| 5. | Where a financial investment business entity commits identical or similar violations continuously or repeatedly. |
| (5) | "Measures prescribed by Presidential Decree" in Article 420 (3) 7 of the Act means the following measures: |
| 1. | Closing branch offices or other business offices or suspending their business completely or partially; |
| 2. | Making a demand or recommendation for improving the methods of business management or operation; |
| 3. | Demanding compensation; |
| 4. | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| 5. | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| 6. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (6) | "Case prescribed by Presidential Decree" in subparagraph 312 of attached Table 1 of the Act means any of cases prescribed in attached Table 5 of this Decree. |
| Article 374 (Measures against Executive Officers and/or Employees) |
| (1) | "As prescribed by Presidential Decree" in subparagraph 312 of attached Table 1 of the Act pursuant to Article 422 (1) and (2) of the Act means cases falling under any subparagraph of attached Table 5 of this Decree. |
| 1. | Filing criminal complaints or informing an investigative agency of violations of the Act, if any; |
| 2. | Informing a related agency or an investigative agency of violations of other Acts, if any; |
| 3. | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
CHAPTER III INVESTIGATIONS, ETC.
| Article 375 (Demands to Financial Investment Business Entities to Submit Data) |
To request materials from a financial investment business entity, an institution related to financial investment business, or an exchange, the Financial Services Commission (referring to the Securities and Futures Commission, in cases of a violation of any of Articles 172 through 174, 176, 178, 178-2 and 180 of the Act; hereafter the same shall apply in Articles 376 and 377) shall make such request in writing, stating the purpose for which such materials are used, the type, issue, and item of the financial investment instrument subject to investigation, the type of trading, the trading period, etc. pursuant to Article 426 (4) of the Act. <Amended by Presidential Decree No. 26374, Jun. 30, 2015>
| Article 376 (Measures Following Results of Investigation) |
| (1) | "Measures prescribed by Presidential Decree" in Article 426 (5) of the Act means the following measures: <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| 11. | For persons not subject to subparagraphs 1 through 10: Any of the following measures: |
| (c) | Filing an accusation or informing an investigation agency of a violation of the Act, if any; |
| (d) | Informing a related agency or an investigation agency of a violation of other Acts, if any; |
| (e) | Other measures that the Financial Services Commission may take pursuant to the Act, this Decree, or any other related statutes. |
| (2) | "Case prescribed by Presidential Decree" in subparagraph 13 of attached Table 15 of the Act referred to in Article 426 (5) of the Act means any of the cases provided in attached Table 19 of this Decree. |
| Article 377 (Public Announcements of Findings from Investigations and Measures Taken) |
The Financial Services Commission may publicly announce the following information and data necessary for preventing violations through a newspaper, broadcasting medium, website or any other means pursuant to Article 426 (8) of the Act: Provided, That public announcements may be omitted completely or partially, where an accusation is filed against a person involved, an offense is informed to an investigation agency, or any other reason prescribed and publicly notified by the Financial Services Commission exists: | 1. | The entity to which the person involved belongs and personal data of that person; |
| 2. | Details of an offense and measures taken; |
| 3. | Other matters prescribed and publicly notified by the Financial Services Commission as necessary for preventing violations by the person involved. |
| Article 378 (Investigative Officers) |
"Person prescribed by Presidential Decree" in Article 427 (1) of the Act means a person recommended by the Chairperson of the Securities and Futures Commission among public officials of the Financial Services Commission and appointed by the Prosecutor General.
CHAPTER IV PENALTY SURCHARGES
| Article 379 (Criteria for Imposing Penalty Surcharges) |
| (1) | The criteria for imposing penalty surcharges under Article 428 (1) and (2) of the Act (including cases to which the aforesaid paragraph shall apply mutatis mutandis under Article 349 (3) of the Act) shall be as specified in attached Table 19-2. <Newly Inserted by Presidential Decree No. 28384, Oct. 17, 2017> |
| (2) | The Financial Services Commission shall observe the following guidelines in imposing a penalty surcharge pursuant to Article 428 (3), 429 or 429-2 of the Act: <Amended by Presidential Decree No. 26374, Jun. 30, 2015; Presidential Decree No. 28384, Oct. 17, 2017> |
| 1. | Where provisions relevant to public disclosure, such as false description or indication, are violated, the Financial Services Commission shall categorize the substance of the violation into the measurable violation and non-measurable violation, and shall determine the severity of the violation, in comprehensive consideration of the effects of the violation on profits for the relevant year, equity capital and other matters, and whether the violation falls under any item of subparagraph 2; |
| 1-2. | Where the duty to refrain from engaging in any conduct of disturbing market practices is violated, the Financial Services Commission shall categorize the substance of the violation into the act provided in Article 178-2 (1) of the Act or any of the acts provided in paragraph (2) of the same Article, and determine the severity of the violation in comprehensive consideration of the following: |
| (a) | Gains (including unrealized gains) accrued from a trade related to such violation or losses hedged by such violation; |
| (c) | Effects of the violation on the market value or price; |
| (d) | Whether the violation falls under subparagraph 2 (a); |
| 2. | Where a violation falls under any of the following, the Financial Services Commission shall impose a penalty surcharge in an amount that is not less than 50 percent of the statutory maximum amount: Provided, That such penalty surcharge may be reduced, if the violation falls under any item of subparagraph 3: |
| (a) | Where the violation has continued for not less than one year or it has been committed repeatedly, on not less than three occasions; |
| (b) | Where gains acquired in relation to the violation are not less than 100 million won (limited to where a penalty surcharge is imposed under Article 428 (3) or 429 of the Act); |
| (c) | Where the violation is related to the unfair trade provided in Part IV of the Act (hereinafter referred to as "unfair trade"), such as inside trading and manipulation of market prices (limited to where a penalty surcharge is imposed under Article 428 (3) or 429 of the Act); |
| 3. | Where a violation falls under any of the following, a penalty surcharge shall be reduced: |
| (a) | Where the substance of the violation is deemed insignificant; |
| (b) | Where the violator has submitted any other disclosure document and it is possible for investors to verify the facts with such disclosure document; |
| (c) | Where the violation has been corrected without delay; |
| (d) | Where investors have been compensated for losses sustained due to the violation. |
| (3) | In imposing a penalty surcharge under Article 429 of the Act in relation to a failure to file a registration statement under Article 119 or 134 of the Act, the statutory maximum amount referred to in paragraph (2) 2 shall be calculated and determined on the basis of the value of public offering or sale actually made or the total value of tender offer. <Amended by Presidential Decree No. 26374, Jun. 30, 2015; Presidential Decree No. 28384, Oct. 17, 2017> |
| (4) | "Which shall be calculated by the method prescribed by Presidential Decree" in the main sentence of Article 429 (4) of the Act means an amount calculated as follows: <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| 1. | In the case provided in Article 429 (4) 1 of the Act: An amount computed by multiplying the closing price of the stock of the relevant corporation formed in the securities market on the business day following the reporting deadline (where no closing price exists, referring to the price of the stock of the relevant corporation initially formed in the securities market after the aforementioned business day; hereafter the same shall apply in this paragraph) by the total number of issued stocks; |
| 2. | In the case provided in Article 429 (4) 2 of the Act: An amount computed by multiplying the closing price of the stock of the relevant corporation formed in the securities market on the business day following the date of reporting by the total number of issued stocks. |
| (5) | "Material fact prescribed by Presidential Decree" in Article 429 (4) 2 of the Act means any of the matters referred to in the subparagraphs of Article 157. <Newly Inserted by Presidential Decree No. 24697, Aug. 27, 2013> |
| (6) | Except as specifically provided in this Decree, details necessary in relation to the imposition of penalty surcharges shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 380 (Procedure for Imposition of Penalty Surcharges) |
| (1) | The Financial Services Commission shall, when it imposes penalty surcharges, issue a notice in writing, clearly stating the category of the offense and the amount of penalty surcharge and demanding payment of the penalty surcharge, in the manner prescribed and publicly notified by the Financial Services Commission. |
| (2) | A person who receives a notice under paragraph (1) shall pay penalty surcharges within 60 days from the date the notice is delivered to a receiving institution designated and publicly notified by the Financial Services Commission. |
| Article 381 (Extension of Deadline for Payment and Payment in Installments) |
| (2) | Where payment in installments is permitted pursuant to Article 433 (1) through (3) of the Act, the interval between deadlines for each installment shall not exceed six months, and such installments shall not exceed three occasions. |
| (3) | An application for extension of deadline or for payment by installments under paragraph (1) or (2) shall be filed as prescribed and publicly notified by the Financial Services Commission. |
| Article 382 (Additional Charges) |
"Additional charges as prescribed by Presidential Decree" in Article 434 (1) of the Act means an amount calculated by multiplying the amount of the penalty surcharge in default by the rate of six percent per annum. In such cases, the period for which additional charges are collected shall not exceed 60 months. <Amended by Presidential Decree No. 22718, Mar. 22, 2011>
| Article 383 (Entrustment of Disposition against Default on Payment) |
| (1) | The Financial Services Commission shall, when it entrusts business affairs related to disposition against default on payment pursuant to Article 434 (3) of the Act to the Commissioner of the National Tax Service, make such entrustment in writing along with the following documents attached thereto: |
| 1. | A letter of resolution of the Financial Services Commission; |
| 2. | A written decision on collection of revenue and a written notice thereof; |
| 3. | A reminder of demand for payment. |
| (2) | The Commissioner of the National Tax Service shall, when he/she is entrusted with business affairs related to disposition against default on payment pursuant to paragraph (1), notify the Financial Services Commission of matters falling under any of the following subparagraphs within 30 days from the date an event under any of the following subparagraphs occurs: |
| 1. | When business affairs related to disposition against default on payment are completed: The date and time when the business affairs are completed, and other necessary matters; and |
| 2. | When there is a request from the Financial Services Commission to inform of the progress: Details of the progress. |
| Article 383-2 (Interest Rates for Additional Payment on Refund) |
"Interest rates for additional payment prescribed by Presidential Decree" in Article 434-3 of the Act means the interest rates determined by the Financial Services Commission and provided by public notice, taking into consideration the interest rates for time deposits of financial institutions. [This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
| Article 383-3 (Disposition on Deficits) |
"Reasons prescribed by Presidential Decree" in subparagraph 6 of Article 434-4 of the Act means any of the following cases: | 2. | Where it is prescribed and publicly notified by the Financial Services Commission as recognized that it is impossible to collect penalty surcharges due to inevitable reasons. |
[This Article Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009]
PART IX SUPPLEMENTARY PROVISONS
| Article 384 (Reporting, etc. of Violations) |
| (1) | Pursuant to Article 435 (1) of the Act, a person shall observe the following guidelines to report to or inform the Financial Services Commission (referring to the Securities and Futures Commission in cases of violations of any provisions of Articles 172 through 174, 176, 178, 178-2 and 180 of the Act; hereafter the same shall apply in this Article) of any violation of the Act, including unfair trade, or facts that he/she has been coerced or proposed to commit a violation (hereafter referred to as "unfair trade or any similar act" in this Article): <Amended by Presidential Decree No. 21291, Feb. 3, 2009; Presidential Decree No. 26374, Jun. 30, 2015> |
| 1. | The facts reported or informed shall be relevant to a specific person's unfair trade or any similar act; |
| 2. | Specific facts of a violation, such as unfair trade or any similar act, including the violator, the date, timing, and place of the violation, shall be clearly stated and presented along with evidence; |
| 3. | The reporter or informant (hereafter referred to as "informant, etc." in this Article) shall show his/her identification. |
| (2) | With respect to a report or information received, the Financial Services Commission may examine the informant, etc. on his/her personal data, reasons for and purport of the report or information, and other matters necessary for specifying the details of such report or information. |
| (3) | The Financial Services Commission may require the informant, etc. to submit relevant materials to the extent as necessary for ascertaining whether the report or information received is true. |
| (4) | The Financial Services Commission shall process a report or information received within 60 days from the date of receipt. In such cases, the Financial Services Commission may extend the period by up to 30 days, if it is deemed necessary to receive materials, hear opinions, or otherwise. |
| (5) | The Financial Services Commission shall notify an informant, etc. of the results of the disposition related to his/her report or information in writing: Provided, that the Financial Services Commission may make such notification verbally; via the information and communications network; or by other means as prescribed and publicly notified by the Financial Services Commission and shall promptly deliver documents related to the results if requested by the informant, etc. in such cases. <Newly Inserted by Presidential Decree No. 21291, Feb. 3, 2009> |
| (6) | Where an informant, etc. is treated unfavorably by the institution to which he/she belongs in connection with a report or information, the informant, etc. may request the Financial Services Commission to take necessary measures, such as reinstatement. |
| (7) | Where the Financial Services Commission deems that a request made by an informant, etc. under paragraph (6) is reasonable, the Financial Services Commission may request the head of the institution to which the informant, etc. belongs to take proper measures, such as reinstatement: Provided, That if the institution to which the informant, etc. belongs is not an institution subject to inspection referred to in Article 38 of the Act on the Establishment, etc. of Financial Services Commission, the Financial Services Commission may recommend the head of the institution to which the informant, etc. belongs or the head of a related institution to take proper measures. <Amended by Presidential Decree No. 21291, Feb. 3, 2009> |
| (8) | Where the Financial Services Commission deems that a report or information received helps detect unfair trade or any similar act or take measures accordingly, the Financial Services Commission may authorize the Governor of the Financial Supervisory Service to pay a reward not exceeding two billion won to the informant, etc. within budgetary limits of the Financial Supervisory Service in accordance with the guidelines prescribed and publicly notified by the Financial Services Commission. <Amended by Presidential Decree No. 24697, Aug. 27, 2013> |
| (9) | Except as specifically provided for in paragraphs (1) through (8), the methods for receiving reports or information on unfair trade or any similar act; the procedures for processing such reports or information; the payment of rewards; 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 385 (Reporting, etc. by Electronic Documents) |
| (1) | A person who files a registration statement, a report, any other document data, etc. (hereinafter referred to as "registration statement, etc.") with the Financial Services Commission, the Securities and Futures Commission, the Governor of the Financial Supervisory Service, the exchange, the Association or the Securities Depository in accordance with the Act, this Decree, or any other statutes may file it by an electronic document (referring to standardized data prepared in an electronic format with a device capable of processing information, such as a computer, and transmitted, received, or stored in the form of document; hereinafter the same shall apply) through an information communications network under the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. |
| (2) | The standard forms, methods, procedures, etc. necessary for filing a registration statement, etc. by an electronic document shall be prescribed and publicly notified by the Financial Services Commission. In such cases, if the registration report, etc. is also submitted to the exchange, the Association, or the Securities Depository, the Financial Services Commission may hear opinions of the relevant institution when it establishes or amends the standard forms, methods, procedures, etc. for the registration report, etc. |
| (3) | Necessary matters in relation to registration statements, etc. submitted in accordance with the business regulations of the exchange, the Association, or the Securities Depository may be prescribed by the relevant institution, notwithstanding the former part of paragraph (2). |
| (4) | Matters necessary for electronic documents, such as the validity and timing of delivery, where a person files a registration statement, etc. by an electronic document, shall be governed by the Act on Promotion of Information and Communications Network Utilization and Information Protection, Etc. |
| Article 386 (Exchange of Information for which Consultation not Required) |
"Cases prescribed by Presidential Decree" in the proviso to Article 437 (4) of the Act means the following cases: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> | 1. | Where an exchange exchanges general information concerning the system, status, etc. of the securities market or derivatives market; |
| 2. | Where an exchange is obligated to disclose records or any other information acquired in accordance with the Act, this Decree, or any other relevant statutes or regulations to the public; |
| 3. | Where an exchange exchanges information on the results of a measure taken pursuant to the Act, this Decree, or any other statutes or regulations; |
| 4. | Where an exchange exchanges any information identical with or similar to information prior-exchanged after having consulting with the Financial Services Commission in accordance with the latter part of Article 437 (4) of the Act. |
| Article 387 (Delegation or Entrustment of Authority) |
| (1) | The Financial Services Commission shall delegate the following authority to the Securities and Futures Commission in accordance with Article 438 (2) of the Act: <Amended by Presidential Decree No. 26374, Jun. 30, 2015> |
| 1. | Authority to conduct investigations into violations of Part III of the Act; |
| 2. | Authority to take measures against violations referred to in subparagraph 1 pursuant to the Act or this Decree: Provided, That excluded herefrom are the following measures: |
| (a) | Imposition of penalty surcharges exceeding 500 million won; |
| (b) | Suspension of entire business for one month or longer; |
| (c) | Closure of branch offices or other business offices; |
| 3. | Authority to impose penalty surcharges against any violation of the duty to refrain from engaging in any conduct of disturbing market practices prescribed in Article 178-2 of the Act. |
| (2) | The Financial Services Commission shall entrust the following authority to an exchange or the Association in accordance with Article 438 (3) of the Act: <Amended by Presidential Decree No. 21611, Jul. 1, 2009> |
| 1. | The following authority to the exchange: |
| (a) | Authority to place restrictions on the trading volume of exchange-traded derivatives, among matters prescribed in subparagraph 7 of Article 416 of the Act; |
| (b) | Authority equivalent to the authority provided in item (a), prescribed and publicly notified by the Financial Services Commission; |
| 2. | The following authority to the Association: |
| (a) | Authority to receive reports filed under the main sentence of, and proviso to, Article 56 (1) of the Act and to examine whether terms and conditions of the relevant agreement fall under paragraph (6) of the aforesaid Article; |
| (b) | Authority to receive related data submitted under Article 10 (3) 16 and 17 (including equivalent foreigners); |
| (c) | Authority over the authority provided in items (a) and (b), prescribed and publicly notified by the Financial Services Commission. |
| (3) | The Financial Services Commission or the Securities and Futures Commission shall entrust its authority over the business affairs provided in the subparagraphs of attached Table 20 to the Governor of the Financial Supervisory Service in accordance with Article 438 (4) of the Act. |
| (4) | The exchange, the Association, and the Governor of the Financial Supervisory Service shall report the details of performing the business affairs entrusted pursuant to paragraphs (2) and (3) to the Financial Services Commission or the Securities and Futures Commission every six months: Provided, That the Financial Services Commission may otherwise determine the reporting cycle for business affairs prescribed and publicly notified by the Financial Services Commission. |
| Article 387-2 (Processing of Sensitive Information and Personally Identifiable Information) |
| (1) | The Financial Services Commission (including those entrusted with the affairs of the Financial Services Commission pursuant to Articles 57, 387 (1) through (3) and attached Table 20) or the Securities and Futures Commission (including those entrusted with the affairs of the Securities and Futures Commission pursuant to Article 387 (3) and attached Table 20) may process data containing criminal history records referred to in subparagraph 2 of Article 18 of the Enforcement Decree of the Personal Information Protection Act, and resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the following affairs: <Amended by Presidential Decree No. 24317, Jan. 16, 2013; Presidential Decree No. 24655, Jul. 5, 2013; Presidential Decree No. 24697, Aug. 27, 2013; Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26374, Jun. 30, 2015; Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 26898, Jan. 12, 2016; Presidential Decree No. 27291, Jun. 28, 2016> |
| 2. | and 3. Deleted; <by Presidential Decree No. 27414, Jul. 28, 2016> |
| 4. | Affairs related to notification of the appointment and change of persons in charge of derivatives business under Article 28-2 of the Act; |
| 5. | Affairs related to the submission of business reports, documents for public disclosure, etc. under Article 33 of the Act; |
| 7. | Affairs related to measures and dispositions under Articles 43, 53, 253, 257, 262, 267, 282, 293, 307, 323-20, 335, 354, 359, 364, 369 and 372 of the Act; |
| 8-2. | Affairs related to the designation of comprehensive financial investment business entities under Article 77-2 of the Act; |
| 13. | Affairs related to the submission of tender offer statements, corrective registration statement, prospectuses for tender offers, statements on manifestation of opinions on tender offers, revocation statements, post tender offer reports under Articles 134, 136 through 139, and 143 of the Act; |
| 15. | Affairs related to reporting on stocks, etc. held in bulk, orders to dispose of stocks held in violation, inspections, and corrective reports under Articles 147, 150 and 151 of the Act; |
| 16. | Affairs related to the submission of proxy forms, reference documents, and statements on manifestation of opinions under Articles 153 and 155 of the Act; |
| 20. | Affairs related to approval for owning stocks issued by public purpose corporations in excess of a specific limit of the ratio of owned stocks and taking corrective measures under Article 167 of the Act; |
| 21. | Affairs related to the submission of materials, reports, and other measures to be taken under Article 169 of the Act; |
| 22. | Affairs related to reporting on the status of specific securities, etc. owned by executive officers, etc. under Article 173 of the Act; |
| 25. | Affairs related to reporting on the dissolution of investment limited partnerships under Article 221 of the Act; |
| 26. | Affairs related to the registration of fund accounting and administration companies under Article 254 of the Act; |
| 29. | and 29-2. Deleted; <by Presidential Decree No. 26600, Oct. 23, 2015> |
| 40. | Affairs related to orders to submit materials, investigations, dispositions, and public disclosure under Article 426 of the Act; |
| 40-2. | Affairs related to the receipt, processing, notification, etc. of reports or information on violations under Article 435 of the Act; |
| 40-3. | Affairs related to the verification of the details of trading of financial investment instruments by the members and public officials referred to in subparagraph 1 and 2 of Article 441 of the Act; |
| 40-4. | Affairs related to the receipt of data submitted under Article 10 (3) 16 or 17 (including foreigners equivalent to the persons referred to in subparagraph 16 or 17); |
| 41. | Affairs related to the registration, etc. of foreigner's investment under Article 188. |
| (2) | The Governor of the Financial Supervisory Service (including those entrusted with the affairs under jurisdiction of the Governor of the Financial Supervisory Service pursuant to Article 372) may process data containing the personal information referred to in the main sentence of paragraph (1), if it is inevitable to perform the following affairs: <Amended by Presidential Decree No. 25532, Aug. 6, 2014> |
| 5. | Affairs related to inspections under Article 419 of the Act (including the case to which the aforesaid provisions shall apply mutatis mutandis under Articles 43, 53, 252, 256, 261, 266, 281, 292, 306, 334, 353, 358, 363, 368 and 371 of the Act); |
| 7. | Affairs related to the verification of the details of trading of financial investment instruments conducted by the Governor, Senior Deputy Governors, Deputy Governors, auditors, and employees of the Financial Supervisory Service referred to in subparagraph 3 of Article 441 of the Act. |
| (3) | The Association may process data containing the personal information referred to in the main sentence of paragraph (1), if it is inevitable to perform the following affairs: <Amended by Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| 6. | Affairs related to the verification of the details of trading of financial investment instruments conducted by executive officers and/or employees under Article 289 of the Act; |
| 7. | Affairs necessary to provide data to the Central Recording Keeping Agency under the latter part of Article 118-21 (1). |
| (4) | An exchange or the Market Oversight Commission established under Article 402 of the Act (applicable only to the affairs prescribed in subparagraphs 7-2, 8 and 9) may process data containing the personal information referred to in the main sentence of paragraph (1), if it is inevitable to perform the following affairs: <Amended by Presidential Decree No. 25532, Aug. 6, 2014> |
| 3. | Affairs related to the submission, etc. of proxy forms and reference documents under Article 153 of the Act; |
| 6. | Affairs related to reporting on the status of specific securities, etc. owned by executive officers, etc. under Article 173 of the Act; |
| 7-2. | Affairs related to the review of abnormal transactions and investigation and supervision of members among the affairs referred to in Article 377 (1) 13 of the Act; |
| 7-3. | Affairs related to the verification of the details of trading of financial investment instruments conducted by executive officers and/or employees under Article 383 (3) of the Act. |
| 8. | Affairs related to the investigations of abnormal trading or supervision of members under Article 404 of the Act; |
| (5) | The Securities Depository may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the following affairs: <Newly Inserted by Presidential Decree No. 24317, Jan. 16, 2013; Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| 2-2. | Affairs related to the verification of the details of trading of financial investment instruments conducted by executive officers and/or employees under Article 304 of the Act; |
| 5. | Affairs related to the preparation, etc. of a register of beneficial shareholders under Article 316 of the Act; |
| (6) | A central counterparty may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the following affairs: <Newly Inserted by Presidential Decree No. 24655, Jul. 5, 2013; Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| 2. | Affairs related to the verification of the details of trading of financial investment instruments conducted by executive officers and/or employees under Article 323-17 of the Act. |
| (7) | A securities finance company may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the affairs related to the verification of the details of trading of financial investment instruments conducted by executive officers and/or employees under Article 328 of the Act. <Newly Inserted by Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| (8) | A credit rating company may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the following affairs: <Newly Inserted by Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| 1. | Affairs related to the verification of the details of trading of financial investment instruments conducted by executive officers and/or employees under Article 335-14 (1) of the Act; |
| 2. | Affairs related to the verification of any act of offering or receiving any economic benefits under Article 324-8 (4) 2. |
| (9) | A transfer agent may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the affairs related to the verification of the details of trading of financial investment instruments conducted by executive officers and/or employees under Article 367 of the Act. <Newly Inserted by Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| (10) | A financial investment business entity may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the following affairs: <Newly Inserted by Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| 1. | Affairs related to the verification of the details of trading of financial investment instruments conducted by executive officers and/or employees under Article 63 (3) of the Act; |
| 2. | Affairs related to the verification of any act of offering or receiving any economic benefits under Article 68 (5) 3, 87 (4) 3, 99 (4) 4, or 109 (3) 4; |
| 3. | Affairs related to keeping and managing records of disciplinary measures taken against executive officers and/or employees under Article 307 (2) 1. |
| (11) | A trust business entity may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the affairs related to the management, disposal, management, or development of the assets referred to in the subparagraphs of Article 103 (1) of the Act as prescribed in Article 2 of the Trust Act and other affairs to achieve the purpose of the trust. <Newly Inserted by Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| (12) | An entity, to which the professionals conducting major tasks referred to in Article 286 (1) 3 of the Act belongs, may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration number, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the following affairs: <Newly Inserted by Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| 2. | Affairs related to keeping and managing records of disciplinary measures taken against professionals conducting major tasks under Article 307 (2) 1 of each financial investment business entity. |
| (13) | The members referred to in Article 387 (2) of the Act may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the affairs related to the prevention and management of abnormal transactions under Article 355 of this Decree, which pertains to the compliance with the Market Oversight Regulations established under Article 403 of the Act. <Newly Inserted by Presidential Decree No. 25532, Aug. 6, 2014; Presidential Decree No. 26898, Jan. 12, 2016> |
| 1. | Affairs related to taking measures to ensure that the limit of issuance of securities and the limit of investors' investment are complied with under Article 117-7 (9) of the Act; |
| (15) | The Central Recording Keeping Agency may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the following affairs: <Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016> |
| 1. | Affairs related to the acquisition of data concerning issuers of online small-value securities and investors under Article 117-13 (1) of the Act; |
| 2. | Affairs related to the management of the limit of issuance of securities and the limit of investors' investment under Article 117-13 (2) of the Act; |
| 3. | Affairs related to keeping in custody and managing data concerning issuers of online small-value securities and investors under Article 117-13 (3) of the Act; |
| (16) | A managing institution of subscription deposits may process data containing resident registration numbers, passport numbers, drivers' license numbers, alien registration numbers, or domestic residence filing number referred to in Article 29 of the Enforcement Decree of the Credit Information Use and Protection Act, if it is inevitable to perform the following affairs: <Newly Inserted by Presidential Decree No. 26898, Jan. 12, 2016> |
| 1. | Affairs related to the preferential payment of subscription deposits under Article 118-13 (2); |
| 2. | Affairs related to the return of subscription deposits under Article 118-14 (3). |
[This Article Newly Inserted by Presidential Decree No. 23488, Jan. 6, 2012]
| Article 388 (Apportionment Rate, Limit, etc. of Expenses) |
| (1) | The apportionment rate of expenses referred to in Article 442 (1) of the Act shall be prescribed and publicly notified by the Financial Services Commission within the following rates. In such cases, if the total issue value is changed after a registration statement is accepted, the rate shall be based on the changed total issue value: |
| 1. | 2/10,000 of the total issue value where stocks are issued; |
| 2. | 1/1,000 of the total issue value where securities, other than the stocks referred to in subparagraph 1, are issued (or 4/10,000 of the total issue value where securities are issued based on a universal shelf registration statement). |
| (3) | Except as specifically provided in paragraphs (1) and (2), methods for collecting apportioned expenses; return of the apportioned expenses; and other necessary matters shall be prescribed and publicly notified by the Financial Services Commission. |
| Article 388-2 (Re-Examination of Regulations) |
| (1) | The Financial Services Commission shall examine the appropriateness of the following matters every three years, counting from each base date specified in the following (referring to the period that ends on the day before every third anniversary) and take measures, such as making improvements: <Amended by Presidential Decree No. 26600, Oct. 23, 2015; Presidential Decree No. 26817, Dec. 30, 2015> |
| 1. | Deleted; <by Presidential Decree No. 27414, Jul. 28, 2016> |
| 2. | Restrictions on trading, etc. with major shareholders of a financial investment business entity under Article 37: January 1, 2014; |
| 3. | Exceptions, etc. to the restriction on limits of asset management of collective investment property of a collective investment business entity under Article 80: January 1, 2014; |
| 4. | Restrictions on borrowing money, etc. against a collective investment business entity under Article 83: January 1, 2014; |
| 5. | Scope of interested parties subject to restriction on transactions with a collective investment business entity, exceptions to the restriction on transactions, restriction, etc. on the acquisition of securities of an affiliated company, etc. under Articles 84 through 86: January 1, 2014; |
| 6. | Requirements, etc. for a collective investment business entity to receive contingent remuneration under Article 88: January 1, 2014; |
| 7. | Methods of conducting trust business of a trust business entity under Article 104: January 1, 2014; |
| 8. | Restrictions on the acquisition or disposal of a trust business entity's treasury stocks under Article 106 (5) 1 (d): January 1, 2014; |
| 9. | Management, etc. of surplus funds by a trust business entity under Article 107: January 1, 2014; |
| 10. | Securities subject to reporting for public offering or sale under Article 120 (1) 1: January 1, 2014; |
| 11. | Correction, etc. of descriptions in a registration statement under Article 130: January 1, 2014; |
| 12. | Reporting on stocks, etc., reporting on stocks held in bulk, etc., special cases concerning reporting on stocks held in bulk, etc., and reporting on changes in material facts under Articles 153 through 155: January 1, 2014; |
| 13. | Limits, etc. on acquisition by foreigners of securities or exchange-traded derivatives under Article 187: January 1, 2014; |
| 14. | Corporations, etc. subject to audit under Article 189: January 1, 2014; |
| 15. | Disclosure, etc. of information under Article 201: January 1, 2014; |
| 16. | Financial instruments investable by money market funds and the method of managing such under Article 241: January 1, 2014; |
| 17. | Redemption price and fees of collective investment securities under Article 255: January 1, 2014; |
| 18. | Methods for management of collective investment property of private equity funds under Article 271-15: January 1, 2014; |
| 19. | Qualification requirements for foreign collective investment business entities, qualification requirements for sale of foreign collective investment securities, etc. under Article 301: January 1, 2014; |
| 20. | Scope of business affairs of securities finance companies under Article 320: January 1, 2014; |
| 21. | Working rules on business conduct of merchant banks under Article 330: January 1, 2016; |
| 22. | Methods for issuing bonds by merchant banks under Article 332: January 1, 2016; |
| 23. | Limits on credit granted to the same borrower, etc. by a merchant bank under Article 334: January 1, 2016; |
| 24. | Limits on investment in securities by a merchant bank under Article 339: January 1, 2016; |
| 25. | Matters subject to approval from the Financial Services Commission for a financial investment business entity and the procedures for such approval under Article 370: January 1, 2014. |
| (2) | The Financial Services Commission shall examine the appropriateness of the following matters every two years, counting from each base date specified in the following (referring to the period that ends on the day before every second anniversary) and take measures, such as making improvements: <Newly Inserted by Presidential Decree No. 25843, Dec. 9, 2014; Presidential Decree No. 26600, Oct. 23, 2015> |
| 1. | Business units of financial investment business requiring authorization under Article 15: January 1, 2015; |
| 2. | Business units of investment advisory business or discretionary investment business requiring registration under Article 20: January 1, 2015; |
| 3. | Persons subject to application of qualifications for executive officers under Article 26-2: January 1, 2015; |
| 4. | Suspension of information exchanges among financial investment business entities under Article 50: January 1, 2015; |
| 5. | Scope of activities that are likely to undermine the protection of investors or sound trading practices under Article 68 (5) 4 (e): January 1, 2015; |
| 6. | Matters concerning the sales commission and sales remuneration under Article 77: January 1, 2015; |
| 7. | Maintaining the records of details of exercise, etc. of voting rights and public disclosure of the exercise of voting rights under Articles 90 and 91: January 1, 2015; |
| 8. | Means of ad hoc public disclosure, etc. under Article 93: January 1, 2015; January 1, 2015; |
| 9. | Grounds for restricting assessment against external assessment institutions under Article 176-5 (10): January 1, 2015; |
| 10. | Over-the-counter trading through inter-dealer brokers under Article 179: January 1, 2015; |
| 11. | Requirements for registration of collective investment schemes under Article 209: January 1, 2015; |
| 12. | Grounds for termination of investment trusts permitted without approval under Article 223; January 1, 2015; |
| 13. | Matters to be stated in partnership agreements under Article 237: January 1, 2015; |
| 14. | Matters to be stated in undisclosed association agreements under Article 239: January 1, 2015; |
| 15. | Matters to be observed in connection with multi-class funds under Article 243: January 1, 2015; |
| 16. | Scope of qualified investors in hedge funds under Article 271: January 1, 2015; |
| 16-2. | Matters to be stated in reports filed by private equity funds and accompanying documents under Article 271-13: January 1, 2015; |
| 16-3. | Requirements for revocation of registration of managing members of private equity funds under Article 271-21 (5): January 1, 2015; |
| 16-4. | Measures against private equity funds under Article 271-26: January 1, 2015; |
| 17. | Grounds, etc. for the deregistration of collective investment schemes under Article 275: January 1, 2015; |
| 18. | Requirements for registration of fund accounting and administration companies under Article 276: January 1, 2015; |
| 19. | Requirements, etc. for registration of fund rating companies under Article 280: January 1, 2015; |
| 20. | Requirements for registration of bond rating companies under Article 285: January 1, 2015; |
| 21. | through 23. Deleted; <by Presidential Decree No. 26600, Oct. 23, 2015> |
| 24. | Requirements, etc. for registration of foreign collective investment business entities under Article 301: January 1, 2015; |
| 25. | Methods, etc. for selling foreign collective investment securities under Article 303: January 1, 2015; |
| 26. | Grounds for deregistration of foreign collective investment schemes under Article 304: January 1, 2015; |
| 27. | Issuance of cover bills by merchant banks under Article 326: January 1, 2015; |
| 28. | Selection of eligible business entities by merchant banks under Article 327: January 1, 2015; |
| 29. | Dealing with unsecured bills, etc. by merchant banks under Article 328: January 1, 2015; |
| 30. | Matters concerning deposits in cash management accounts by merchant banks under Article 329: January 1, 2015; |
| 31. | Holding reserve assets by merchant banks under Article 341: January 1, 2015; |
| 32. | Restrictions on activities of fund brokerage companies under Article 346: January 1, 2015; |
| 33. | Matters subject to reporting by financial investment business entities under Article 371: January 1, 2015. |
[This Article Wholly Amended by Presidential Decree No. 25050, Dec. 30, 2013]
PART X PENALTY PROVISIONS
| Article 389 (Material Facts) |
"Material fact prescribed by Presidential Decree" in subparagraph 18 of Article 444 of the Act means a fact falling under any subparagraph of Article 157.
| Article 390 (Criteria for Imposing Administrative Fines) |
The criteria for imposing administrative fines prescribed in Article 449 (1) through (3) of the Act shall be as specified in attached Table 22. <Amended by Presidential Decree No. 28384, Oct. 17, 2017> [This Article Newly Inserted by Presidential Decree No. 26135, Mar. 3, 2015]
ADDENDA
Article 1 (Enforcement Date)
This Decree shall enter into force on February 4, 2009: Provided, That Article 4 of the Addenda shall enter into force on August 4, 2008.
Article 2 (Repeal of Other Statutes)
The following statutes are hereby repealed, respectively:
| 3. | The Enforcement Decree of the Indirect Investment Asset Management Business Act; |
| 4. | The Enforcement Decree of the Trust Business Act; |
| 6. | The Enforcement Decree of the Korea Securities and Futures Exchange Act. |
Article 3 Deleted. <by Presidential Decree No. 21291, Feb. 3, 2009>
Article 4 (Matters Concerning Establishment of Korea Financial Investment Association)
| (1) | The committee for establishment of the Korea Financial Investment Association referred to in Article 3 (2) of the Addenda to the Act (hereinafter referred to as the "establishment committee") shall be comprised of the following persons commissioned by the Chairperson of the Financial Services Commission pursuant to Article 3 (3) of the Addenda to the Act: |
| 1. | Two persons recommended by the Chairperson of the Financial Services Commission; |
| 2. | One person each recommended by the Korea Securities Dealers Association established pursuant to Article 162 of the former Securities and Exchange Act, the Korea Futures Association established with permission granted under Article 75 of the former Futures Trading Act, and the Asset Management Association of Korea established with permission granted under Article 160 (3) of the former Indirect Investment Asset Management Business Act, respectively (hereinafter referred to as "associations subject to merger"). |
| (2) | The establishment committee may prescribe matters concerning appointment of the chairperson of the establishment committee and matters necessary for operation of the establishment committee, including the method and procedure for adopting resolutions. |
| (3) | The merger agreement under Article 3 (5) of the Addenda to the Act shall state the following: |
| 1. | The name and purposes of the Association and the domicile of the central association; |
| 2. | Assets that each association subject to merger shall transfer to the Association and the values of such assets; |
| 3. | The date of the general meeting of members at which a resolution on approval for merger is to be adopted; |
| 5. | Other matters necessary for merger. |
| (4) | The resolution on approval for merger under Article 3 (5) of the Addenda to the Act shall be completed within three months from the lapse of one year after the Act is promulgated. |
| (5) | The associations subject to merger shall keep the following documents in their principal places of business for six months from one week before the date of general meeting of members for adopting a resolution on approval for merger in accordance with Article 3 (19) of the Addenda to the Act: |
| 2. | The last balance sheets of the associations subject to merger. |
| (6) | The associations subject to merger shall, when each of them calls the general meeting of members for adopting a resolution on approval for merger, notify its members of the agenda of the meeting and outlines of the merger agreement in writing by no later than one week before the date of general meeting of member. |
| (7) | If it fails to adopt a resolution on merger within the period specified in paragraph (4), the Financial Services Commission may amend terms and conditions of the merger agreement. |
| (8) | Articles 363 (1) and (2), 364, 368 (3) and (4), 371 (2), and 373 of the Commercial Act shall apply mutatis mutandis to the inaugural general meeting under Article 3 (8) of the Addenda to the Act. In such cases, "shareholders" in Article 363 (1) of the aforesaid Act shall be construed as "members," "company" in the aforesaid paragraph as "establishment committee," "domicile of its head office" in Article 364 of the aforesaid Act as "domicile of the central association," "shareholders" in Article 368 (3) of the aforesaid Act as "members," "shareholders" in Article 371 (2) of the aforesaid Act as "members," and "chairperson and directors present" in Article 373 (2) of the aforesaid Act as "chairperson of the establishment committee and members of the establishment committee present." |
| (9) | Upon completion of the merger, the associations subject to the merger shall promptly complete the registration of dissolution of the associations subject to the merger upon receiving approval of the Financial Services Commission under Article 3 (10) of the Addenda to the Act. |
| (10) | When the registration of establishment is completed in accordance with Article 3 (12) of the Addenda to the Act, transactions of stocks, which were made in accordance with Article 84-28 (5) of the Enforcement Decree of the Securities and Exchange Act but for which payment has not been settled, shall be deemed to have been made under the same terms and conditions in accordance with Article 178. |
Article 5 (Important Contracts Subject to Reporting on Stocks, etc. Held in Bulk)
"Material fact prescribed by Presidential Decree, including the essential terms and conditions of the contract" in Article 21 (2) of the Addenda to the Act means the matters provided for in the subparagraphs of Article 155. Article 6 (Special Cases concerning Restriction on Sale)
| (1) | "Cases prescribed by Presidential Decree" in the proviso to Article 30 (1) of the Addenda to the Act means where a collective investment scheme established under the Act is registered with the Financial Services Commission in accordance with Article 29 of the Addenda to the Act and a registration statement is filed with the Financial Services Commission in accordance with Article 119 (1) or (2) of the Act. |
| (2) | "Cases prescribed by Presidential Decree" in the proviso to Article 30 (2) of the Addenda to the Act means the following cases: |
| 1. | Where it is inevitable for a securities investment trust or a securities investment company eligible for tax benefits pursuant to the Restriction of Special Taxation Act to issue additional beneficiary certificates or to newly issue the stocks of the securities investment company; |
| 3. | Where a securities investment company incorporated in accordance with Article 79 of the former Securities Investment Company Act has entrusted management of its assets to any person other than an asset management company established under the aforesaid Act. |
| (3) | "Cases prescribed by Presidential Decree" in the proviso to Article 30 (3) of the Addenda to the Act means the following cases: |
| 1. | Where a trustor of a money trust created in accordance with the Trust Business Act as at the time the Indirect Investment Asset Management Business Act (Act No. 6987) is in force, in which it is allowed to entrust additional money until the termination of the trust under the former trust contract, requests to accept such additional entrustment by the deadline set by the trust; |
| 2. | Where a holder of an insurance policy of a special account created in accordance with the Insurance Business Act as at the time the Indirect Investment Asset Management Business Act (Act No. 6987) is in force, in which it is allowed to pay additional insurance premiums until the termination of the payment period, requested to accept such additional payment by the deadline set by the insurance contract. |
Article 7 (Applicability to Maintaining Requirements for Authorization for or Registration of Financial Investment Business Entities)
The requirements prescribed in subparagraphs 1 (e) (i) and 4 (d) of attached Table 2, referred to in items of Article 19 (1) 2 and subparagraph 2 of Article 23, shall begin to apply from the first violation committed on or after the date this Decree enters into force. Article 8 (Applicability to Executive Officers)
The requirements prescribed in the subparagraphs of Article 27 (3) shall begin to apply from the first violation committed on or after the date this Decree enters into force. Article 9 (Applicability to Requirements for Maintaining Authorization for Securities Finance Companies)
The requirements prescribed in subparagraphs 1 (e) (i) and 4 (d) of attached Table 2, referred to in Article 319 (2) 2, shall begin to apply from the first violation committed on or after the date this Decree enters into force. Article 10 (Applicability to Requirements for Maintaining Authorization for Fund Brokerage Companies)
The requirements prescribed in subparagraphs 1 (e) (i) and 4 (d) of attached Table 2, referred to in Article 345 (3) 2, shall begin to apply from the first violation committed on or after the date this Decree enters into force. Article 11 (Applicability to Requirements for Maintaining Authorization for Short-Term Finance Companies)
The requirements prescribed in subparagraphs 1 (e) (i) and 4 (d) of attached Table 2, referred to in Article 348 (5) 2, shall begin to apply from the first violation committed on or after the date this Decree enters into force. Article 12 (Special Cases concerning Requirements for Maintaining Authorization for Foreign Financial Investment Business Entities, etc.)
Where a branch office or any other business office (hereafter in this Article referred to as "branch office, etc.") of a foreign financial investment business entity, a foreign financial institution permitted under the Banking Act, or a foreign insurance company permitted under the Insurance Business Act (hereafter in this Article referred to as "financial investment business entity, etc.") engages in a business equivalent to the investment trading business as of one year after the promulgation of the Act, "70 percent" in Article 19 (1) 1 shall be construed as "50 percent" for the purposes of applying the requirements prescribed in the aforesaid subparagraph: Provided, That the same shall not apply to any of the following cases: <Amended by Presidential Decree No. 21291, Feb. 3, 2009> | 1. | Where a branch office, etc. of a foreign financial investment business entity, etc. receives a revised authorization by adding a business unit requiring authorization in accordance with Article 16 of the Act, files for registration of a financial investment business in accordance with Article 18 (1) of the Act, or files for revised registration in accordance with Article 21 of the Act; |
| 2. | Where a branch office, etc. of a foreign financial investment business entity, etc. receives authorization for a financial investment business, or files for registration of a financial investment business, by adding a business unit requiring authorization or registration in accordance with Article 6 (1) of the Addenda to the Act; |
| 3. | Where a foreign financial investment business entity, etc. installs an additional branch office, etc. in accordance with the latter part of Article 16 (9). |
Article 13 (Special Cases concerning Restriction on Limits of Asset Management)
For the purposes of Article 80 (1) 2 (c), "30 percent" in subparagraph 2 of the aforesaid paragraph shall be construed as "100 percent" until February 3, 2011. Article 14 (Special Cases concerning Money Trusts)
Article 15 (General Transitional Measures)
| (1) | Any approval, registration, order, disposition, or other business activities of the Financial Services Commission, the Securities and Futures Commission, or the Governor of the Financial Supervisory Service in accordance with the former Enforcement Decree of the Securities and Exchange Act, the former Enforcement Decree of the Futures Trading Act, the former Enforcement Decree of the Indirect Investment Asset Management Business Act, the former Enforcement Decree of the Trust Business Act, the former Enforcement Decree of the Merchant Banks Act, or the former Enforcement Decree of the Korea Securities and Futures Exchange Act as at the time this Decree enters into force shall be deemed to be the business activities of the Financial Services Commission, the Securities and Futures Commission, or the Governor of the Financial Supervisory Service pursuant to this Decree. |
| (2) | Any registration, application, report, or other action filed with, or taken in relation to the Financial Services Commission, the Securities and Futures Commission, or the Governor of the Financial Supervisory Service pursuant to the former Enforcement Decree of the Securities and Exchange Act, the former Enforcement Decree of the Futures Trading Act, the former Enforcement Decree of the Indirect Investment Asset Management Business Act, the former Enforcement Decree of the Trust Business Act, the former Enforcement Decree of the Merchant Banks Act, or the former Enforcement Decree of the Korea Securities and Futures Exchange Act as at the time this Decree enters into force, shall be deemed to be the action taken in relation to the Financial Services Commission, the Securities and Futures Commission, or the Governor of the Financial Supervisory Service pursuant to this Decree. |
Article 16 (Transitional Measures concerning Commercial Paper)
Article 17 (Transitional Measures concerning Appointment of Outside Directors and Composition of Board of Directors)
A person obligated to newly appoint an outside director in accordance with Article 28 (1) 1 (excluding persons referred to in the subparagraphs of Article 9 of the Addenda to the Act) shall elect the outside director by the date of the first general meeting of shareholders held after this Decree enters into force in accordance with Article 25 of the Act. In such cases, a person elected as an outside director at the general meeting of shareholders shall be deemed to have been recommended by the committee on the recommendation of candidates for outside directors in accordance with Article 25 (2) and (4) of the Act. Article 18 (Transitional Measures concerning Establishment of Audit Committee)
A person obligated to establish a new audit committee in accordance with Article 29 (1) (excluding persons referred to in the subparagraphs of Article 10 of the Addenda to the Act) shall establish the audit committee by the date of the first general meeting of shareholders held after this Decree enters into force in accordance with Article 26 of the Act. Article 18-2 (Transitional Measures concerning Qualifications for Full-time Auditor)
Article 29 (3) shall not apply to any full-time auditor who holds office in a financial investment business entity, which is obliged to appoint a new full-time auditor under Article 27 of the Act as on February 4, 2009, until his/her term of office ends. [This Article Newly Inserted by Presidential Decree No. 21611, Jul. 1, 2009]
Article 19 (Transitional Measures concerning Reporting on Net Operating Capital)
Article 20 (Transitional Measures concerning Restriction on Use of Trade Names in Foreign Languages)
A person who uses a trade name in violation of Article 42 as at the time this Decree enters into force may use the trade name only for six months after the date this Decree enters into force. Article 21 (Transitional Measures concerning Entrustment of Business Affairs)
Business affairs entrusted as at the time this Decree enters into force shall be deemed to have been entrusted in accordance with the Act and this Decree until the term of the contract for entrustment of business affairs expires, notwithstanding Article 45.
Article 22 (Transitional Measures concerning Qualifications for Investment Solicitors)
| (1) | A person who has passed an examination conducted by a former association subject to merger as at the time this Decree enters into force, and who has satisfied requirements prescribed by the Association shall be deemed to have passed an examination conducted by the Association in accordance with subparagraph 1 (a) and (b) of Article 56. |
| (2) | A person who has completed a training course designated by a former association subject to merger as at the time this Decree enters into force, and who has satisfied requirements prescribed by the Association shall be deemed to have completed a training course designated by the Association and confirmed by the Financial Services Commission in accordance with subparagraph 2 of Article 56. |
Article 23 (Transitional Measures concerning Descriptions of Registration Statements, Half-Yearly and Quarterly Reports, and Accompanying Documents)
Notwithstanding Articles 125 (3), 170 (1) and (2), where a corporation, whose total assets as of the end of the most recent business year are less than two trillion won and which is required to prepare consolidated financial statements, (including where the total assets of a corporation, whose total assets are less than two trillion won as of the end of the business year that begins on or after January 1, 2010, exceed two trillion won as of the end of the business year that begins on or after January 1, 2011) shall apply the Korean International Financial Reporting Standards (K-IFRS) for the business year that begins on or after January 1, 2011 and thereafter, it may describe matters concerning financial affairs and supplementary schedules (in the case of a registration statement, referring to the matters concerning financial affairs provided in Article 125 (1) 3 (c) and other matters prescribed and publicly notified by the Financial Services Commission) referred to in Article 168 (2) 7, and other matters prescribed and publicly notified by the Financial Services Commission, among descriptions of a registration statement, half-yearly or quarterly report on the basis of its financial statements, until the business year that begins on or after January 1, 2012, describe the audit opinion of an auditor on its financial statements (including where such audit opinion is substituted by verification and comments), and may submit a registration statement, half-yearly or quarterly report along with only a half-yearly audit report and a half-yearly review report or a quarterly audit report and a quarterly review report of the auditor on its financial statements. <Amended by Presidential Decree No. 21611, Jul. 1, 2009; Presidential Decree No. 22197, Jun. 11, 2010> Article 24 (Transitional Measures concerning Members of Market Efficiency Promotion Committee)
The members commissioned in accordance with Article 13 (1) 6 of the former Enforcement Decree of the Korea Securities and Futures Exchange Act as at the time this Decree enters into force shall be deemed to have been commissioned as members of the market efficiency promotion committee established under Article 368 (3). Article 25 (Transitional Measures concerning Indirect Investment Schemes, etc.)
| (1) | An investment trust (excluding a special account created by an insurance company) or an investment company created or established in accordance with the former Indirect Investment Asset Management Business Act as at the time this Decree enters into force shall be governed by the former Enforcement Decree of the Indirect Investment Asset Management Business Act. |
| (2) | Foreign indirect investment securities registered with the Financial Services Commission in accordance with the former Indirect Investment Asset Management Business Act as at the time this Decree enters into force shall be governed by the former Enforcement Decree of the Indirect Investment Asset Management Business Act. |
| (3) | A securities investment trust or a securities investment company referred to in the proviso to Article 3 of the Addenda to the former Enforcement Decree of the Indirect Investment Asset Management Business Act (Presidential Decree No. 18325) shall be governed by the former Enforcement Decree of the Securities Investment Trust Business Act or the former Enforcement Decree of the Securities Investment Company Act. |
Article 26 Omitted.
Article 27 (Transitional Measures following Amendments to other Statutes)
Article 28 (Relationship to other Acts)
ADDENDA <Presidential Decree No. 21291, Feb. 3, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on February 4, 2009.
Article 2 (Special Cases concerning Restriction on Short Sale)
The amended provisions of Article 280 (2) other than each subparagraph shall apply starting with the restriction on short sale first made under this Decree. Article 3 Omitted.
Article 4 (Relations to other Statutes)
A citation of provisions of the former Securities and Exchange Act or the Enforcement Decree thereof, the former Futures Trading Act or the Enforcement Decree thereof in any other statutes enforceable when this Decree enters into force shall, if any, be deemed to be a citation of the Act or this Decree or of corresponding provisions of the Act or this Decree in lieu of the former provisions, if such corresponding provisions in the Act or this Decree exist.
ADDENDA <Presidential Decree No. 21480, May 6, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on May 8, 2009.
Articles 2 and 3 Omitted.
ADDENDA <Presidential Decree No. 21518, May 29, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on June 1, 2009.
Articles 2 and 3 Omitted.
ADDENDA <Presidential Decree No. 21565, Jun. 26, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on June 30, 2009. (Proviso Omitted.)
Articles 2 through 4 Omitted.
ADDENDA <Presidential Decree No. 21611, Jul. 1, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 (Applicable Cases concerning Special Cases concerning Restriction on Limits of Asset Management)
The amended provisions falling under Article 80 (1) 6 (a) through (c) shall not apply to any act committed prior to the enforcement of this Decree. Article 3 (Applicable Cases concerning Undisclosed Important Information)
The amended provisions falling under Article 201 (1) shall apply beginning with the cases where information is disclosed, published, broadcasted, or provided after the date this Decree enters into force. Article 4 (Transitional Measures concerning Verification of Internal Control Guidelines by Financial Services Commission)
Where any person files an application with the Financial Services Commission for verification of the internal control guidelines in accordance with the amended provisions of the latter part of Article 51 (2) 1 (b) within one month after this Decree enters into force, notwithstanding the same amended provisions, he/she may provide information according to the relevant internal control guidelines before he/she obtains verification from the Financial Services Commission. Article 5 (Transitional Measures concerning Executive Officers Holding other Jobs)
The amended provisions of the same subparagraph shall not apply to an executive officer of a financial investment business entity who holds office this Decree enters into force and who holds other jobs, in violation of the amended provisions of Article 51 (2) 2 by the earlier of the expiration date of the term of office as an executive officer for the financial investment business entity, or the expiration date of the term of office as an executive officer of another company for which he/she holds an additional position.
ADDENDA <Presidential Decree No. 21744, Sep. 21, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on October 1, 2009.
Articles 2 through 5 Omitted.
ADDENDA <Presidential Decree No. 21765, Oct. 1, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Articles 2 through 5 Omitted.
ADDENDA <Presidential Decree No. 21835, Nov. 20, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on November 22, 2009.
Articles 2 and 3 Omitted.
ADDENDA <Presidential Decree No. 21898, Dec. 21, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 (Period of Validity)
| (1) | The amended provisions of Article 292 (3) shall be valid until December 31, 2010. |
| (2) | The amended provisions of Article 295 (4) shall be valid until June 30, 2011. |
Article 3 (Applicability, etc. concerning Limit of Sales Remuneration and Commission)
| (1) | The amended provisions of Article 77 (4) shall apply to the collective investment scheme first created or established after this Decree enters into force. |
| (2) | Notwithstanding paragraph (1), where the multiple class fund created or established before this Decree enters into force issues new types of collective investment securities, the amended provisions of Article 77 (4) shall apply to the limit of the sales remuneration and sales commission of such collective investment securities. |
ADDENDA <Presidential Decree No. 21904, Dec. 24, 2009>
Article 1 (Enforcement Date)
This Decree shall enter into force on January 1, 2010.
Articles 2 through 6 Omitted.
ADDENDA <Presidential Decree No. 21978, Jan. 6, 2010>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Articles 2 through 4 Omitted.
ADDENDA <Presidential Decree No. 22003, Jan. 27, 2010>
Article 1 (Enforcement Date)
This Decree shall enter into force on February 1, 2010.
Articles 2 through 5 Omitted.
ADDENDA <Presidential Decree No. 22151, May 4, 2010>
Article 1 (Enforcement Date)
This Decree shall enter into force on May 5, 2010.
Articles 2 through 4 Omitted.
ADDENDA <Presidential Decree No. 22197, Jun. 11, 2010>
Article 1 (Enforcement Date)
This Decree shall enter into force on June 13, 2010: Provided, That the amended provisions of Article 119 (1) 36 shall enter into force on July 6, 2010. Article 2 (Transitional Measure concerning Accounting Standards of Foreign Corporations, etc.)
The amended provisions of Article 176 (6) shall start applying to the business year which begins first after January 1, 2010. Article 3 (Transitional Measure concerning Citation of other Statutes)
By July 5, 2010, "the Korea Trade Insurance Corporation established under the Trade Insurance Act" in the amended provisions of Article 300-2 (1) 5 shall be deemed "the Korea Export Insurance Corporation established under the Export Insurance Act".
ADDENDUM <Presidential Decree No. 22467, Nov. 2, 2010>
This Decree shall enter into force on the date of its promulgation.
ADDENDA <Presidential Decree No. 22493, Nov. 15, 2010>
Article 1 (Enforcement Date)
This Decree shall enter into force on November 18, 2010.
Articles 2 through 5 Omitted.
ADDENDA <Presidential Decree No. 22516, Dec. 7, 2010>
Article 1 (Enforcement Date)
This Decree shall enter into force on December 9, 2010.
Articles 2 through 8 Omitted.
ADDENDA <Presidential Decree No. 22637, Jan. 24, 2011>
Article 1 (Enforcement Date)
This Decree shall enter into force on January 24, 2011. (Proviso Omitted.)
Articles 2 through 23 Omitted.
ADDENDUM <Presidential Decree No. 22718, Mar. 22, 2011>
This Decree shall enter into force on the date of its promulgation.
ADDENDA <Presidential Decree No. 23073, Aug. 11, 2011>
Article 1 (Enforcement Date)
This Decree shall enter into force on August 19, 2011.
Article 2 Omitted.
ADDENDUM <Presidential Decree No. 23197, Sep. 30, 2011>
This Decree shall enter into force on the date of its promulgation.
ADDENDUM <Presidential Decree No. 23285, Nov. 4, 2011>
This Decree shall enter into force on November 5, 2011.
ADDENDA <Presidential Decree No. 23488, Jan. 6, 2012>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation. (Proviso Omitted.)
Article 2 Omitted.
ADDENDA <Presidential Decree No. 23496, Jan. 6, 2012>
Article 1 (Enforcement Date)
This Decree shall enter into force on March 2, 2012.
Article 2 Omitted.
ADDENDA <Presidential Decree No. 23644, Feb. 29, 2012>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation. (Proviso Omitted.)
Articles 2 through 4 Omitted.
ADDENDA <Presidential Decree No.23924, Jun. 29, 2012>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation: Provided, That the amended provisions of Article 208 (2) 3 shall enter into force two months after the date of its promulgation; the amended provisions of Articles 7 (3) 5-2, 68 (2) 4-2 through 4-4 and 181 (3) shall enter into force three months after the date of its promulgation; and the amended provisions of Article 296 (3) shall enter into force on January 1, 2013. Article 2 (Applicability concerning Issuance of Derivative-Combined Securities by Foreign Investment Traders)
The amended provisions of Article 7 (3) 5-2 shall apply to derivative-combined securities issued outside Korea on or after the date the relevant provisions enter into force under the proviso to Article 1 of the Addenda. Article 3 (Applicability concerning Reports on Net Balance Held by Persons who have Sold Stocks Short)
The amended provisions of Article 208 (2) 3 shall apply to stocks sold short on or after the date the relevant provisions enter into force under the proviso to Article 1 of the Addenda. Article 4 (Transitional Measures concerning Appointment, etc. of Outside Directors)
Notwithstanding the amended provisions of Article 28 (3) 5, the term of office of a person who holds office as an outside director as at the time this Decree enters into force shall be subject to former provisions until his/her term of office expires.
ADDENDUM <Presidential Decree No. 24317, Jan. 16, 2013>
This Decree shall enter into force on the date of its promulgation. (Proviso Omitted.)
ADDENDA <Presidential Decree No. 24435, Mar. 23, 2013>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Articles 2 through 4 Omitted.
ADDENDA <Presidential Decree No. 24497, Apr. 5, 2013>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 (Applicability to Modification of Standards for Submission of Reports on Material Facts)
The amended provisions of Article 171 (1) shall apply beginning from the time when a resolution to acquire or transfer an essential business or asset is adopted after this Decree enters into force.
ADDENDA <Presidential Decree No. 24636, Jun. 21, 2013>
This Decree shall into force on the date of its promulgation.
ADDENDA <Presidential Decree No. 24655, Jul. 5, 2013>
Article 1 (Enforcement Date)
This Decree shall enter into force on July 6, 2013.
Article 2 (Applicability to Requirements for Authorization for Financial Investment Business)
Amended Article 16 (8) 2 (c) shall begin to apply from a person who applies for authorization for financial investment business under Article 13 (1) of the Act or who applies for preliminary authorization for financial investment business under Article 14 (1) of the Act. Article 3 (Transitional Measures concerning Clearing Business, etc. of Transactions on Consignment by the Securities Depository)
| (1) | The Securities Depository that has been engaged in the clearing business of transactions on consignment under amended Article 14-2 (2) 3 as at the time this Decree enters into force shall be deemed to have obtained authorization to engage in central counterparty clearing business, the business unit of which is for transactions on consignment under amended Article 14-2 (2) 3: Provided, That it shall fulfill the requirements for authorization provided in 323-3 (2) of the Act within three months from the enforcement date of this Decree. |
| (2) | Where an exchange holds more than 20 percent of the total number of outstanding voting stocks of the Securities Depository deemed to have obtained authorization to engage in central counterparty clearing business under the main sentence of paragraph (1) as at the time this Decree enters into force, the exchange shall be deemed to have obtained approval from the Financial Services Commission under amended subparagraph 3 of Article 318-10. |
ADDENDA <Presidential Decree No. 24697, Aug. 27, 2013>
Article 1 (Enforcement Date)
This Decree shall enter into force on August 29, 2013: Provided, That the following amended provisions shall enter into force on the dates specified in the following subparagraphs:
| 1. | Amended Article 168 (1) through (4), and (6): November 29, 2013; |
| 2. | Amended proviso to Article 80 (1) 8: July 1, 2014; |
| 3. | Amended Articles 224-2, 231-2, 238 (2), 316, and 317: January 1, 2015. |
Article 2 (Applicability to Business Reports of Collective Investment Business Entities)
Amended Article 94 (1) 3 shall begin to apply from the voting rights to be exercised on or after the date this Decree enters into force. Article 3 (Applicability to Calculation of Merger Value of Stock-Listed Corporations)
Amended Article 176-5 (1) shall begin to apply from the first case where a board of directors adopts a resolution for a merger on or after the date this Decree enters into force. Article 4 (Applicability to Reports on Changes of Registered Matters of Private Equity Firms)
Amended Article 290 (6) shall begin to apply from the first case where any matter referred to in subparagraphs of Article 290 (5) changes on or after the date this Decree enters into force. Article 5 (Applicability to Payment of Rewards for Reporting or Informing Unfair Trade, etc.)
Amended Article 384 (8) shall begin to apply from the first report or information received on or after the date this Decree enters into force. Article 6 (Transitional Measures concerning Qualifications of Executive Officers)
Where a person falling under amended Article 26-2 as at the time this Decree enters into force becomes to fall under any subparagraph of Article 24 (1) of the Act due to a cause which has occurred before this Decree enters into force, former provisions shall apply, notwithstanding amended Article 26-2. Article 7 (Transitional Measures concerning the Korea Exchange)
Notwithstanding amended Article 354-3 (8), the Korea Exchange operating as at the time this Decree enters into force shall be deemed to have fulfilled the requirements for permission for an exchange: Provided, That it shall establish the system for preventing conflicts of interest prescribed in the same Article within six months from the date this Decree enters into force. Article 8 (Transitional Measures concerning Members of Director Nomination Committee)
Notwithstanding amended Article 358, stock-listed corporations recommended by an organization established by the Korea Exchange with stock-listed corporations in a securities market as its members and stock-listed corporations recommended by an organization established by and consisting of stock-listed corporations in the KOSDAQ market under the former Article 358 shall be deemed to be the members of the director nomination committee. Article 9 (Transitional Measures concerning Requirements for Revocation of Authorization for Collective Investment Business Entities)
Persons who have been authorized to engage in collective investment business referred to in 3-12-1, 3-12-2, 3-13-1, or 3-13-2 of attached Table 1 before this Decree enters into force shall be governed by the former provisions in respect of a period within which the persons shall commence its business, notwithstanding amended Article 373 (4) 1. Article 10 (Transitional Measures concerning Registration of Investment Advisory Business or Discretionary Investment Business)
Persons who have been registered to engage in investment advisory business or discretionary investment business referred to in 5-0-1, 5-0-2, 6-0-1, or 6-0-2 of the former provisions of attached Table 3 as at the time this Decree enters into force shall be deemed to have been registered to engage in the investment advisory business or discretionary investment business referred to in 5-2-1, 5-2-2, 6-2-1, or 6-2-2 of the amended provisions of attached Table 3.
Article 11 (Transitional Measures concerning Major Shareholders of Credit Rating Companies)
In applying amended Article 335-6 of the Act to the major shareholders of a credit rating company deemed to be authorized under the Article 14 (1) of Addenda to the partially amended Financial Investment Services and Capital Markets Act (Act No. 11845) as at the time this Decree enters into force, the major shareholders shall be deemed to have fulfilled the requirements prescribed in amended subparagraphs 1 (d) and 4 (c) of attached Table 13-2 in respect of the acts conducted before this Decree enters into force, notwithstanding amended subparagraph 4 (c) of the same Table. Article 12 Omitted.
Article 13 (Relationship with Other Acts)
Where any other statutes cites the former provisions of this Decree as at the time this Act enters into force, the relevant provisions of this Decree shall be deemed to be cited in lieu of the former provisions, if any corresponding provisions exists herein.
ADDENDUM <Presidential Decree No. 24841, Nov. 13, 2013>
This Decree shall enter into force on November 14, 2013.
ADDENDUM <Presidential Decree No. 25050, Dec. 30, 2013>
This Decree shall enter into force on January 1, 2014 (Proviso Omitted.)
ADDENDA <Presidential Decree No. 25279, Mar. 24, 2014>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Articles 2 and 3 Omitted.
ADDENDUM <Presidential Decree No. 25532, Aug. 6, 2014>
This Decree shall enter into force on August 7, 2014.
ADDENDA <Presidential Decree No. 25553, Aug. 12, 2014>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation: Provided, That the amended provisions of Articles 104 (6) and (7) and 106 (4) 1, and subparagraph 19 of attached Table 5 shall enter into force from the date three months elapse after the promulgation of this Decree. Article 2 (Applicable Cases concerning Matters to be Complied with when Concluding of Specified Money Trust or Changing its Management Method)
The amended provisions of Article 104 (6) shall apply beginning with cases where a specified money trust is concluded (including renewal) on and after the enforcement date prescribed in the proviso to Article 1 of the Addenda.
ADDENDA <Presidential Decree No. 25843, Dec. 9, 2014>
Article 1 (Enforcement Date)
This Decree shall enter into force on January 1, 2015: Provided, That the amended provisions of Articles 154 (1) 4 shall enter into force on the date of its promulgation, and the amended provisions of Articles 34 (1) and 35 (2) 1 shall enter into force on April 1, 2015, and the amended provisions of Article 109 (1) 4 shall enter into force on July 1, 2015. Article 2 (Applicable Cases concerning Prohibition against Unsound Business Conduct)
The amended provisions of Article 109 (1) 4 shall apply beginning with cases where a trust business entity conducts a transaction (including the renewal of existing transactions) with the inherent property of a trust business entity using trust property on or after July 1, 2015.
ADDENDA <Presidential Decree No. 25945, Dec. 30, 2014>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date the registration for a merger under Article 4 (6) of the Addenda to the Korea Development Bank Act (Act No. 12663) is completed. Articles 2 through 5 Omitted.
ADDENDA <Presidential Decree No. 26135, Mar. 3, 2015>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 (Applicable Cases concerning Exception to Prohibition against Commingling and Management of Trust Property)
The amended provisions of Article 109 (3) 5 (b) shall apply beginning with cases where a trust business entity that fulfills the requirements prescribed and publicly notified by the Financial Services Commission creates a trust which provides a guarantee for indemnifying for losses or an assurance of profits under the proviso to Article 104 (1) after this Decree enters into force.
ADDENDUM <Presidential Decree No. 26190, Apr. 7, 2015>
This Decree shall enter into force from the date three months elapse after the promulgation of this Decree.
ADDENDA <Presidential Decree No. 26205, Apr. 20, 2015>
Article 1 (Enforcement Date)
This Decree shall enter into force on April 29, 2015.
Articles 2 and 3 Omitted.
ADDENDA <Presidential Decree No. 26374, Jun. 30, 2015>
Article 1 (Enforcement Date)
This Decree shall enter into force on July 1, 2015.
Article 2 (Applicability to Exception to Prohibition on Market Disturbance)
Amended subparagraphs 1 through 3 of Article 207-2 shall also apply where any of the acts prescribed in the items of subparagraph 1 of the same Article has been conducted and where a corrective order or suspension order has been issued by the Government before this Decree enters into force.
ADDENDA <Presidential Decree No. 26600, Oct. 23, 2015>
Article 1 (Enforcement Date)
This Decree shall enter into force on October 25, 2015: Provided, That amended Articles 318-8 (2) and (3), 362 (2), and 363 (2) shall enter into force on January 25, 2016. Article 2 (Method for Calculation of Total Amount of Collective Investment Securities in Relation to Special Cases for Collective Investment Business Entities, etc.)
| (1) | The following collective investment securities shall be disregarded for the purposes of calculating the total amount of collective investment securities that can be issued by a collective investment business entity, etc. referred to in Article 4 (1) of the Addenda to the Act (hereinafter referred to as "collective investment business entity, etc.") under the former provisions as prescribed in paragraph (3) of the same Article: |
| 1. | Where the collective investment business entity, etc., which is a privately placed fund registered under Article 182 of the Act before this Decree enters into force, concludes an agreement, which provides that the investor shall, if requested, purchase the collective investment securities of any of the privately placed funds prescribed in the subparagraphs 1 through 3 of Article 229 the Act, and thereafter issues the collective investment securities under the agreement after this Decree enters into force; |
| 2. | Where the collective investment business entity, etc., which has dividends at the time of settlement of accounts of a privately placed fund registered under Article 182 of the Act before this Decree enters into force, issues collective investment securities to distribute the dividends to investors after this Decree enters into force; |
| 3. | Where the collective investment business entity, etc., which has concluded a contract to hedge an exchange risk of a privately placed fund registered under Article 182 of the Act before this Decree enters into force, issues collective investment securities to fulfill the contract after this Decree enters into force. |
| (2) | The total amount of collective investment securities of any privately placed fund created or established under paragraph (1) shall be based on the original amount, or prices of stocks or other equity securities of the privately placed fund to be terminated and dismissed after this Decree enters into force; and the detailed method, etc. for calculating the total amount of the collective investment securities shall be prescribed and publicly notified by the Financial Services Commission. |
Article 3 (Applicability to Sale of Foreign Collective Investment Securities in Korea)
Amended Articles 7 (4) 6-2 and 301 (4) shall begin to apply from the foreign collective investment securities to be sold in Korea by a foreign investment trust, a foreign collective investment business entity of a foreign undisclosed investment association, or a foreign investment company, etc. in accordance with such amended provisions after this Decree enters into force. Article 4 (Applicability to Members or Stockholders of Special-Purpose Companies)
Amended Article 271-19 (2) shall begin to apply from an agreement, contract, etc. to be concluded between an entity referred to in Article 271-19 (2) 2 and the managing member of a private equity fund that has invested in a special-purpose company, to participate jointly in the management of an enterprise in which the special purpose company invests, after this Decree enters into force. Article 5 (Special Cases concerning Registration of Hedge Fund Investment Business by Filing Reports)
Where a person, who runs a collective investment business as at the time the Act is promulgated under Article 5 (1) of the Addenda to the Act and is authorized for the whole collective investment business or the collective investment business for the former hedge fund investment business, files a report upon having fulfilled the requirements for maintaining registration for a hedge fund investment business, and the Financial Services Commission verifies whether he/she fulfills the requirements for maintaining the registration under paragraph (2) of the same Article, only the requirements prescribed in amended subparagraph 1 of the same Article shall apply, notwithstanding amended Article 271-3. In such cases, a person who fails to fulfill the requirements prescribed in amended subparagraph 2 of Article 271-3 shall fulfill such requirements by no later than December 31, 2015. Article 6 (Special Cases concerning Registration of Hedge Fund Investment Business by Filing Applications)
Notwithstanding amended Article 271-2 (5), the requirements prescribed in amended subparagraph 2 of Article 271-3 shall apply to a collective investment business entity that files an application to register its hedge fund investment business under Article 6 of the Addenda to the Act. Article 7 (Transitional Measures concerning Restriction on Collective Investment Scheme's Acquisition of Securities Issued by Affiliated Companies)
Where a collective investment business entity authorized before this Decree enters into force fails to comply with amended Article 86 (1) 1, the collective investment business entity shall be deemed to comply with such amended provisions for six months from the date this Decree enters into force. Article 8 (Transitional Measures concerning Compensation for Damage, etc. by Central Counterparty)
Notwithstanding amended Article 318-8 (2) and (3), compensation, etc. for losses incurred from default arising from any trade subject to clearing conducted before the enforcement dates prescribed in the proviso to Article 1 of the Addenda shall be governed by the former provisions. Article 9 Omitted.
ADDENDUM <Presidential Decree No. 26817, Dec. 30, 2015>
This Decree shall enter into force on the date of its promulgation.
ADDENDUM <Presidential Decree No. 26898, Jan. 12, 2016>
This Decree shall enter into force on January 25, 2016.
ADDENDUM <Presidential Decree No. 26961, Feb. 5, 2016>
This Decree shall enter into force on the date of its promulgation.
ADDENDA <Presidential Decree No. 27037, Mar. 11, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 Omitted.
ADDENDA <Presidential Decree No. 27115, Apr. 29, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Articles 2 through 5 Omitted.
ADDENDA <Presidential Decree No. 27205, May 31, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on September 30, 2016. (Proviso Omitted.)
Articles 2 and 3 Omitted.
ADDENDA <Presidential Decree No. 27290, Jun. 28, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on July 30, 2016. (Proviso Omitted.)
Article 2 Omitted.
ADDENDA <Presidential Decree No. 27291, Jun. 28, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on June 30, 2016: Provided, That amended Article 7-2 (2) shall enter into force on June 30, 2017; amended Article 81 (4) on the date of its promulgation; and amended Article 168 (2) on March 30, 2018, respectively. Article 2 (Transitional Measures concerning Suspension of Information Exchanges with Affiliated Companies, etc.)
Notwithstanding amended Article 51 (2) 2, a person holding a concurrent office at or being dispatched to an affiliated company of a financial investment business entity or any of the companies referred to in the subparagraphs of Article 51 (1) as at the time this Decree enters into force shall be governed by the former provisions until the period of the concurrent office or dispatch expires. Article 3 (Transitional Measures concerning Grounds for Submission of Reports on Material Facts)
Notwithstanding amended Article 171, submission of reports on material facts that occurred before this Decree enters into force shall be governed by the former provisions. Article 4 (Transitional Measures concerning Restriction on Affairs of External Assessment Institutions)
Notwithstanding amended Article 176-5 (12), any restriction on the affairs of assessment imposed under Article 165-4 (3) of the Act on any ground that occurred before this Decree enters into force shall be governed by the former provisions. Article 5 (Transitional Measures concerning Requirements for Major Shareholders among Requirements for Authorization for Financial Investment Business)
Notwithstanding amended subparagraph 1 (e) (i) of attached Table 2, persons who have applied for authorization for financial investment business before this Decree enters into force shall be governed by the former provisions.
ADDENDA <Presidential Decree No. 27322, Jul. 6, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on July 25, 2016.
Articles 2 through 4 Omitted.
ADDENDA <Presidential Decree No. 27414, Jul. 28, 2016>
Article 1 (Enforcement Date)
Articles 2 through 4 Omitted.
ADDENDA <Presidential Decree No. 27444, Aug. 11, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on August 12, 2016.
Articles 2 through 8 Omitted.
ADDENDA <Presidential Decree No. 27472, Aug. 31, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on September 1, 2016.
Articles 2 through 7 Omitted.
ADDENDA <Presidential Decree No. 27556, Oct. 25, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on December 1, 2016.
Article 2 Omitted.
ADDENDA <Presidential Decree No. 27751, Dec. 30, 2016>
Article 1 (Enforcement Date)
This Decree shall enter into force on January 1, 2017. (Proviso Omitted.)
Articles 2 through 12 Omitted.
ADDENDUM <Presidential Decree No. 27861, Feb. 13, 2017>
This Decree shall enter into force on the date of its promulgation.
ADDENDA <Presidential Decree No. 28040, May 8, 2017>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date promulgation: Provided, That the amended provisions of Article 77-6 (3) 6 shall enter into force one year after the date of its promulgation. Article 2 (Applicability to Holding of Shares of Exchange in Excess of Limit)
The amended provisions of Article 366 (1) shall also apply to any corporation that has completed its registration of merger before this Decree enters into force. Article 3 (Transitional Measures concerning Dispositions against Financial Investment Business Entities, etc. that have Violated Restrictions on Entrustment of Business Affairs)
Notwithstanding the amended provisions of subparagraph 2 of Article 45, application of dispositions, etc. under Article 420 or 422 of the Act, notification, etc. under Article 424 of the Act, or penalty provisions under subparagraph 4 of Article 446 of the Acts, against any financial investment business entity, etc. that has violated the restrictions on entrustment of business affairs before this Decree enters into force, shall be governed by the former provisions. Article 4 (Transitional Measures concerning Dispositions against Collective Investment Business Entities, etc. that have Violated Restrictions on Limits of Asset Management)
Notwithstanding the amended provisions of Article 80 (1) 5, 5-4 and 8-2, and 81 (3), application of dispositions, etc. under Article 420 or 422 of the Act, notification, etc. under Article 424 of the Act, or penalty provisions under subparagraph 9 of Article 446 of the Act, against any collective investment business entity, etc. that has violated the restrictions on limits of asset management before this Decree enters into force, shall be governed by the former provisions. Article 5 (Transitional Measures concerning Dispositions, etc. against Issuers who have Violated Obligation to Submit Registration Statements)
Notwithstanding the amended provisions of Article 120 (2), application of dispositions, etc. under Article 420 or 422 of the Act, notification, etc. under Article 424 of the Act, penalty surcharges under Article 429 (1), or penalty provisions under Article 444 of the Act, against any issuer that has violated the obligation to submit registration statements before this Decree enters into force, shall be governed by the former provisions. Article 6 (Transitional Measures concerning Underwriters' Liabilities for Damage)
Notwithstanding the amended provisions of Article 135 (2) 1, the scope of persons liable to compensate for the damage caused by false entry, etc. in a registration statement or investment prospectus submitted before this Decree enters into force, shall be governed by the former provisions. Article 7 (Transitional Measures concerning Dispositions, etc. against Collective Investment Business Entities, etc. that have Violated Restrictions on Additional Issuance of Collective Investment Securities of Closed-End Funds)
Notwithstanding the amended provisions of Article 242 (1), application of dispositions, etc. under Article 420 or 422 of the Act or notification, etc. under Article 424 of the Act against any collective investment business entity, etc. that has violated the restrictions on additional issuance of collective investment securities of a closed-end fund before this Decree enters into force, shall be governed by the former provisions. Article 8 (Transitional Measures concerning Dispositions, etc. against Private Equity Funds that have Violated Methods of Operating Surplus Funds)
Notwithstanding the amended provisions of Article 271-16 (5), application of dispositions, etc. under Article 249-21 of the Act against any private equity fund, etc. that has violated the methods of operating surplus funds, shall be governed by the former provisions.
ADDENDA <Presidential Decree No. 28384, Oct. 17, 2017>
Article 1 (Enforcement Date)
This Decree shall enter into force on October 19, 2017: Provided, That the amended provisions of Articles 68 (5) 2-2 and 109 (3) 1-2 shall enter into force on January 1, 2018. Article 2 (Transitional Measures concerning Criteria for Imposing Penalty Surcharges)
Notwithstanding the amended provisions of Article 379 and attached Table 19-2, the application of the criteria for imposing penalty surcharges against a violation committed before this Decree enters into force, shall be governed by the former provisions of Article 379.
ADDENDA <Presidential Decree No. 28564, Dec. 29, 2017>
Article 1 (Enforcement Date)
This Decree shall enter into force on the date of its promulgation.
Article 2 (Transitional Measures concerning Continued Compliance with Requirements for Authorization for Credit Rating Business)
Notwithstanding the amended provisions of subparagraph 1 (d) (iii) of attached Table 13-2, the application of the provisions on continued compliance with requirements for authorization under Article 335-6 of the Act to a person who has obtained authorization for credit rating business pursuant to Article 335-3 of the Act before this Decree enters into force, shall be governed by the former provisions for up to three months after this Decree enters into force.
ADDENDUM <Presidential Decree No. 28796, Apr. 10, 2018>
This Decree shall enter into force on May 1, 2018: Provided, That the amended provisions of Articles 14-5 (2) 3, 118-17 (4) 3 and 4, the main sentence of Article 118-17 (6), and Article 271-28 shall enter into force on the date of its promulgation.