CHAPTER I GENERAL PROVISIONS
The purpose of this Act is to enhance the effectiveness of protection of financial consumers and to contribute to the development of the national economy by prescribing obligations that financial product distributors and financial product advisors shall observe in operating their businesses and matters concerning policies for financial consumers, procedures for the mediation of financial disputes, etc. for the protection of rights and interests of financial consumers in order to promote rights and interests of financial consumers and to establish sound market practices for financial product distribution businesses and financial product advisory businesses.
The terms used in this Act are defined as follows:
| 1. | The term “financial product” means: |
| (f) | Others specified by Presidential Decree among those similar to the products specified in items (a) through (e); |
| 2. | The term “financial product distribution business” means a business that engages in activities conducted continually or repeatedly for the purpose of earning income and that falls under any of the following: Provided, That the businesses specified by Presidential Decree as those required to be excluded from financial product distribution businesses in view of the nature of relevant activities and the necessity for the protection of financial consumers shall be excluded: |
| (b) | Financial product distribution agency or brokerage business: A business operated for agency or brokerage for the conclusion of contracts on financial products; |
| 3. | The term “financial product distributor” means a person who engages in a financial product distribution business authorized, permitted, or registered for business transactions of a financial product distribution business under any finance-related statute specified by Presidential Decree (hereinafter referred to as “finance-related statute”) (including persons who engage in business transactions that fall within the category of financial product distribution business without authorization, permission, or registration if the relevant finance-related statute provides that no authorization, permission, or registration is required for such business transactions) or a person who has a financial product distribution business registered under Article 12 (1), who shall be classified into: |
| (a) | Financial product direct seller: A person who engages in a financial product direct sales business, among financial product distributors; |
| (b) | Financial product distribution agent or broker: A person who engages in a financial product distribution agency or brokerage business, among financial product distributors; |
| 4. | The term “financial product advisory business” means a business of providing advice continually or repeatedly on decision-making with regard to the value, or the acquisition and disposal, of financial products (hereinafter referred to as “advisory service on financial products”) for the purpose of earning income: Provided, That the following activities shall be excluded: |
| (a) | Providing advice through periodicals, publications, communications, broadcasting, etc. issued or transmitted to many unspecified persons and made available for frequent purchase and receipt by many unspecified persons; |
| (b) | Other activities specified by Presidential Decree as those that need to be excluded from financial product advisory business in consideration of the nature of relevant activities and the necessity for protecting financial consumers where an attorney-at-law, a patent attorney or a certified public tax accountant provides advice pursuant to relevant statutes or in any similar cases; |
| 5. | The term “financial product advisor” means a person who engages in a financial product advisory business with authorization, permission, or registration under relevant statutes for services that fall under the category of financial product advisory business, where finance-related statutes require such authorization, permission, or registration, or a person who engages in a financial product advisory business registered under Article 12 (1); |
| 6. | The term “financial company” means a company falling under any of the following: |
| (a) | A bank under the Banking Act (including the Industrial Bank of Korea, the Korea Development Bank, the credit service sector of the National Federation of Credit Unions, the Nonghyup Bank, the Suhyup Bank, and the Korea Federation of Savings Banks, which are governed by the Banking Act respectively under Article 3 (3) of the Industrial Bank of Korea Act, Article 3 (1) of the Korea Development Bank Act, Article 6 (3) of the Credit Unions Act, Article 161-11 (8) of the Agricultural Cooperatives Act, Article 141-4 (2) of the Fisheries Cooperatives Act, and Article 36 (4) of the Mutual Savings Banks Act; hereinafter the same shall apply); |
| (f) | Other persons specified by Presidential Decree as similar to the persons referred to in items (a) through (e) in consideration of the necessity for protecting financial consumers; |
| 7. | The term “financial company or other relevant person” means a person falling under any of the following: |
| (h) | Other persons specified by Presidential Decree as similar to those referred to in items (a) through (g) in consideration of the necessity for protecting financial consumers; |
| 8. | The term “financial consumer” means the counterparty to a transaction with a financial product distributor for the conclusion of a contract or the solicitation of conclusion of a contract for a financial product or the acceptance of an offer of a financial product (hereinafter referred to as “the conclusion of a contract for a financial product or other relevant transactions”) or a professional financial consumer or an ordinary financial consumer who is the counterparty to a financial product advisor for advisory service; |
| 9. | The term “professional financial consumer” means a financial consumer falling under any of the following, among financial consumers who are capable of taking risks on a contract for a financial product in light of expertise in financial products, the size of assets owned by them, etc.: Provided, That if any of the persons specified by Presidential Decree, among professional financial consumers, notifies a financial product distributor or a financial product advisor (hereinafter referred to as “financial product distributor or advisor”), in writing, of his or her willingness to be treated as an ordinary financial consumer, the financial product distributor or advisor shall consent to such notification, unless a compelling reason exists not to do so, and if the financial product distributor or advisor consents, the financial consumer concerned shall be deemed an ordinary financial consumer: |
| (c) | A financial company specified by Presidential Decree; |
| (d) | A listed corporation under Article 9 (15) 3 of the Financial Investment Services and Capital Markets Act (applicable only where a person notifies a financial product distributor or advisor, in writing, of his or her willingness to be treated as a professional financial consumer for the purpose of concluding a contract for an investment product or conducting other relevant transactions); |
| (e) | Other persons specified by Presidential Decree for each type of financial products; |
| 10. | The term “ordinary financial consumer” means a financial consumer who is not a professional consumer. |
| Article 3 (Types of Financial Products) |
Financial products shall be classified into the following types: Provided, That if a particular product has attributes by which it can be classified into two or more of the following types of product, such product shall be deemed to be classifiable into each relevant type:
| 1. | Deposit products: The financial products specified by Presidential Decree, among the deposits under subparagraph 1 (a) and (d) of Article 2 and those similar to the aforementioned deposits; |
| 2. | Loan products: The financial products specified by Presidential Decree, among the loans under subparagraph 1 (a) and (d) of Article 2, credit card, facility leasing, deferred payment sale, installment financing under item (e) of that subparagraph, or similar financial products specified by Presidential Decree; |
| 3. | Investment products: Financial investment products under subparagraph 1 (b) of Article 2 and similar financial products specified by Presidential Decree; |
| 4. | Indemnity products: Indemnity products under subparagraph 1 (c) of Article 2 and similar financial products specified by Presidential Decree. |
| Article 4 (Classification of Financial Companies and Other Relevant Persons by Type of Business) |
Financial companies and other relevant persons shall be classified into financial product direct sellers, financial product distribution agents or brokers, or financial product advisors under this Act as follows: Provided, That if a financial company or other relevant person referred to in any of the following subparagraphs concurrently operates a financial product distribution business or a financial product advisory business not mentioned in the relevant subparagraph (referring to a financial product distribution business or a financial product advisory business; hereinafter the same shall apply) under any other statute, such financial company or other relevant person shall be deemed to be also a financial product distributor or advisor for the concurrently operated business:
| 1. | A bank under the Banking Act: A financial product direct seller or a financial product distribution agent or broker; |
| 10. | An insurance solicitor under the Insurance Business Act: A financial product distribution agent or broker; |
| 12. | A certified insurance broker under the Insurance Business Act: A financial product distribution agent or broker; |
| 13. | A mutual bank under the Mutual Savings Banks Act: A financial product direct seller or a financial product distribution agent or broker; |
| 14. | A specialized credit financial business company under the Specialized Credit Finance Business Act or a concurrent loan service provider under that Act: A financial product direct seller or a financial product distribution agent or broker; |
| 16. | A financial company or other relevant person under subparagraph 7 (h): A financial product distributor or advisor specified by Presidential Decree. |
| Article 5 (Scope of Application) |
| Article 6 (Relationship to Other Statutes) |
Except as otherwise provided in other statutes, this Act shall apply to the protection of financial consumers.
CHAPTER II RIGHTS AND RESPONSIBILITIES OF FINANCIAL CONSUMERS AND RESPONSIBILITIES OF STATE AND FINANCIAL PRODUCT DISTRIBUTORS AND ADVISORS
| Article 7 (Fundamental Rights of Financial Consumers) |
Financial consumers shall have the following rights:
| 1. | The right to be protected from damage caused to property by illegal business activities of financial product distributors and advisors; |
| 2. | The right to be provided with necessary knowledge and information in the course of selecting and consuming financial products; |
| 3. | The right to reflect opinions in the policies of the State and local governments affecting financial consumption practices; |
| 4. | The right to be appropriately compensated for damage sustained in the course of consumption of financial products through prompt and fair proceedings; |
| 5. | The right to receive necessary education for reasonable financial consumption practices; |
| 6. | The right to form organizations and conduct activities through such organizations in order for financial consumers to enhance their rights and interests on their own. |
| Article 8 (Responsibilities of Financial Consumers) |
| (1) | Financial consumers shall recognize that they are main players of financial markets, together with financial product distributors and advisors, shall choose right financial products, and shall fairly exercise their fundamental rights under Article 7. |
| (2) | Financial consumers shall endeavor to learn knowledge and information necessary for enhancing their rights and interests on their own. |
| Article 9 (Responsibilities of the State) |
The State shall take responsibilities to take the following measures in order to ensure the realization of fundamental rights of financial consumers under Article 7: | 1. | The establishment and implementation of policies necessary to enhance financial consumers’ rights and interests; |
| 2. | The enactment, amendment, and repeal of statutes and regulations concerning the protection of financial consumers; |
| 3. | The alignment of necessary administrative organizations and the improvement of operation of such organizations; |
| 4. | Support for, and the promotion of, robust and autonomous organizational activities of financial consumers. |
| Article 10 (Responsibilities of Financial Product Distributors and Advisors) |
Financial product distributors and advisors shall take the following responsibilities in order to promote the realization of fundamental rights of financial consumers under Article 7: | 1. | Responsibility to proactively cooperate with the State in implementing national policies for enhancing rights and interests of financial consumers; |
| 2. | Responsibility to endeavor to create an environment for fair financial consumption practices in providing financial products; |
| 3. | Responsibility to take necessary measures to prevent financial products from causing damage to property of financial consumers; |
| 4. | Responsibility to avoid any term, condition, or method that is likely to infringe on reasonable choice or interests of financial consumers for a transaction of providing a financial product; |
| 5. | Responsibility to provide information about financial products earnestly and accurately to financial consumers; |
| 6. | Responsibility to handle personal information of financial consumers carefully to prevent personal information from being lost, stolen, released, falsified, altered, or damaged. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 10
CHAPTER III REGISTRATION OF FINANCIAL PRODUCT DISTRIBUTORS AND ADVISORS
| Article 11 (Prohibition of Business Activities of Persons Other than Financial Product Distributors and Advisors) |
No person, except financial product distributors and advisors under this Act, shall engage in a financial product distribution business or a financial product advisory business.
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 11
| Article 12 (Registration of Financial Product Distributors and Advisors) |
| (1) | A person who intends to operate a financial product distribution business or a financial product advisory business shall determine the scope of the financial products with which the person intends to deal, among deposit products, loan products, investment products, and indemnity products classified under Article 3, as a financial product direct seller, a financial product distribution agent or broker, or a financial product advisor, and shall register with the Financial Services Commission: Provided, That in any of the following cases a person may operate a financial product distribution business or a financial product advisory business without registration: |
| 1. | Where a finance-related statute requires to obtain authorization, permission, or registration for business lines falling within the category of a financial product distribution business or a financial product advisory business; |
| 2. | Where a finance-related statute requires to engage in business lines falling within the category of a financial product distribution business or a financial product advisory business without authorization, permission, or registration under the relevant statute. |
| (2) | A person who intends to register as a financial product direct seller or a financial product advisor under paragraph (1) shall meet all the following requirements: Provided, That the requirement of subparagraph 6 shall not apply to financial product direct sellers: |
| 1. | Such person shall be equipped with the human resources, computer systems, and other physical facilities specified by Presidential Decree so as to be capable of protecting financial consumers and conducting business activities; |
| 2. | Such person shall have an equity capital not less than the amount specified by Presidential Decree for each type of business to register under paragraph (1); |
| 3. | Such person shall have good financial standing and social credibility prescribed by Presidential Decree; |
| 4. | Such person shall have no executive officer falling under any item of paragraph (4) 1; |
| 5. | Such person shall have a system for preventing conflicts of interest with financial consumers, which shall meet the requirements prescribed by Presidential Decree; |
| 6. | Such person shall have no interest in any financial product distributor and shall meet the following requirements: |
| (c) | Such person shall have no executive officer or employee who concurrently holds a position as an executive officer or employee of any financial product distributor or who is seconded by any financial product distributor; |
| (d) | Other requirements prescribed by Presidential Decree to prevent conflicts of interest with financial consumers. |
| (3) | A person who intends to register as a financial product distribution agent or broker under paragraph (1) shall meet all the following requirements: |
| 1. | Such person shall have the qualifications specified by Presidential Decree, including the completion of educational programs; |
| 2. | Such person shall not fall under any item of paragraph (4) 2 (in cases of a corporation that intends to register as a financial product distribution agent or broker, any of its executive officers shall not fall under any item of paragraph (4) 2); |
| 3. | Such persons shall meet the requirements prescribed by Presidential Decree concerning the standards for the conduct of business activities of financial product distribution agents and brokers, the possession of necessary human resources, etc. as matters necessary for the protection of rights and interests of financial consumers and the sound trading practices. |
| (4) | A person falling under any item of the relevant subparagraph, among the following subparagraphs, shall not become a financial product direct seller, a financial product advisor, or an executive officer of a corporate financial product distribution agent and broker who is registered under paragraph (1): |
| 1. | In cases of a financial product direct seller or a financial product advisor: |
| (a) | A minor, a person under adult guardianship, or a person under limited guardianship; |
| (b) | A person declared bankrupt and not yet reinstated; |
| (c) | A person in whose case five years have not passed since his or her imprisonment without labor or greater punishment sentenced by a court was completely executed or he or she was discharged from such imprisonment (including cases where the execution of such sentence is deemed to have been completed); |
| (d) | A person who is under suspension of the execution of imprisonment without labor or greater punishment sentenced to him or her by a court; |
| (e) | A person in whose case five years have not passed since the complete execution of, or the discharge from, a sentence of a fine or greater punishment to him or her for a violation of this Act, a finance-related statute specified by Presidential Decree, or a finance-related statute of a foreign country (including cases where such sentence is deemed to have been completely executed); |
| (f) | A person in whose case the period specified by Presidential Decree within a maximum of five years for each type of sanction has not passed since a sanction was imposed upon him or her under this Act or a finance-related statute specified by Presidential Decree (in cases of a retired or resigned executive officer, including notification equivalent to such sanction); |
| (g) | A person specified by Presidential Decree as a person who is likely to undermine the protection of financial consumers and the sound trading practices; |
| 2. | In cases of a corporate financial product distribution agent or broker: |
| (a) | A person falling under subparagraph 1 (a), (b), or (d); |
| (b) | A person in whose case two years have not passed since his or her imprisonment without labor or greater punishment sentenced by a court was completely executed or he or she was discharged from such imprisonment (including cases where the execution of such sentence is deemed to have been completed); |
| (c) | A person in whose case two years have not passed since the complete execution of, or the discharge from, a sentence of a fine or greater punishment to him or her for a violation of this Act, a finance-related statute specified by Presidential Decree, or a finance-related statute of a foreign country (including cases where such sentence is deemed to have been completely executed). |
| (5) | A person who intends to register as a financial product distributor or advisor under paragraph (1) shall pay fess prescribed by Presidential Decree in consideration of necessary expenses for the examination and management of requirements for registration. |
| (6) | Except as provided in paragraphs (1) through (5), matters necessary for the registration of financial product distributors and advisors shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 12 (1), (2), (4), (5), and (6)
CHAPTER IV OBLIGATIONS OF FINANCIAL PRODUCT DISTRIBUTORS AND ADVISORS IN BUSINESS ACTIVITIES
SECTION 1 General Principles of Business Activities
| Article 13 (Guidelines for Interpretation of Obligations in Business Activities) |
Any person who intends to interpret and apply provisions of this Chapter concerning obligations in business activities shall consider rights and interests of financial consumers preferentially and shall ensure that such provisions be interpreted and applied equitably to each type of financial product or each type of business of financial product distributors and advisors according to the nature, etc. of each financial product or contractual relationship.
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 13
| Article 14 (Duty of Good Faith) |
| (1) | Financial product distributors and advisors shall observe the principle of good faith in executing a contract for a financial product or for advisory service on financial products, exercising rights, and conducting obligations. |
| (2) | Financial product distributors and advisors shall ensure fairness in the details of, and the procedure for, business activities in operating a financial product distribution business or a financial product advisory business and shall not gain benefits for themselves or for a third party to the detriment of financial consumers’ interests without good cause. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 14
| Article 15 (Non-Discrimination) |
In executing a contract for a financial product or for advisory service on financial products, neither a financial product distribution business nor a financial product advisory business shall unfairly discriminate against any financial consumer, without good cause, in regard to terms and conditions of contract on the grounds of gender, educational background, disability, social status, etc.
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 15
| Article 16 (Responsibility of Financial Product Distributors and Advisors for Management) |
| (1) | Financial product distributors and advisors shall manage their executive officers and employees and financial product distribution agents and brokers (excluding certified insurance brokers under subparagraph 11 of Article 2 of the Insurance Business Act; hereafter the same shall apply in this Article) in good faith so as to ensure that they observe statutes and regulations and do not undermine the robust trading system while conducting business activities. |
| (2) | The persons specified by Presidential Decree, among corporate financial product distributors and advisors, shall prepare standards and procedures that their executive officers and employees and financial product distribution agents and brokers shall observe in performing their duties (hereinafter referred to as “internal control standards”) in accordance with Presidential Decree in order to perform the management function under paragraph (1). |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 16 (1)
SECTION 2 Obligations in Business Activities by Types of Financial Products
| Article 17 (Principle of Suitability) |
| (1) | In executing a contract for a financial product, conducting other relevant transactions, or providing advisory service, financial product distributors and advisors shall ascertain whether a counterparty financial consumer is an ordinary financial consumer or a professional financial consumer. |
| (2) | When a financial product distributor or advisor solicits an ordinary financial consumer to conclude a contract for a financial product referred to in any of the following subparagraphs (including cases where a financial product advisor provides advisory service; hereafter the same shall apply in this Article), the financial product distributor or advisor shall obtain the information required under the relevant subparagraph through interviews, inquiries, etc. by requesting the ordinary financial consumer to affix his or her signature (including the digital signature defined in subparagraph 2 of Article 2 of the Digital Signature Act; hereinafter the same shall apply) or to print his or her name and affix his or her seal, by tape-recording oral statements of the ordinary financial consumer, or by obtaining confirmation from the ordinary financial consumer by other methods prescribed by Presidential Decree, shall maintain and manage such information appropriately, and shall provide the confirmed information to the ordinary financial consumer, without delay: |
| (a) | The age of the ordinary financial consumer; |
| (b) | The status of property (referring to information about assets and income, including debts; hereinafter the same shall apply); |
| (c) | The purpose of conclusion of a contract for the indemnity product; |
| 2. | An investment product (excluding the investment products specified by Presidential Decree, such as securities subject to the crowdfunding brokerage under Article 9 (27) of the Financial Investment Services and Capital Markets Act; hereafter the same shall apply in this Article) or a deposit product specified by Presidential Decree as a financial product with a rate of return variable according to the performance of investment: |
| (a) | The purpose of acquisition or disposal of the relevant financial product by the ordinary financial consumer; |
| (b) | The status of property; |
| (c) | Experiences in acquisition or disposal; |
| (a) | The status of property of the ordinary financial consumer; |
| (b) | Credit and the repayment plan; |
| 4. | Other information specified by Presidential Decree as necessary for soliciting ordinary financial consumers to conclude a contract for financial products suitable to ordinary financial consumers. |
| (3) | No financial product distributor or advisor shall solicit an ordinary financial consumer to conclude a contract considered unsuitable to the ordinary financial consumer in light of the information referred to in the relevant subparagraph of paragraph (2). The criteria for the determination on suitability in such cases shall be prescribed by Presidential Decree in accordance with the relevant subparagraph of paragraph (2). |
| (4) | Further details of the information that financial product distributors and advisors shall obtain for each type of financial product under paragraph (2) shall be prescribed by Presidential Decree. |
| (5) | Paragraphs (1) through (3) shall not apply where a financial product distributor or advisor sells collective investment securities of a hedge fund under Article 249-2 of the Financial Investment Services and Capital Markets Act: Provided, That the same shall not apply where a person specified by Presidential Decree, such as an ordinary financial consumer, among qualified investors under Article 249-2 of that Act, requests in accordance with Presidential Decree. |
| (6) | Financial product distributors and advisors under paragraph (5) shall inform the persons specified by Presidential Decree, in advance, in accordance with Presidential Decree, that they may separately request the application of paragraphs (1) through (3) under the proviso of paragraph (5). |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 17
| Article 18 (Principle of Appropriateness) |
| (1) | When a financial product distributor intends to conclude a contract for a financial product with an ordinary financial consumer without soliciting the ordinary financial consumer to conclude a contract for an indemnity product, an investment product, or a loan product specified respectively by Presidential Decree, such financial product distributor shall obtain the information required in the relevant subparagraph, among the following subparagraphs, through prior interviews, inquiries, etc.: |
| 1. | Indemnity products: Information referred to in Article 17 (2) 1; |
| 2. | Investment products: Information referred to in Article 17 (2) 2; |
| 3. | Loan products: Information referred to in Article 17 (2) 3; |
| 4. | Information specified by Presidential Decree as considered necessary for financial product distributors to determine whether a contract for the sale of a financial product is appropriate to an ordinary financial consumer. |
| (2) | If a financial product distributor determines that the financial product concerned is not appropriate for an ordinary financial consumer in light of the information identified in accordance with the relevant subparagraph of paragraph (1), the financial product distributor shall notify the ordinary financial consumer of the fact in accordance with Presidential Decree and shall obtain confirmation on the notification by requesting the ordinary financial consumer to affix his or her signature or print his or her name and affix his or her seal, by tape-recording oral statements of the ordinary financial consumer, or by obtaining confirmation from the ordinary financial consumer by other methods prescribed by Presidential Decree. The criteria for the determination on appropriateness shall be prescribed by Presidential Decree for the products referred to in each subparagraph of paragraph (1). |
| (3) | Further details of the information that financial product distributors shall obtain for each type of financial product under paragraph (1) shall be prescribed by Presidential Decree. |
| (4) | Paragraphs (1) and (2) shall not apply where a financial product distributor sells collective investment securities of a hedge fund under Article 249-2 of the Financial Investment Services and Capital Markets Act: Provided, That the same shall not apply where a person specified by Presidential Decree, such as an ordinary financial consumer, among qualified investors under Article 249-2 of that Act, requests in accordance with Presidential Decree. |
| (5) | Financial product distributors under paragraph (4) shall inform the persons specified by Presidential Decree, in advance, in accordance with Presidential Decree, that they may separately request the application of paragraphs (1) and (2) under the proviso of paragraph (4). |
| Article 19 (Obligation to Explain) |
| (1) | When a financial product distributor or advisor solicits an ordinary financial consumer to conclude a contract (including cases where a financial product advisor provides advisory service) or when an ordinary financial consumer requests explanation, the financial product distributor or advisor shall explain important matters concerning financial products referred to in any of the following subparagraphs (limited to relevant matters if an ordinary financial consumer wants explanation about particular matters) to the ordinary financial consumer in a manner that the ordinary financial consumer can understand: |
| 1. | Matters concerning products referred to in each of the following items: |
| (i) | Description of an indemnity product; |
| (ii) | Insurance premium (including mutual aid premium; hereinafter the same shall apply); |
| (iii) | Grounds for restriction on the payment of insurance claims (including mutual aid claims; hereinafter the same shall apply) and the procedure for payment; |
| (iv) | The scope of risk coverage; |
| (v) | Other matters specified by Presidential Decree as important for indemnity products, such as the term of risk coverage; |
| (i) | Description of an investment product; |
| (ii) | Risks of investment; |
| (iii) | In cases of the investment products specified by Presidential Decree, the risk rating determined by a financial product direct seller in accordance with standards prescribed by Presidential Decree; |
| (iv) | Other matters specified by Presidential Decree as important for investment products, including fees to be paid by financial consumers; |
| (i) | Description of a deposit product; |
| (ii) | Other matters specified by Presidential Decree as important for deposit products, such as interest rate, rate of return, etc.; |
| (i) | Description of a loan product, such as the interest rate, whether the interest rate is variable or not, whether an early repayment charge (referring to the fee imposed when a financial consumer fully or partially repays a loan before the maturity of the loan; hereinafter the same shall apply) is to be imposed or not, the term of the loan, and fee rates; |
| (ii) | The amount of repayment and the interest rate and timing for repayment, depending upon the method of repayment; |
| (iii) | Matters concerning the creation of mortgages and other security rights, the ground for execution of security rights, and matters concerning changes in rights, such as the forfeiture of the title to collateral by exercising a security right; |
| (iv) | The total amount, including the loan principle and fees, to be borne by financial consumers when concluding a loan agreement; |
| (v) | Other matters specified by Presidential Decree for loan products, including matters concerning the termination of loan agreements; |
| 2. | Where a financial product or service is linked or tied with a financial product under any item of subparagraph 1 (hereinafter referred to as “linked or tied product or service), the following matters: |
| (a) | Description of the linked or tied product or service; |
| (b) | Matters concerning responsibility for the performance of the linked or tied product or service; |
| (c) | Other matters specified by Presidential Decree as important for linked or tied products or services, such as the period of provision of a linked or tied product or service; |
| 3. | Matters concerning the deadline for the withdrawal of an offer under Article 46, the method and effect of exercise of such right; |
| 4. | Other matters specified by Presidential Decree for the protection of financial consumers. |
| (2) | A financial product distributor or advisor shall provide a written explanation necessary for the explanation under paragraph (1) to each ordinary financial consumer and shall obtain confirmation that the ordinary financial consumer understands the explanation by requesting the ordinary financial consumer to affix his or her signature or print his or her name and affix his or her seal, by tape-recording oral statements of the ordinary financial consumer, or by other methods prescribed by Presidential Decree: Provided, That in cases specified by Presidential Decree as those where the protection of financial consumers and the robust trading system are unlikely to be undermined, such written explanation need not be provided. |
| (3) | In providing the explanation under paragraph (1), no financial product distributor or advisor shall falsify or misrepresent (referring to an act of providing conclusive judgment on any uncertain matter or providing misleading information) any matter specified by Presidential Decree as likely to seriously affect reasonable judgment of ordinary financial consumers or the value of a financial product or omit any important matter specified by Presidential Decree. |
| (4) | Further details about the contents of a written explanation under paragraph (2) and the methods and procedure for providing such written explanation shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 19
| Article 20 (Prohibition of Unfair Business Activities) |
| (1) | No financial product distributor or advisor shall commit any of the following acts (hereinafter referred to as “unfair business activities”), which violates rights and interests of financial consumers, taking advantage of his or her dominant position: |
| 1. | Forcing a financial consumer to conclude a contract for a financial product contrary to the financial consumer’s intention in the context of concluding a contract for a loan product or any other financial product specified by Presidential Decree; |
| 2. | Unfairly requiring a financial consumer to offer an asset as security or a guarantee in the context of concluding a contract for a loan product or any other financial product specified by Presidential Decree; |
| 3. | Demanding or receiving any benefit by a financial product distributor or advisor or any of its executive officers and employees in connection with its business activities; |
| 4. | In cases of a loan product, any of the following acts: |
| (a) | Forcing a financial consumer to choose a particular method for the repayment of a loan for its own benefit or for a third party’s benefit; |
| (b) | Except the cases referred to in (i) through (iii) below, imposing any fee, penalty, or early repayment charge, in whatsoever name; |
| (i) | Where a loan is repaid within three years from the date of execution of the loan agreement; |
| (ii) | Where imposing an early repayment charge is allowed under any other statute or regulation; |
| (iii) | Other acts specified by Presidential Decree as unlikely to undermine the protection of financial consumers and the robust trading system; |
| (c) | Demanding a third party’s joint surety in connection with a contract for a loan product specified by Presidential Decree, such as a loan to an individual; |
| 5. | If a linked or tied product or service is involved, an act specified by Presidential Decree as an act of unfairly reducing or changing such linked or tied product or service: Provided, That the cases where, although a linked or tied product or service is inevitably reduced or changed, another linked or tied product or service, equivalent to such product or service, is provided instead or where it is inevitable to reduce or change a linked or tied product or service due to the suspension of business activities, bankruptcy, or a crisis of management of a financial product distributor or advisor, shall be excluded; |
| 6. | Any other act of violating a financial consumer’s rights and interests by a financial product distributor or advisor, taking advantage of its dominant position. |
| (2) | Specific types of, or the criteria for, unfair business activities shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 20
| Article 21 (Prohibition of Unfair Solicitation) |
No financial product distributor or advisor shall commit any of the following acts in soliciting the conclusion of a contract (including cases where a financial product advisor provides advisory service; hereafter the same shall apply in this Article): Provided, That the acts specified by Presidential Decree as unlikely to undermine the protection of financial consumers and the robust trading system shall be excluded:
| 1. | Providing conclusive judgment on any uncertain matter or giving any misleading information; |
| 2. | Misrepresenting the description of a financial product; |
| 3. | Knowingly omitting to inform a financial consumer of any matter seriously affecting the value of a financial product; |
| 4. | Representing that the financial product concerned is better or more advantageous than other financial products with regard to part of the description of the financial product, without specifying compared products and criteria or with no objective ground; |
| 5. | In cases of an indemnity product, any of the following acts: |
| (a) | Hindering a financial consumer (including interested persons specified by Presidential Decree; hereafter the same shall apply in this subparagraph) from notifying a financial product direct seller of any important matter concerning a contract for an indemnity product or soliciting a financial consumer to refrain from information such important matter; |
| (b) | Soliciting a financial consumer to provide a financial product direct seller with inadequate information about any important matter concerning a contract for an indemnity product; |
| 6. | In cases of an investment product, any of the following acts: |
| (a) | Using a method for real-time conversation, such as a visit in person or telephone, without receiving any request from a financial consumer to solicit the conclusion of a contract; |
| (b) | Continuing to solicit the conclusion of a contract even after the financial consumer solicited to conclude such contract has already expressed his her refusal to the solicitation; |
| 7. | Other acts specified by Presidential Decree as likely to undermine the protection of financial consumers or the robust trading system. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 21
| Article 22 (Obligations Relating to Advertisements of Financial Products) |
| (1) | Neither a person who is not a financial product distributor or advisor nor a financial product distributor or advisor specified by Presidential Decree, such as a financial product distribution agent or broker dealing with investment products, shall make an advertisement of any business line of financial product distributors and advisors or of any financial product (hereinafter referred to as “advertisement of a financial product or other matter”): Provided, That a person specified by Presidential Decree, such as an institution falling under any of the following subparagraphs (hereinafter referred to as “relevant association or institution”) or a financial holding company that is not a financial product distributor or advisor but has a financial product distributor or advisor as its subsidiary or second-tier subsidiary, may make an advertisement of a financial product or other matter: |
| 6. | Other institutions specified by Presidential Decree as similar to those referred to in subparagraphs 1 through 5. |
| (2) | When a financial product distributor or advisor (including the persons falling under the proviso of paragraph (1); hereafter the same shall apply in this Article) makes an advertisement of a financial product or other matter, it shall communicate the description of the financial product clearly and fairly so as to avoid misleading information. |
| (3) | An advertisement of a financial product or other matter by a financial product distributor or advisor shall include the following contents: Provided, That the same shall not apply to advertisements of an investment product under the main clause of Article 17 (5): |
| 1. | A statement of recommending the reading of the written explanation and terms and conditions of the contract for the financial product concerned before concluding the contract for the financial product; |
| 2. | The name of the financial product distributor or advisor and the description of the financial product; |
| 3. | The following information: |
| (a) | In cases of an indemnity product: The statement that if a financial consumer terminates an existing contract and concludes another contract, the conclusion of the contract may be denied, the expenses payable by the financial consumer, such as insurance premium, (hereafter referred to as “insurance premium, etc.” in this Article) may be increased, or the coverage may be changed; |
| (b) | In cases of an investment product: |
| (ii) | When making an advertisement including the past performance of operation, the statement that past investment performance is not indicative of future returns; |
| (c) | In cases of a deposit product: In illustrating the amount payable at maturity, etc. in an advertisement, the statement that the amount payable at maturity, etc. illustrated in the advertisement does not guarantee future profit (limited to financial products specified by Presidential Decree as deposit products for which the amount payable at maturity is variable); |
| (d) | In cases of a loan product: Terms and conditions of the loan; |
| 4. | Other information specified by Presidential Decree for the protection of financial consumers. |
| (4) | No financial product distributor or advisor shall commit any of the following acts in making an advertisement of a financial product or other matter: |
| 1. | In cases of an indemnity product: |
| (a) | Misleading financial consumers into believing that they are entitled to indemnity without limitations by omitting coverage limits, terms and conditions of restriction on indemnity, exclusions, or grounds for reducing payments or by notifying such information inadequately; |
| (b) | Misleading financial consumers into believing that coverage is greater by emphasizing a particular term or condition or by introducing a case for which a great amount of insurance proceeds is guaranteed; |
| (c) | Misleading financial consumers into believing that insurance premium, etc. are inexpensive by expressing insurance premium on a daily basis or by insufficiently explaining the standards for the calculation of insurance premium; |
| (d) | In cases of an indemnity product automatically renewed at maturity, failing to notify financial consumers sufficiently enough for them to recognize that insurance premium, etc. may be increased at the time of renewal; |
| (e) | In cases of an indemnity product for which the amount refundable at maturity is variable according to interest rate and the performance of investment, acts specified by Presidential Decree for the protection of financial consumers, such as misleading financial consumers to believe that a definite amount of the refund at maturity will be paid at the maturity of the indemnity product; |
| 2. | In cases of investment products: |
| (a) | Misleading financial consumers to believe that losses are compensated or profits are guaranteed: Provided, That the cases specified by Presidential Decree as those where financial consumers are unlikely to be misled shall be excluded; |
| (b) | Using in an advertisement any matter other than the matters specified by Presidential Decree in consideration of the nature of the investment product concerned with regard to the investment products specified by Presidential Decree; |
| (c) | Acts specified by Presidential Decree for the protection of financial consumers, such as an act of indicating the rate of return or the performance of operation only for a period in which the rate of return or the performance of operation was better, in indicating a rate of return or the performance of operation; |
| 3. | In cases of a deposit product: |
| (a) | Misleading financial consumers by failing to clearly indicate the range of interest rates, the method of calculation of interest rates, the timing for the payment and imposition of interest, and incidental benefits and expenses; |
| (b) | Acts specified by Presidential Decree for the protection of financial consumers, such as an act of indicating the rate of return or the performance of operation only for a period in which the rate of return or the performance of operation was better, in indicating a rate of return or the performance of operation; |
| (a) | Misleading financial consumers by failing to clearly indicate the range of interest rates for the loan, the method of calculation of interest rates, the timing for the payment and imposition of interest on the loan, and incidental benefits and expenses; |
| (b) | Misleading financial consumers to believe that the interest rate for the loan is lower by expressing the interest on the loan on a daily basis. |
| (6) | A relevant association or institution may check whether a financial product distributor or advisor observes the standards for advertisement under paragraphs (1) through (4) in accordance with Presidential Decree with regard to advertisements of financial products and other matters of the financial product distributor or advisor and may notify the relevant financial product distributor or advisor of its opinion on findings from its checking. |
| (7) | Further details concerning paragraphs (2) through (4) and the method and procedure for advertising shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 22
| Article 23 (Obligation to Provide Contract Documents) |
| (1) | When a financial product distributor or advisor concludes a contract with a financial consumer for a financial product or for advisory service on financial products, it shall deliver contract documents specified by Presidential Decree for each type of financial product, to the financial consumer, without delay: Provided, That contract documents need not be delivered in cases specified by Presidential Decree as those where terms and conditions of a contract, etc. are unlikely to undermine the protection of financial consumers. |
| (2) | If a dispute with a financial consumer arises with respect to whether contract documents under paragraph (1) have been delivered, the financial product distributor or advisor shall prove it. |
| (3) | The method and procedure for the delivery of contract documents under paragraph (1) shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 23
SECTION 3 Obligations in Business Activities by Types of Business of Financial Product Distributors and Advisors
| Article 24 (Prohibition of Agency or Brokerage for Distribution of Financial Products through Unregistered Persons) |
No financial product distributor shall engage any person, other than financial product distributors and advisors, as an agent or a broker for the conclusion of a contract for a financial product or other relevant transactions.
| Article 25 (Prohibited Acts of Financial Product Agents and Brokers) |
| (1) | No financial product distribution agent or broker shall commit any of the following acts: |
| 1. | Receiving a benefit from a financial consumer in return for the performance of a contract, such as investment or insurance premium: Provided, That the acts specified by Presidential Decree where a financial product distribution agent or broker has the power delegated by a financial product direct seller to receive benefits shall be excluded; |
| 2. | Engaging a third party as an agent or a broker by a financial product distribution agent or broker or paying a fee, remuneration or other reward for such engagement by a financial product distribution agent or broker: Provided, That the acts specified by Presidential Decree as those that do not conflict with interests of the financial product direct seller and do not undermine the protection of financial consumers shall be excluded; |
| 3. | Other acts specified by Presidential Decree as likely to undermine the protection of financial consumers or the robust trading system. |
| (2) | No financial product distribution agent or broker shall demand or accept money, goods, or any other economic benefit from a financial product distributor or advisor, in addition to the prescribed fees for serving as an agent or a broker for the distribution of financial products. |
| (3) | Further details about the limits on the fees under paragraph (2) and economic benefits shall be prescribed by Presidential Decree. |
| Article 26 (Obligation of Financial Product Distribution Agents and Brokers to Notify) |
| (1) | In serving as an agent or a broker for the distribution of financial products, a financial product distribution agent or broker shall notify financial consumers of all the following information: |
| 1. | The name of the financial product direct seller for whom the financial product distribution agent or broker serves as an agent or a broker and the details of its business lines; |
| 2. | Whether the financial product distribution agent or broker serves as an agent or a broker only for one financial product direct seller; |
| 3. | In cases of a financial product distribution agent or broker who has no power delegated by the financial product direct seller to conclude contracts for financial products, the fact that he or she has no power to conclude contracts for financial products; |
| 4. | Matters concerning liability for damages under Articles 44 and 45; |
| 5. | Other matters specified by Presidential Decree for the protection of financial consumers or the robust trading system. |
| (2) | In serving as an agent or a broker for the distribution of financial products, a financial product distribution agent or broker shall post the mark indicating that he or she is a financial product distribution agent or broker or shall present the relevant certificate to financial consumers. |
| (3) | Further details about the posting of a mark or the presentation of a certificate under paragraph (2) shall be prescribed by Presidential Decree. |
| Article 27 (Rules on Business Activities of Financial Product Advisors) |
| (1) | Financial product advisors shall exercise due care as a good manager in providing advisory service to financial consumers. |
| (2) | Financial product advisors shall perform advisory service earnestly in order to protect interests of financial consumers. |
| (3) | A financial product advisor shall inform financial consumers of the following matters in the course of performing advisory service and shall post a mark indicating that they are financial product advisors or present the relevant certificate to financial consumers: |
| 1. | Whether the financial product advisor is a person who meets the requirements under Article 12 (2) 6 (hereinafter referred to as “independent financial product advisor”); |
| 2. | If the financial product advisor receives economic benefits in relation to advisory service from financial product distributors, the kinds and size of such economic benefits: Provided, That minor economic benefits specified by Presidential Decree shall be excluded; |
| 3. | If the financial product advisor concurrently operates a financial product distribution business, the name of the financial product distributor who has the relationship of entrustment of business transactions, including the conclusion of contracts for financial products and other relevant transactions, with the financial product advisor and the details of entrustment; |
| 4. | The scope of financial products on which advisory service is provided; |
| 5. | The procedure for the provision of advisory service; |
| 6. | Other matters specified by Presidential Decree for the protection of rights and interests of financial consumers or the robust trading system. |
| (4) | No person, except independent financial product advisors, may use the characters with the meaning “independent” or the foreign language characters specified by Presidential Decree as those having the same meaning (hereinafter referred to as “characters with the meaning of ‘independent’”) in names or advertisements. |
| (5) | No independent financial product advisor shall commit any of the following acts: |
| 1. | Receiving any economic benefit from a financial product distributor (including its executive officers and employees) in relation to a response to a financial consumer’s request for advisory service: Provided, That the cases specified by Presidential Decree such as those where an independent financial product advisor receives fees for advisory service provided to financial product distributors; |
| 2. | Other acts specified by Presidential Decree as those that can cause a conflict of interest with a financial consumer. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 27
| Article 28 (Keeping, Maintenance, and Management of Records) |
| (1) | Every financial product distributor or advisor shall keep records of the information specified by Presidential Decree about business activities of the financial product distribution business or the financial product advisory business and shall maintain and manage such records for the period specified by Presidential Decree for each type of information. |
| (2) | Every financial product distributor or advisor shall establish and implement measures appropriate for preventing the records that shall be kept, maintained, and managed under paragraph (1) from being destroyed, falsified, or altered. |
| (3) | A financial consumer may request a financial product distributor or advisor to allow him or her to inspect (including provision of copies, hearings; hereafter the same shall apply in this Article) the records that shall be kept, maintained, and managed by the financial product distributor or advisor under paragraph (1), for the purpose of seeking remedies for his or her rights, including mediation in a dispute or litigation under Article 36. |
| (4) | Upon the receipt of a financial consumer’s request for inspection under paragraph (3), a financial product distributor or advisor shall allow the financial consumer to inspect relevant records within the period specified by Presidential Decree for each type of information within a maximum of 10 days from the date the financial product distributor or advisor receives such request. If it is impracticable to allow inspection within such period due to good cause in such cases, the financial product distributor or advisor may notify the financial consumer of such cause and postpone inspection but shall allow the financial consumer to inspect the relevant records, without delay, when such cause ceases to exist. |
| (5) | In any of the following cases, a financial product distributor or advisor may restrict inspection or refuse to allow inspection by notifying the financial consumer concerned of the ground for such restriction or refusal: |
| 1. | Where a financial product distributor or advisor may restrict inspection or may refuse to allow inspection under a statute or regulation; |
| 2. | Where inspection is likely to be harmful to the life or body of any other person or is likely to unfairly violate property or an interest of any other person; |
| (6) | When a financial consumer requests a financial product distributor or advisor to allow inspection, the financial product distributor or advisor may charge fees and postal charges (applicable only where mailing copies is requested) in accordance with Presidential Decree. |
| (7) | Necessary matters concerning the methods and procedures for the requesting of, the restriction on, and the notification of, inspection under paragraphs (3) through (5) shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Article 28
CHAPTER V PROTECTION OF FINANCIAL CONSUMERS
SECTION 1 Establishment of Policies for Financial Consumers and Financial Education
| Article 29 (Protection of Financial Consumers) |
| (1) | The Financial Services Commission shall establish policies for financial consumers in order to protect rights and interests of financial consumers and establish a robust market system for financial product distribution business and financial product advisory business. |
| (2) | The Financial Services Commission shall endeavor to promote rights and interests of financial consumers, support healthy financial lives, and improve financial consumers’ financial capabilities. |
| Article 30 (Financial Education) |
| (1) | The Financial Services Commission shall endeavor to help financial consumers make reasonable decisions and enjoy financial wellbeing in a long term, based on high comprehension about finance through financial education, and may provide subsidies necessary for such education, within the budget. |
| (2) | The Financial Services Commission shall develop educational programs for enhancing financial consumers’ financial capabilities in response to changes in the financial environment. |
| (3) | The Financial Services Commission shall establish and implement policies for raising the effect of financial education by connecting financial education with school education and lifelong education. |
| (4) | The Financial Services Commission shall conduct a survey on financial consumers’ financial capabilities once every three years and shall reflect findings from the survey in policies to be established for financial education. |
| (5) | The Financial Services Commission may entrust the work relating to financial education under paragraphs (2) through (4) to the head of the Financial Supervisory Service (referring to the Financial Supervisory Service under the Act on the Establishment of Financial Services Commission; hereinafter the same shall apply) (hereinafter referred to as the “Governor of the Financial Supervisory Service”) or an institution or organization in the field of financial education. |
| Article 31 (Financial Education Council) |
| (1) | The Financial Education Council (hereinafter referred to as the “Council”) shall be established within the Financial Services Commission in order to have the Council deliberate and resolve on policies for financial education. |
| (2) | The Council shall deliberate and resolve on the following matters: |
| 1. | Comprehensive implementation of financial education; |
| 2. | The evaluation of education of financial consumers, the improvement of the system for education of financial consumers, and interministerial cooperation; |
| 3. | Other matters tabled by the Chairperson for the enhancement of financial capabilities of financial consumers. |
| (3) | The Council shall be composed of not more than 25 members, including one Chairperson. |
| (4) | The Council shall be chaired by the Vice-Chairperson of the Financial Services Commission. |
| (5) | Members of the Council shall comprise the following persons: |
| 1. | Persons appointed by the head of the institution to which each person belongs, from among public officials of the related administrative agencies specified by Presidential Decree as those involved in financial education, such as the Financial Services Commission, the Fair Trade Commission, the Ministry of Economy and Finance, the Ministry of Education, the Ministry of the Interior and Safety, and the Ministry of Employment and Labor, who are members of the Senior Executive Service; |
| 2. | The senior deputy governor of the Financial Supervisory Service who is responsible for the protection of financial consumers. |
| (6) | If necessary for the deliberation and resolution under paragraph (2), the Council may request the institutions under each subparagraph of paragraph (5) to submit relevant information. |
| (7) | Except as provided in paragraphs (1) through (6), matters necessary for the composition and operation of the Council shall be prescribed by Presidential Decree. |
| Article 32 (Pubic Disclosure of Comparison of Financial Products) |
| (1) | The Financial Services Commission may make public disclosures of the comparison of main terms and conditions of financial products by the types of financial product under Article 3 to help financial consumers compare and easily understand main terms and conditions of financial products. |
| (2) | The Governor of the Financial Supervisory Service may evaluate the current situation of the protection of financial consumers by the financial product distributors and advisors specified by Presidential Decree and may publicly announce the result of such evaluation. |
| (3) | The financial product distributors and advisors specified by Presidential Decree shall establish basic procedures and standards that their executive officers and employees shall observe in performing their duties (hereinafter referred to as “standards for the protection of financial consumers”) to protect financial consumers through the prevention of grievances of financial consumers and prompt subsequent remedies therefor. |
| (4) | Necessary matters concerning the scope and details of financial products subject to the comparative public disclosure under paragraph (1), the procedure for such comparative public disclosure, the details of the current situation of the protection of financial consumers under paragraph (2) and the procedures for the evaluation and public announcement of such current situation, and the details of, and the procedure for, the standards for the protection of financial consumers under paragraph (3) shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Articles 32 (2), (3), and (4)
SECTION 2 Mediation of Financial Disputes
| Article 33 (Organization for Mediation of Financial Disputes) |
The Committee for the Mediation of Financial Disputes shall be established within the Financial Supervisory Service in order to have the committee deliberate and resolve on matters concerning the mediation of finance-related disputes arising among the institutions referred to in each subparagraph of Article 38 of the Act on the Establishment of Financial Services Commission (hereinafter referred to as “institutions subject to mediation”), financial consumers, and other interested persons.
| Article 34 (Composition of Mediation Committee) |
| (1) | The Committee for the Mediation of Financial Disputes under Article 33 (hereinafter referred to as the “Mediation Committee”) shall be composed of not more than 35 members, including one Chairperson. |
| (2) | The Chairperson of the Mediation Committee shall be appointed by the Governor of the Financial Supervisory Service, from among senior deputy governors of the Financial Supervisory Service. |
| (3) | Members of the Financial Supervisory Service shall be appointed by the Governor of the Financial Supervisory Service, from among deputy governors of the Financial Supervisory Service, and commissioned by the Governor of the Financial Supervisory Service, from among persons falling under any of the following subparagraphs, taking gender equality into consideration: |
| 1. | A judge, a public prosecutor, or an licensed attorney-at-law; |
| 2. | A person who serves or served as an executive officer of the Korea Consumer Agency under the Framework Act on Consumers or a consumer organization registered under that Act or a person who has worked for not less than 15 years for such institution or organization; |
| 3. | A person who has worked for not less than 15 years for an institution subject to mediation or a finance-related institution or organization; |
| 4. | A person who has knowledge and experiences in the field of finance or consumers; |
| 5. | A medical doctor with a specialist license; |
| 6. | Other persons who the Governor of the Financial Supervisory Service considers necessary for the mediation of disputes. |
| (4) | The term of office of committee members under each subparagraph of paragraph (3) shall be two years. |
| (5) | If the Chairperson of the Mediation Committee is unable to perform his or her duties due to any unavoidable cause, the member of the Mediation Committee designated by the Governor of the Financial Supervisory Service shall act on behalf of the Chairperson. |
| Article 35 (Withdrawal of Appointment, and Cancellation of Commissioning, of Members of Mediation Committee) |
If any member of the Mediation Committee falls under any of the following subparagraphs, the Governor of the Financial Supervisory Service may withdraw the appointment of the member or cancel the commissioning of the member:
| 1. | If a member is unable to perform his or her duties due to a mental or psychological impairment; |
| 2. | If a member is found to have committed misconduct in connection with his or her duties; |
| 3. | If a member is found incompetent for the office due to neglect of duty or indecent conduct or on any other ground; |
| 4. | If a member does not voluntarily refrain from participating in proceedings, although he or she falls under any subparagraph of Article 38 (1); |
| 5. | If a member voluntarily discloses that he or she has difficulty in performing duties. |
| Article 36 (Mediation of Disputes) |
| (1) | When a dispute arises in connection with finance, an institution subject to mediation, a financial consumer, or other interested person may apply for the mediation of the dispute to the Governor of the Financial Supervisory Service. |
| (2) | Upon the receipt of an application for the mediation of a dispute under paragraph (1), the Governor of the Financial Supervisory Service may notify relevant parties of the issues of the application and may recommend settlement by agreement to them: Provided, That if the issues of the application fall under any of the following subparagraphs, it does not need to recommend settlement by agreement or refer the dispute to the Mediation Committee under paragraph (4): |
| 1. | If the Governor of the Financial Supervisory Service finds that the issues of the application is not appropriate to settle by mediation; |
| 2. | If the issues of the application have no practical merit in proceeding with recommendation of settlement by agreement or mediation, in light of objective evidence, etc.; |
| 3. | Other cases specified by Presidential Decree as similar to those referred to in subparagraph 1 or 2. |
| (3) | When the Governor of the Financial Supervisory Service does not recommend settlement by agreement or refer a dispute to the Mediation Committee under the proviso, with the exception of the subparagraphs, of paragraph (2), he or she shall notify the involved parties of the fact in writing. |
| (4) | When a dispute is not settled by agreement under the main clause, with the exception of the subparagraphs, of paragraph (2) within 30 days from the filing date of an application for the mediation of a dispute, the Governor of the Financial Supervisory Service shall refer the dispute to the Mediation Committee, without delay. |
| (5) | When a dispute is referred to the Mediation Committee for mediation under paragraph (4), the Mediation Committee shall deliberate on the dispute and prepare a draft mediation agreement within 60 days. |
| (6) | When the Mediation Committee completes a draft mediation agreement, the Governor of the Financial Supervisory Service may propose the draft mediation agreement to the applicant and involved parties to recommend them to accept it. |
| (7) | If the applicant and involved parties do not accept a draft mediation agreement within 20 days from the date the draft mediation agreement is proposed to them under paragraph (6), the draft mediation agreement shall be deemed not accepted. |
| Article 37 (Meetings of Mediation Committee) |
| (1) | A meeting of the Mediation Committee shall be formed with 6 to 10 members of the Mediation Committee designated for each meeting by the Chairperson of the Mediation Committee, and each meeting shall be convened by the Chairperson of the Mediation Committee. |
| (2) | A majority of the members of the Mediation Committee shall constitute a quorum, and any resolution thereof shall require a concurring vote of at least a majority of those present. |
| Article 38 (Disqualification of, Challenge to, and Refrainment by, Members) |
| (1) | In any of the following cases, a member of the Mediation Committee shall be barred from deliberation and resolution on the relevant application for the mediation of a dispute (hereinafter referred to as “relevant case”): |
| 1. | If the committee member or the current or former spouse of the committee member becomes a party to the relevant case (if the party is a corporation, organization or other similar entity, including its executive officers; hereafter the same shall apply in this subparagraph and subparagraph 2) or is a joint right holder or joint obligor with a party to the relevant case; |
| 2. | If the committee member is a current or former relative of a party to the relevant case; |
| 3. | If the committee member belongs or belonged to a corporation or an organization (including affiliates and other related companies; hereafter the same shall apply in this paragraph) during the latest five years before the filing date of the mediation application; |
| 4. | If the committee member of the corporation, organization, or office to which the committee member belongs has testified, provided legal advice, appraised damage, or provided similar services with respect to the relevant case; |
| 5. | If the committee member or the corporation, organization, or office to which the committee member belongs is or was involved in the relevant case as the representative of a party. |
| (2) | If a party reasonably suspects that a committee member will be partial in the proceedings of deliberation and resolution, the party may file a challenge against the committee member to the Chairperson of the Mediation Committee; and the Chairperson of the Mediation Committee shall determine to accept the challenge if he or she finds that the challenge is reasonable. |
| (3) | If a committee member is to be disqualified under any subparagraph of paragraph (1), he or she shall voluntarily refrain from participating in the proceedings of deliberation and resolution on the relevant case. |
| Article 39 (Effect of Mediation) |
When both parties accept a draft mediation agreement under Article 36 (5), the draft mediation agreement shall be as effective as judicial compromise.
| Article 40 (Interruption of Prescription) |
| (1) | An application for the mediation of a dispute under Article 36 (1) shall have the effect of interrupting prescription: Provided, That the same shall not apply where settlement by agreement is not recommended or a dispute is not referred to the Mediation Committee under the proviso of paragraph (2) of that Article. |
| (2) | When a judicial claim is filed or a party intervenes in bankruptcy proceedings against the other party or puts the other party’s property under attachment or provisional attachment or obtains provisional injunction against the other party within one month in cases of the proviso of paragraph (1), prescription shall be deemed to be interrupted by the initial application for the mediation of the dispute. |
| (3) | Prescription interrupted under the main clause of paragraph (1) shall begin to run again at the time falling under either of the following subparagraphs: |
| 1. | When both parties accept a draft mediation agreement; |
| 2. | When the proceedings of mediation end, although the dispute has not been settled by mediation. |
| Article 41 (Relationship to Litigation) |
| (1) | When a lawsuit filed before or after an application for mediation is filed for the same case is pending with a court, the court may stay litigation proceedings until mediation proceedings end. |
| (2) | If litigation proceedings are not stayed under paragraph (1), the Mediation Committee discontinue mediation proceedings of the relevant case. |
| (3) | If a lawsuit is pending with a court with respect to the same or a similar case where two or more persons are involved for the same cause as the cause of the case for which an application for mediation has been filed, the Mediation Committee may discontinue mediation proceedings by its decision. |
| Article 42 (Special Case concerning Small-Amount Dispute Cases) |
When a mediation proceeding has commenced with regard to a dispute that meets all the following requirements, the institution subject to mediation shall not file a lawsuit before a draft mediation agreement is proposed under Article 36 (6): Provided, That the same shall not apply where a written notice has been given under Article 36 (3) or no draft mediation agreement has been proposed within the period specified in Article 36 (5): | 1. | The application for mediation has been filed by an ordinary financial consumer; |
| 2. | The value of the right or interest asserted through mediation is not greater than the amount specified by Presidential Decree within a maximum of 20 million won. |
| Article 43 (Operation of Mediation Committee) |
Necessary matters concerning the composition and operation of the Mediation Committee and the procedure for the mediation of disputes shall be prescribed by Presidential Decree.
SECTION 3 Liability for Damages
| Article 44 (Liability of Financial Product Distributors and Advisors for Damages) |
| (1) | A financial product distributor or advisor shall be liable for damage that it intentionally or negligently inflicts on a financial consumer. |
| (2) | A financial product distributor or advisor shall be liable for damage that it inflicts on a financial consumer by its violation of Article 19: Provided, That the same shall not apply where the financial product distributor or advisor proves that such damage occurred without intentional or negligent conduct on its part. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 44
| Article 45 (Liability of Financial Product Direct Sellers for Damages) |
| (1) | A financial product direct seller shall be liable for damage inflicted on a financial consumer while a financial product distribution agent or broker (including third parties serving as agents and brokers in accordance with the proviso of Article 25 (1) 2, but excluding certified insurance brokers under subparagraph 11 of Article 2 of the Insurance Business Act) concludes a contract for a financial product or conducts other relevant transactions as his or her agent or broker or while an executive officer or employee falling under Article 83 (1) 4 of the Insurance Business Act (hereafter referred to as “financial product distribution agent or broker or other relevant person” in this Article) serves as his or her agent or broker: Provided, That the same shall not apply where a financial product direct seller has exercised due care in appointing a financial product distribution agent or broker or other relevant person and supervising its business activities and has endeavored to prevent damage. |
| (2) | The liability of a financial product direct seller for damages under the main clause of paragraph (1) shall not obstruct the exercise of the right to demand a reimbursement by the financial product direct seller to the financial product distribution agent or broker or other relevant person. |
| Article 46 (Withdrawal of Offer) |
| (1) | An ordinary financial consumer who has offered a contract for an indemnity product, an investment product, or a loan product specified by Presidential Decree or for advisory service on financial products with a financial product distributor or advisor may withdraw such offer within the relevant period specified in the following subparagraphs (if the parties to a transaction have agreed on a period longer than the period specified in the relevant subparagraph, such longer period): |
| 1. | In cases of an indemnity product: 15 days from the date on which an insurance policy under Article 640 of the Commercial Act is delivered or 30 days from the date of the offer, whichever comes earlier; |
| 2. | In cases of an investment product or advisory service on financial products: Seven days from either of the following dates: |
| (a) | The date on which contract documents are delivered under the main clause of Article 23 (1); |
| (b) | In cases of the proviso of Article 23 (1), the date of conclusion of the contract; |
| 3. | In cases of a loan product: 14 days from any of the following dates (if money, goods (hereafter referred to as “money or goods” in this Article) or service under a contract are paid, delivered, or provided later than either of the following dates, the date of payment, delivery, or provision): |
| (a) | The date on which contract documents are delivered under the main clause of Article 23 (1); |
| (b) | In cases of the proviso of Article 23 (1), the date of conclusion of the contract; |
| (2) | The withdrawal of the offer under paragraph (1) shall become effective at the time specified in the following subparagraphs: |
| 1. | In cases of indemnity products, investment products, or advisory service on financial products: When an ordinary financial consumer dispatches a written notice to manifest his or her intention to withdraw the offer (including cases where such intention is communicated by the means specified by Presidential Decree; hereafter referred to as “written notice or other means”); |
| 2. | In cases of loan products: When an ordinary financial consumer dispatches a written notice or other means to manifest his or her intention to withdraw the offer and return money or goods specified in the following items (excluding service already provided, but including rights to use certain facilities or to receive service; hereafter the same shall apply in this paragraph): |
| (a) | Money or goods already received; |
| (b) | Interest specified by Presidential Decree in connection with money already received; |
| (c) | Expenses specified by Presidential Decree, such as fees that a financial product distributor or advisor has already paid to a third party. |
| (3) | When the offer is withdrawn under paragraph (1), the financial product distributor or advisor shall return money or goods already received from the ordinary financial consumer in any of the following manners: |
| 1. | In cases of an indemnity product: The financial product distributor or advisor shall return the money or goods already received, within three business days from the filing date of the withdrawal of the offer, and shall pay an additional amount calculated in accordance with Presidential Decree for the period during which the return of money or goods are delayed; |
| 2. | In cases of an investment product or advisory service on financial products: The financial product distributor or advisor shall return the money or goods already received, within three business days from the filing date of the withdrawal of the offer, and shall pay an additional amount calculated in accordance with Presidential Decree for the period during which the return of money or goods are delayed: Provided, That if the amount to be returned is not greater than the amount specified by Presidential Decree, such amount need not be returned; |
| 3. | In cases of a loan product: The financial product distributor or advisor shall return the money or goods already received, including fees received from the ordinary financial consumer in connection with the relevant loan, to the ordinary financial consumer, in accordance with Presidential Decree within three business days from the date on which it received the money or goods and interest and fees returned by the ordinary financial consumer under paragraph (2) 2 and shall pay an additional amount calculated in accordance with Presidential Decree for the period during which the return of money or goods are delayed; |
| (4) | Where the offer is withdrawn under paragraph (1), no financial product distributor or advisor may claim compensation for damage caused by the withdrawal of the offer or the payment of money as penalty. |
| (5) | If an insurance event has already occurred before the offer of an indemnity product is withdrawn, the withdrawal of such offer shall not become effective: Provided, That the same shall not apply where an ordinary financial consumer withdraws the relevant offer, knowing that an insurance event has already occurred. |
| (6) | Any special term or condition contrary to paragraphs (1) through (5) and unfavorable to ordinary financial consumers shall be void. |
| (7) | Necessary matters concerning the exercise of the right to withdraw an offer, the effect thereof, etc. under paragraphs (1) through (3) shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 46
| Article 47 (Termination of Illegal Contract) |
| (1) | Where a financial product distributor or advisor concludes a contract for any financial product specified by Presidential Decree with a financial consumer, in violation of Article 17 (3), 18 (2), 19 (1) or (3), 20 (1), or 21, the financial consumer may demand the termination of the contract by a written notice or other means, within the period specified by Presidential Decree within a maximum of five years: In such cases, the financial product distributor or advisor shall notify the financial consumer of whether to accept such demand within 10 days from the date on which it receives the demand for termination and shall also give the reason for refusal if it refuses to accept such demand. |
| (2) | If the financial product distributor or advisor does not comply with the demand under paragraph (1), without good cause, the ordinary financial consumer may terminate the relevant contract. |
| (3) | When a contract is terminated under paragraph (1) or (2), the financial product distributor or advisor shall not claim expenses relating to the termination of contract, including fees and penalty. |
| (4) | Necessary matters concerning the requirements for exercise of the right to demand the termination of a contract under paragraphs (1) through (3), the scope of exercise of such right, valid reasons therefor, etc. shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 47
CHAPTER VI SUPERVISION AND DISPOSITIONS
| Article 48 (Supervision over Financial Product Distributors and Advisors) |
| (1) | The Financial Services Commission shall supervise financial product distributors and advisors to ensure that they observe this Act or an order issued or a disposition made under this Act for the protection of rights and interests of financial consumers and the robust trading system. |
| (2) | A financial product advisor registered under Article 12 shall prepare business operation reports for 3 months, 6 months, 9 months, and 12 months respectively from the commencement date of each business year and shall submit the business operation reports to the Financial Services Commission within the period specified by Presidential Decree, which shall not exceed 45 days after the lapse of the respective periods. |
| (3) | If any matter specified by Presidential Decree, among requirements for the registration of financial product distributors and advisors, is changed with respect to any person specified by Presidential Decree, among financial product distributors and advisors registered in compliance with the requirements under Article 12, such person shall report the change to the Financial Services Commission within one month. |
| (4) | Mandatory contents of the business operation reports under paragraph (2), the method and procedure for reporting changes under paragraph (3), and other necessary matters shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 48
| Article 49 (Financial Services Commission’s Power to Issue Orders) |
| (1) | The Financial Services Commission may take necessary measures, such as corrective measures and the suspension of business operations, against a financial product distributor or advisor with regard to the following matters if it considers that such measures are necessary for the protection of rights and interests of financial consumers and the robust trading system: |
| 1. | Matters relating to the improvement of business management and operation of the financial product distributor or advisor; |
| 2. | Matters relating to the maintenance of order in business; |
| 3. | Matters relating to business methods; |
| 4. | Matters relating to the establishment of minimum or maximum limits on payments to be paid by a financial consumer for a financial product, such as investments; |
| 5. | Other matters specified by Presidential Decree as necessary for the protection of rights and interests of financial consumers and the robust trading system. |
| (2) | In cases specified by Presidential Decree as those where it is considered obvious that a financial product may cause serious economic damage to financial consumers, the Financial Services Commission may order the financial product distributor who sells the financial product to preclude the solicitation of conclusion of contracts for the financial product or restrict or preclude the conclusion of contracts for the financial product. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 49
| Article 50 (Inspections of Financial Product Distributors and Advisors) |
| (1) | Financial product distributors and advisors shall undergo inspections conducted by the Governor of the Financial Supervisory Service on their business operations and the current status of their property. |
| (2) | Where deemed necessary for inspections under paragraph (1), the Governor of the Financial Supervisory Service may request a financial product distributor or advisor to submit a report and data on its business operations or property or to have its officers make an appearance before him or her to express their opinions orally or may authorize employees of the Financial Supervisory Service to enter the office or place of business of the financial product distributor or advisor to inspect its business operations, books of accounts, documents, facilities, or other necessary articles. |
| (3) | The persons conducting the inspection under paragraph (2) shall carry a certificate of their authority and shall produce it to interested persons. |
| (4) | The Governor of the Financial Supervisory Service shall report the findings from the inspection conducted under paragraph (1) to the Financial Services Commission. If a violation of this Act or an order issued or a disposition made under this Act was found in such cases, the report shall be accompanied by a written opinion on the disposition on such violation. |
| (5) | The Governor of the Financial Supervisory Service may request the external auditor appointed by a financial product distributor or advisor under the Act on External Audit of Stock Companies, in writing, to submit the information obtained as a result of the audit of the financial product distributor or advisor and other materials relating to its business activities to the minimum extent necessary for his or her purpose of use. |
| (6) | The Financial Services Commission may determine and publicly notify necessary matters concerning the inspection, including the methods and procedure for the inspection. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 50
| Article 51 (Dispositions against Financial Product Distributors and Advisors) |
| (1) | If a financial product distributor or advisor registered under Articles 12, among financial product distributors and advisors, falls under any of the following subparagraphs, the Financial Services Commission may revoke the registration of its financial product distribution business or financial product advisory business under Article 12: Provided, That in cases of subparagraph 1, the Financial Services Commission must revoke the registration: |
| 1. | If a financial product distributor or advisor registers its business under Article 12 by fraud or other improper means; |
| 2. | If a financial product distributor or advisor ceases to maintain the requirements provided in Article 12 (2) or (3): Provided, That the cases specified by Presidential Decree as those where a financial product distributor or advisor fails to maintain the requirements for registration temporarily shall be excluded; |
| 3. | If a financial product distributor or advisor continues its business operations during a period of suspension of business operations; |
| 4. | If a financial product distributor or advisor does not take corrective measures or suspend its business operations within the period specified by the Financial Services Commission after it received an order from the Financial Services Commission to take corrective measures or suspend business operations; |
| 5. | Other cases specified by Presidential Decree as those where serious damage is likely to be caused financial consumers’ interests or where it is considered impracticable to engage in the relevant financial product distribution business or financial product advisory business. |
| (2) | In cases specified by Presidential Decree, such as cases where a financial product distributor or advisor falls under any of paragraph (1) 2 through 5 or where it is considered that a financial product distributor or advisor is unlikely to operate its financial product distribution business or financial product advisory business legitimately because of its violation of this Act or an order issued under this Act, the Financial Services Commission may take any of the following measures in accordance with Presidential Decree: Provided, That the measure under subparagraph 1 shall be limited to financial product distributors and advisors registered under Article 12, among financial product distributors and advisors: |
| 1. | Complete or partial suspension of business operations for not more than six months; |
| 2. | An order to take measures to rectify the violation; |
| 3. | An order to stop the violation; |
| 4. | An order to publicly announce or post the fact that the financial product distributor or advisor has become subject to measures for the violation; |
| 5. | An institutional warning; |
| 6. | An institutional caution; |
| 7. | Other measures specified by Presidential Decree as those necessary for rectifying or preventing violations. |
| (3) | Notwithstanding paragraph (2), the following subparagraphs shall apply to financial product distributors falling under subparagraph 6 (a), (c), or (e) or subparagraph 7 (d), (e), or (f) of Article 2: |
| 1. | With respect to financial product distributors and advisors falling under subparagraph 6 (a) of Article 2, the Financial Services Commission may take the measure under any of paragraph (2) 2, 4, and 7 in response to the recommendation of the Governor of the Financial Supervisory Service or may authorize the Governor of the Financial Supervisory Service to take the measure under paragraph (2) 3, 5, or 6; |
| 2. | With respect to financial product distributors and advisors under subparagraph 6 (c) or (e) of Article 2 or subparagraph 7 (d), (e), or (f) of that Article, the Financial Services Commission may take the measure under any of paragraph (2) 2 through 7 according to the recommendation of the Governor of the Financial Supervisory Service or may authorize the Governor of the Financial Supervisory Service to take the measure under paragraph (2) 5 or 6. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 51
| Article 52 (Measures against Executive Officers and Employees of Financial Product Distributors and Advisors) |
| (1) | In cases specified by Presidential Decree, such as cases where it is considered that an executive officer of a financial product distributor or advisor is unlikely able to work for the financial product distribution business or financial product advisory business legitimately because of his or her violation of this Act or an order issued under this Act, the Financial Services Commission may request the financial product distributor or advisor to take any of the following measures: |
| 1. | Removal of such executive officer; |
| 2. | Suspension performance of such executive officer’s duties; |
| (2) | In cases specified by Presidential Decree, such as cases where it is considered that an employee of a financial product distributor or advisor is unlikely able to work for the financial product distribution business or financial product advisory business legitimately because of his or her violation of this Act or an order issued under this Act, the Financial Services Commission may request the financial product distributor or advisor to take any of the following measures: |
| 2. | Suspension from office for not more than six months; |
| (3) | Notwithstanding paragraph (1), the following subparagraphs shall apply to executive officers of financial product distributors and advisors falling under subparagraph 6 (a), (c), or (e) of Article 2 or subparagraph 7 (d), (e), or (f) of that Article: |
| 1. | With respect to executive officers of a financial product distributor or advisor falling under subparagraph 6 (a) of Article 2, the Financial Services Commission may take the measure under paragraph (1) 1 or 2 in response to recommendation from the Governor of the Financial Supervisory Service and may authorize the Governor of the Financial Supervisory Service to take the measure under in any subparagraph of paragraph (1) 3 through 5; |
| 2. | With respect to executive officers of a financial product distributor or advisor falling under subparagraph 6 (c) or (e) of Article 2 or subparagraph 7 (d), (e), or (f) of that Article, the Financial Services Commission may take the measure under any subparagraph of paragraph (1) in response to recommendation from the Governor of the Financial Supervisory Service or may authorize the Governor of the Financial Supervisory Service to take the measure under any subparagraph of paragraph (1) 3 through 5. |
| (4) | Notwithstanding paragraph (2), the following subparagraphs shall apply to employees of the financial product distributors and advisors falling under subparagraph 6 (a), (c), or (e) of Article 2 or subparagraph 7 (d), (e), or (f) of that Article: |
| 1. | With respect to employees of a financial product distributor or advisor falling under subparagraph 6 (a) of Article 2, the Financial Services Commission may request the financial product distributor or advisor to take the measure under any subparagraph of paragraph (2); |
| 2. | With respect to employees of a financial product distributor or advisor falling under subparagraph 6 (c) or (e) of Article 2 or subparagraph 7 (d), (e), or (f) of that Article, the Financial Services Commission may request the financial product distributor or advisor to take the measure under any subparagraph of paragraph (2) in response to recommendation from the Governor of the Financial Supervisory Service or may authorize the Governor of the Financial Supervisory Service to request the financial product distributor or advisor to take such measure. |
| (5) | When the Financial Services Commission or the Governor of the Financial Supervisory Service takes a measure against an executive officer or employee of a financial product distributor or advisor or requests a financial product distributor or advisor to take such measure under paragraphs (1) through (4), the Financial Services Commission or the Governor of the Financial Supervisory Service may concurrently take measures against the executive officers or employees who are responsible for the supervision of such executive officer or employee or may concurrently request the financial product distributor or advisor to take such measures: Provided, That such measures may be mitigated or exempted where the persons who are responsible for management and supervision have exercised due care in the management and supervision of such executive officer or employee. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 52
| Article 53 (Notification of Measures against Retired Executive Officers and Others) |
The Financial Services Commission (including the Governor of the Financial Supervisory Service who may take measures under Article 52 or who may request to take such measures) may notify the head of a financial product distributor or advisor of the details of the measure under Article 52 that it considers that an executive officer who retired from the financial product distributor or advisor or an employee resigned from the financial product distributor or advisor would deserve if the former executive officer or employee were still in service or in employment. Upon the receipt of a notice in such cases, the financial product distributor or advisor shall notify the details thereof to the executive officer or employee concerned. [Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 53
The Financial Services Commission shall hold hearings when it intends to make a disposition or take a measure under either of the following subparagraphs:
| 1. | Revoking the registration of a financial product distributor or advisor under Article 51 (1); |
| 2. | Requesting the removal of an executive officer or the dismissal of an employee, as a measure under any of Article 52 (1) through (5). |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 54
| Article 55 (Petition for Objection) |
| (1) | A person who protests against a disposition made or a measure taken under Article 51 or 52 (excluding the revocation of registration or the requesting for removal or dismissal) may file a petition for objection, with the reason for protest stated therein, within 30 days from the date on which he or she is notified of such disposition or measure. |
| (2) | The Financial Services Commission shall render a decision on the petition for application under paragraph (1) within 60 days: Provided, That the period may be extended by not more than 30 days if it is impossible to render a decision within such period due to inevitable circumstances. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 55
| Article 56 (Recording of Dispositions and Measures) |
| (1) | The Financial Services Commission and the Governor of the Financial Supervisory Service shall keep, maintain, and manage records of the details of each disposition made or each measure taken under Article 49, 51, or 52. |
| (2) | When a financial product distributor or advisor takes measures against executive officers and employees concerning according to a request of the Financial Services Commission or the Governor of the Financial Supervisory Service under Article 52 or is notified of the details of measures against retired executive officers, etc. under Article 53, it shall record the details thereof and shall maintain and manage such records. |
| (3) | A financial product distributor or advisor or an executive officer or employee of a financial product distributor or advisor may request the Financial Services Commission, the Financial Supervisory Service, or the financial product distributor or advisor to reply to his or her inquiry about whether a disposition was made or a measure was taken against him or her under Article 49 or Articles 51 through 53 or the details of such disposition or measure. |
| (4) | Upon the receipt of an inquiry under paragraph (3), the Financial Services Commission, the Financial Supervisory Service, or a financial product distributor or advisor shall notify the inquirer of whether a disposition was made or a measure was taken and the details of such disposition or measure, unless a compelling reason exists not to do so. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 56
| Article 57 (Penalty Surcharges) |
| (1) | If a financial product distributor or advisor falls under any of the following subparagraphs, the Financial Services Commission may impose a penalty surcharge within a maximum of 50/100 of the revenue that it gained from contracts relating to such violation or an amount equivalent to such earnings (hereafter referred to as “revenue” in this Article): Provided, That in cases specified by Presidential Decree as cases where the person who committed such violation has no revenue gained from contracts relating to the violation or where it is impracticable to calculate such revenue, a penalty charge not exceeding one billion won may be imposed: |
| 1. | Where a financial product distributor or advisor omits to explain any important matter, in violation of Article 19 (1), or omits to provide a written explanation or obtains confirmation, in violation of paragraph (2) of that Article; |
| 2. | Where a financial product distributor or advisor commits an act falling under any subparagraph of Article 20 (1); |
| 3. | Where a financial product distributor or advisor commits an act falling under any subparagraph of Article 21; |
| 4. | Where a financial product distributor or advisor makes an advertisement of a financial product or other matter, in violation of Article 22 (3) or (4). |
| (2) | If a financial product distribution agent or broker whom a financial product direct seller authorized to act as his or her agent or broker for the conclusion of a contract for a financial product or the conduct of other relevant transaction (limited to financial product distribution agents and brokers acting as agents only for one financial product direct seller under this Act or any other finance-related statute or regulation) or an executive officer or employee of a financial product direct seller commits an act falling under any subparagraph of paragraph (1), the Financial Services Commission may impose a penalty surcharge on the financial product direct seller within a maximum of 50/100 of the revenue that he or she gained from contracts relating to such violation: Provided, That the amount may be reduced or exempted if the financial product direct seller has not neglected due care and supervision over relevant business activities to prevent such violation. |
| (3) | Where the Financial Services Commission may order a financial product distributor or advisor to suspend its business operation under Article 51 (2) 1 but suspending business operations is likely to seriously affect interested persons or undermine public interest, the Financial Services Commission may impose a penalty surcharge within a maximum of the profit that the financial product distributor or advisor is expected to gain during the period of suspension of business operations, in lieu of the suspension of business operation, in accordance with Presidential Decree. |
| (4) | Matters concerning the determination of the revenue gained from contracts relating to a violation under paragraph (1) shall be prescribed by Presidential Decree in consideration of the causes of change according to environmental changes, characteristics of each type of financial product, the size of business of financial product distributors and advisors, etc. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 57 (1), (3), and (4)
| Article 58 (Imposition of Penalty Surcharges) |
| (1) | In imposing a penalty surcharge under Article 57, the Financial Services Commission shall consider the following matters according to the guidelines prescribed by Presidential Decree: |
| 1. | The substance and degree of the violation; |
| 2. | The duration of the violation and the number of violations; |
| 3. | The amount of profit obtained from the violation; |
| 4. | The period of suspension of business operations (limited to cases where a penalty surcharge is imposed under Article 57 (3)). |
| (2) | If a corporation that violated this Act is merged with another corporation, the Financial Services Commission may impose a penalty on the corporation surviving the merger or newly established by the merger and collect it from such corporation, deeming that the violation committed by the former corporation was committed by the latter corporation. |
| (3) | Except as provided in paragraphs (1) and (2), matters necessary for the imposition of penalty surcharges shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 58
| Article 59 (Petition for Objection) |
| (1) | A person who protests against the imposition of a penalty surcharge under Article 57 or 58 (2) may file a petition for objection, with the reason for protest stated therein, within 30 days from the date on which he or she is notified of such disposition. |
| (2) | The Financial Services Commission shall render a decision on the petition for application under paragraph (1) within 60 days: Provided, That the period may be extended by not more than 30 days if it is impossible to render a decision within such period due to inevitable circumstances. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 59
| Article 60 (Extension of Period for Payment of Penalty Surcharges and Payment in Installments) |
| (1) | If the Financial Services Commission determines that a person upon whom a penalty surcharge was imposed under Article 57 or 58 (2) (hereinafter referred to as “person obligated to pay a penalty surcharge”) is unable to pay it in a lump sum due to any of the following causes or events, it may extend the period of payment or permit payment in installments. In such cases, the Financial Services Commission may require such person to provide collateral if it considers necessary to do so: |
| 1. | If the person obligated to pay a penalty surcharge sustained a serious economic loss due to a disaster, theft, or other similar event; |
| 2. | If the business of the person obligated to pay a penalty surcharge is in a critical crisis due to the deterioration of business conditions; |
| 3. | If it is expected that the person obligated to pay a penalty surcharge will suffer severe difficulty in financing as a consequence of the payment of the penalty surcharge in a lump sum; |
| 4. | If any other cause or event equivalent to the causes and events under subparagraphs 1 through 3 has occurred. |
| (2) | If a person obligated to pay a penalty surcharge wishes to obtain permission for the extension of the period for the payment of the penalty surcharge or the payment in installments under paragraph (1) shall file an application therefor with the Financial Services Commission no later than 10 days before the deadline for payment. |
| (3) | If a person obligated to pay a penalty surcharge who has the period of payment extended or is permitted to pay in installments under paragraph (1) falls under any of the following subparagraphs, the Financial Services Commission may revoke the decision to extend the period of payment or to permit the payment in installments and may collect the penalty surcharge in a lump sum: |
| 1. | If the person obligated to pay a penalty surcharge fails to pay the penalty surcharge payable in installments within the period of payment; |
| 2. | If the person obligated to pay a penalty surcharge fails to comply with an order issued by the Financial Services Commission as necessary for the change or supplementation of collateral; |
| 3. | If it is found that it is impossible to collect the whole amount or balance of a penalty surcharge due to forced execution, the commencement of an auction, the declaration of bankruptcy, the dissolution of the corporation concerned, or the disposition on the delinquency of a national or local tax; |
| 4. | If any other cause or event equivalent to the causes and events under subparagraphs 1 through 3 has occurred. |
| (4) | Necessary matters concerning the extension of the period of payment of a penalty surcharge, payment in installments, collateral, etc. provided in paragraphs (1) through (3) shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 60
| Article 61 (Collection of Penalty Surcharges and Disposition on Delinquency) |
| (1) | If a person obligated to pay a penalty surcharge fails to pay the penalty surcharge by the deadline for payment, the Financial Services Commission may collect the additional charge prescribed by Presidential Decree for the period starting on the day immediately after the deadline for payment and ending on the day immediately before the date of actual payment. The period for which an additional charge may be collected in such cases shall not exceed 60 months. |
| (2) | If a person obligated to pay a penalty surcharge fails to pay the penalty surcharge by the deadline for payment, the Financial Services Commission shall urge for payment within the period designated by it and may collect the penalty surcharge and the additional charge under paragraph (1) in the same manner as provided for the disposition on the delinquency of national taxes if such person fails to pay them within the designated period. |
| (3) | The Financial Services Commission may entrust the Commissioner of the National Tax Service with affairs relating to the collection of penalty surcharges and additional charges and the disposition on the delinquency of them under paragraphs (1) and (2). |
| (4) | Except as provided in paragraphs (1) through (3), matters necessary for the collection of penalty surcharges and additional charges shall be prescribed by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 61
| Article 62 (Refund of Overpayment or Erroneous Payment) |
| (1) | If a person obligated to pay a penalty surcharge claims the refund of an overpaid or erroneously paid penalty surcharge on the ground of a decision on a petition for objection, a court judgment, or any other equivalent adjudication, the Financial Services Commission shall refund such payment, without delay, and shall refund any payment identified by the Financial Services Commission as overpaid or erroneously paid even where the person obligated to pay a penalty surcharge does not claim the refund of such payment. |
| (2) | Where the Financial Services Commission shall refund an overpayment or erroneous payment, the Financial Services Commission may appropriate the refundable amount for any other penalty surcharge that the person entitled to such refund shall pay otherwise to the Financial Services Commission. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 62
| Article 63 (Additional Payment on Refund) |
When the Financial Services Commission shall refund a penalty surcharge under Article 62 (1), it shall pay an additional payment on refund to the person entitled to the refund by applying the interest rate specified by Presidential Decree for such additional payment to the period starting on the date of actual payment of the penalty surcharge and ending on the date of refund. [Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 63
| Article 64 (Disposal of Deficiency) |
If any of the following events occurs to a person obligated to pay a penalty surcharge, the Financial Services Commission may dispose of the deficiency as a loss:
| 1. | If the amount allocated for the payment of the delinquent amount after the disposition on delinquency is less than the delinquent amount; |
| 2. | If extinctive prescription for the claim for collecting a penalty surcharge and additional charges is completed; |
| 3. | If the whereabouts of the delinquent payer is uncertain or if it is found that the delinquent payer has no asset; |
| 4. | If it is found that there will be no leftover after satisfying expenses for the disposition on delinquency from the estimated value of total assets subject to the disposition on delinquency; |
| 5. | If it is found that there will be no leftover after satisfying national taxes, local taxes, and claims, etc. secured by rights to lease on a deposit basis, pledge rights, mortgages, security interests under the Act on Security over Movable Property and Claims, which are senior to the penalty surcharge and additional charges, from total assets subject to the disposition on delinquency; |
| 6. | Other cases where it is impossible to collect a penalty surcharge and additional charges due to any cause or event specified by Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 64
CHAPTER VII SUPPLEMENTARY PROVISIONS
| Article 65 (Entrustment of Business Affairs) |
| (1) | The Financial Services Commission may entrust part of the business affairs assigned to it under this Act to the Governor of the Financial Supervisory Service, the relevant association or institution in accordance with Presidential Decree. |
| (2) | The Governor of the Financial Supervisory Service may delegate part of the business affairs assigned to him or her under this Act to the relevant association or institution in accordance with Presidential Decree. |
| (3) | For the purpose of applying Articles 129 through 132, the executive officers and employees of the relevant association or institution performing part of the business affairs entrusted by the Financial Services Commission or the Governor of the Financial Supervisory Service under paragraphs (1) and (2) shall be deemed public officials. |
| Article 66 (Guidance for and Supervision over Governor of Financial Supervisory Service) |
| (1) | If necessary to exercise the powers under this Act, the Financial Services Commission may guide and supervise the Governor of the Financial Supervisory Service and may order the Governor of the Financial Supervisory Service to take other measures necessary for supervision. |
| (2) | The Financial Supervisory Service shall perform the business affairs assigned to it under this Act and the business affairs entrusted by the Financial Services Commission, under the guidance and supervision of the Financial Services Commission under this Act. |
CHAPTER VIII PENALTY PROVISIONS
| Article 67 (Penalty Provisions) |
Any of the following persons shall be punished by imprisonment with labor for not less than five years or by a fine not exceeding 200 million won:
| 1. | A person who engages in a financial product distribution business or a financial product advisory business without registering the financial product distribution business or financial product advisory business, in violation of Article 12; |
| 2. | A person who registers under Article 12 by fraud or other improper means; |
| 3. | A person who engages any person, other than financial product distribution agents and brokers, as an agent or a broker for the conclusion of a contract for a financial product or other relevant transactions, in violation of Article 24. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in subparagraphs 1 and 2 of Article 67
| Article 68 (Joint Penalty Provisions) |
If the representative of a corporation or an agent or employee of, or any other person employed by, the corporation or an individual commits any violation described in Article 67 in performing any business affair of the corporation or individual, the corporation or individual shall, in addition to punishing the violator accordingly, be punished by a fine prescribed in the relevant Article: Provided, That the same shall not apply where the corporation or individual has not neglected exercising due care and supervising the violator to prevent such violation. [Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 68
| Article 69 (Administrative Fines) |
| (1) | Any of the following persons shall be subject to an administrative fine not exceeding 100 million won: |
| 1. | A person who fails to prepare internal control standards, in violation of Article 16 (2); |
| 2. | A person who fails to explain an important matter, in violation of Article 19 (1), or who fails to deliver a written explanation or obtain confirmation, in violation of paragraph (2) of that Article; |
| 3. | A person who commits an act falling under any subparagraph of Article 20 (1); |
| 4. | A person who commits an act falling under any subparagraph of Article 21; |
| 5. | A person who makes an advertisement of a financial product or other matter, in violation of Article 22 (1), (3), or (4); |
| 6. | Where a financial product distribution agent or broker who is engaged by another financial product distribution agent or broker as an agent or a broker for the conclusion of a contract for a financial product or other relevant transactions commits any of the following acts, the latter financial product distribution agent or broker who engages the former financial product distribution agent or broker as an agent or broker for such transactions: Provided, That the financial product distribution agents and brokers who engaged other persons as brokers or agents but have not neglected exercising due care and supervising such persons with respect to the transactions concerned in order to prevent their violations shall be excluded: |
| (a) | Where a financial product distribution agent or broker fails to explain an important matter, in violation of Article 19 (1), or fails to deliver a written explanation or obtain confirmation, in violation of paragraph (2) of that Article; |
| (b) | Where a financial product distribution agent or broker commits an act falling under any subparagraph of Article 20 (1); |
| (c) | Where a financial product distribution agent or broker commits an act falling under any subparagraph of Article 21; |
| (d) | Where a financial product distribution agent or broker makes an advertisement of a financial product or other matter, in violation of Article 22 (3) or (4); |
| 7. | A person who fails to deliver contract documents to a financial consumer, in violation of Article 23 (1); |
| 8. | Where a financial product distribution agent or broker who is engaged by a financial product direct seller as an agent or a broker for the conclusion of a contract for a financial product or other relevant transactions commits an act falling under Article 25 (1) 2, the financial product direct seller who engages the financial product distribution agent or broker as an agent or broker for such transactions: Provided, That the financial product direct sellers who engaged other persons as brokers or agents but have not neglected exercising due care and supervising such persons with respect to the transactions concerned in order to prevent their violations: |
| 9. | A person who fails to inform financial consumers of the matters referred to in any subparagraph of Article 27 (3) or who fails to post a mark or present the relevant certificate to financial consumers, in violation of that paragraph; |
| 10. | A person who uses characters with the meaning of ‘independent’ in a name or an advertisement, in violation of Article 27 (4); |
| 11. | A person who commits an act falling under any subparagraph of Article 27 (5); |
| 12. | A person who fails to record data or maintain and manage data by types, in violation of Article 28 (1); |
| 13. | A person who refuses, obstructs, or evades an inspection conducted under Article 50 (1), without good cause. |
| (2) | Any of the following persons shall be subject to an administrative fine not exceeding 30 million won: |
| 1. | A person who fails to identify information, to obtain confirmation, to maintain and manage information, or to provide the confirmed information without delay, in violation of Article 17 (2); |
| 2. | A person who solicits the conclusion of a contract, in violation of Article 17 (3); |
| 3. | A person who fails to identify information, in violation of Article 18 (1); |
| 4. | A person who fails to give notice of the fact that the financial product concerned is not appropriate or to obtain confirmation, in violation of Article 18 (2); |
| 5. | A person who commits an act falling under any subparagraph of Article 25 (1); |
| 6. | A person who demands or accepts money, goods, or any other economic benefit, in violation of Article 25 (2); |
| 7. | A person who fails to notify a financial consumer of the information falling under any subparagraph of Article 26 (1), in violation of that paragraph, or a person who fails to post a mark or present a certificate, in violation of paragraph (2) of that Article. |
| (3) | Any person who fails to report a change in the requirements for registration, in violation of Article 48 (3), shall be subject to an administrative fine not exceeding 10 million won. |
| (4) | The administrative fines under paragraphs (1) through (3) shall be imposed and collected by the Financial Services Commission in accordance with Presidential Decree. |
[Enforcement Date: Sep. 25, 2021] Provisions relevant to financial product advisors in Article 69 (1) 1, 2, 3, 4, 5, 7, 9, 10, 11, 12, and 13 and Article 69 (2) 1 and 2, and (3)
ADDENDA <Act No. 17112, Mar. 24, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force one year after the date of its promulgation: Provided, That the provisions enumerated in subparagraph 1 concerning financial product advisors and the provisions enumerated in subparagraph 2 shall enter into force one year and six months after the date of its promulgation:
| 1. | Article 10, Article 11, Article 12 (1), (2), and (4) through (6), Articles 13 through 15, Article 16 (1), Article 17, Articles 19 through 21, Article 22, Article 23, Article 27, Article 32 (2) through (4), Article 44, Articles 46 through 56, Article 57 (1), (3), and (4), Articles 58 through 64, subparagraphs 1 and 2 of Article 67, Article 69 (1) 1 through 5, 7, and 9 through 13, Article 69 (2) 1 and 2, and Article 69 (3); |
Article 2 (Applicability to Keeping, Maintenance, and Management of Records of Data)
Article 28 shall begin to apply to cases where a contract for a financial product or for advisory service for financial products is solicited (including cases where a financial product advisor provides advisory service) or concluded after this Act enters into force. Article 3 (Applicability to Survey on Financial Consumers’ Financial Capabilities)
The first survey on financial consumers’ financial capabilities under Article 30 (4) shall be conducted within three years after the enforcement date of this Act. Article 4 (Applicability to Effect of Interruption of Prescription by Application for Mediation)
Articles 40 through 42 shall begin to apply to the applications filed for mediation of a dispute after this Act enters into force. Article 5 (Applicability to Liability of Financial Product Distributors and Advisors for Damages)
Article 44 (2) shall begin to apply to cases where a financial product distributor or advisor causes damage to a financial consumer after this Act enters into force, in violation of Article 19. Article 6 (Applicability to Liability of Financial Product Direct Sellers for Damages)
Article 45 shall begin to apply where a financial product distribution agent or broker acts as an agent or a broker after this Act enters into force. Article 7 (Applicability to Withdrawal of Offer)
Article 46 shall begin to apply to offers of contracts after this Act enters into force. Article 8 (Applicability to Termination of Illegal Contracts)
Article 47 shall begin to apply to the contracts concluded after this Act enters into force. Article 9 (Applicability to Submission of Business Operation Reports)
Article 48 (2) shall begin to apply to the business years beginning after this Act enters into force. Article 10 (Transitional Measures concerning Establishment of Committee for Mediation of Financial Disputes)
| (1) | The Committee for the Mediation of Financial Disputes, established within the Financial Services Commission under Article 51 of the Act on the Establishment of Financial Services Commission (referring to the Act before amended under Article 13 (1) of the Addenda; hereinafter the same shall apply) before this Act enters into force, shall be deemed the Mediation Committee under Article 38 of this Act. |
| (2) | The members of the Committee for the Mediation of Financial Disputes, appointed or commissioned under Article 52 (2) of the previous Act on the Establishment of Financial Services Commission before this Act enters into force, shall be deemed the members of the Mediation Committee, appointed or commissioned under Article 34 of this Act, and their term of office shall be counted from the date they were commissioned under Article 52 (2) of the previous Act on the Establishment of Financial Services Commission. |
| (3) | The cases for which a mediation application was filed under Article 53 of the Act on the Establishment of Financial Services Commission before this Act enters into force shall be deemed the cases for which a mediation application was filed under Article 36 of this Act: Provided, That Articles 40 through 42 shall not apply to such cases. |
| (4) | The acts done by the Committee for the Mediation of Financial Disputes or the Governor of the Financial Supervisory Service under the previous Act on the Establishment of Financial Services Commission in connection of mediation of finance-related disputes before this Act enters into force shall be deemed the acts done by the Mediation Committee or the Governor of the Financial Supervisory Service under this Act. |
Article 11 (Transitional Measure concerning Penalty Surcharges and Additional Payments)
When an administrative disposition, such as an order under Article 49, a disposition against a financial product distributor or advisor under Article 51, a measure against executive officers and employees under Article 52, or the imposition of a penalty surcharge under Article 57, is made for a violation of the Act before amended under Article 13 of the Addenda (hereinafter referred to as the “previous Act”), committed before this Act enters into force but terminated before this Act enters into force or persisting even after this Act enters into force, the provisions relevant to such violation in the previous Act shall apply. Article 12 (Transitional Measure concerning Penalty Provisions and Administrative Fines)
In applying penalty provisions or imposing an administrative fine with regard to a violation committed before this Act enters into force, the provisions relevant to such violation in the previous Act shall apply.
Article 13 Omitted.
ADDENDA <Act No. 17292, May 19, 2020>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Articles 2 and 3 Omitted.