SECURITIES INVESTMENT TRUST BUSINESS ACT

Article 1(Purpose) #

The purpose of this Act is to contribute to the development of the national economy by establishing a securities investment trust system to facilitate an investment by investors in securities, etc., and by protecting the beneficiaries of the securities investment trust. <Amended by Act No. 6179, Jan. 21, 2000>

Article 2(Definitions) #

(1) In this Act, the term “securities investment trust” (hereinafter referred to as an “investment trust”) means a trust in which a truster entrusts a trustee with the funds, etc. (hereinafter referred to as “trust property”) received from investors for the purpose of investing in the securities, etc., and has the trustee invest and operate them in the specified securities, etc. according to the instructions of the relevant truster, and have the investors acquire the right for divided returns accruing therefrom. <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

(2) In this Act, the term “exchange traded fund” means an investment trust that satisfies all the requirements of the following subparagraphs: <Newly Inserted by Act No. 6693, Apr. 27, 2002>

1. To aim at an operation linked up with the fluctuation of the index which meet the conditions prescribed by the Presidential Decree, from among indexes indicating the composite price level of a number of issues in accordance with the type of securities, etc.;

2. Redemption of beneficiary certificates to be allowed; and

3. Within the time frame prescribed by the Presidential Decree from the day the investment trust concerned is established, the beneficiary certificates to be listed on the securities market (hereinafter referred to as the “securities market”) under Article 2 (12) of the Securities and Exchange Act, or to be registered with the Association brokerage market (hereinafter referred to as the “Association brokerage market”) under Article 2 (14) of the same Act.

(3) The term “indirect investment trust” in this Act means an investment trust that has the main purpose of investment in the securities falling under any of the following subparagraphs with a portion, above the proportion prescribed by the Presidential Decree, of total asset of the trust property: <Newly Inserted by Act No. 6693, Apr. 27, 2002>

1. Beneficiary certificates issued pursuant to this Act or the Trust Business Act;

2. Foreign beneficiary certificates pursuant to the provisions of Article 42-4 (1);

3. Stocks issued by securities investment companies pursuant to the Securities Investment Company Act; or

4. Stocks of foreign securities investment companies pursuant to the provisions of Article 80 (1) of the Securities Investment Act.

(4) The term “securities, etc.” in this Act means what falls under any of the following subparagraphs: <Amended by Act No. 6179, Jan. 21, 2000>

1. The securities and stock index (hereinafter referred to as the “securities”) under Articles 2 (1) and (2) and 2-2 (1) of the Securities and Exchange Act;

2. Other debt instruments, including bills, that are issued, sold or intermediated by the financial institutions prescribed by the Presidential Decree;

3. The foreign currency securities prescribed by the Ordinance of the Ministry of Finance and Economy from among those under the Foreign Exchange Transactions Act; and

4. The instruments prescribed by the Ordinance of the Ministry of Finance and Economy from among the instruments indicating the right of property value.

(5) The term “truster company” in this Act means a company who is in the business of acting as a truster of investment trust, and who obtains the permission therefor under Article 9.

(6) The term “trustee company” in this Act means a company who is in the business of acting as trustee, and is either a trust company prescribed by the Trust Business Act or a financial institution operating concurrently the trust business.

(7) The term “selling company” in this Act means a company falling under any of the following subparagraphs, which is engaged in selling the beneficiary certificates prescribed in Article 10 (1) 2: <Amended by Act No. 5558, Sep. 16, 1998>

1. A securities company under Article 2 (9) of the Securities and Exchange Act;

2. A financial institution established under the Banking Act; and

3. Other financial institutions as prescribed by the Presidential Decree.

(8) The term “beneficiary” in this Act means a person holding the beneficiary certificates issued by the truster company under Article 6: Provided, That in the case of any registered beneficiary certificates, it refers to a person registered as beneficiary.

Article 3(Trust Deemed Securities Investment Trust) #

Any trust in which the trustee invests and operates a trust property in the specified securities, etc. in compliance with the instructions of the truster, for the purpose of having the trustee of investment trust acquire the beneficial right to them, shall be considered as an investment trust. <Amended by Act No. 6693, Apr. 27, 2002>

Article 4(Prohibition of Similar Investment Trust) #

Except as provided by this Act, no person shall engage in any service of receiving any property such as cash, and investing and operating it in the securities, with the intention of dividing the beneficial right to them for acquisition thereof by many and unspecified persons.

Article 5 #

Deleted.<by Act No. 5740, Feb. 1, 1999>

Article 6(Beneficiary Certificates) #

(1) The beneficial right to the investment trust shall be divided equally, and the divided beneficial rights shall be represented by the beneficiary certificates.

(2) Issuance of the beneficiary certificates shall be reported in advance to the Financial Supervisory Commission: Provided, That when the beneficiary certificates are issued in accordance with the standard terms and conditions of a trust pursuant to the provisions of Article 22 (2), this shall be reported to the Investment Trust Association (hereinafter referred to as the “Investment Trust Association”) under the provisions of Article 49 (1). <Amended by Act No. 5740, Feb. 1, 1999; Act No. 6693, Apr. 27, 2002>

(3) A transfer of the divided beneficial right to any investment trust and any other exercise of rights thereunder, shall be done by means of the beneficiary certificates: Provided, That in a case of the registered beneficiary certificates, it shall be subject to the conditions as prescribed by the Presidential Decree.

(4) The beneficiaries of investment trust shall have an equal right in proportion to the number of their shares, with respect to redemption of the trust principal and distribution of the profits.

(5) The beneficiary certificates shall be issued as securities with no par value and in the bearer form: Provided, That they may be issued in the registered form upon request of the beneficiaries.

(6) The registered beneficiary certificates may be converted into the bearer ones upon request of the beneficiaries.

(7) The beneficiary certificates shall be issued by the truster company, upon confirmation of the trustee company with respect to the matters prescribed in each subparagraph of paragraph (10) and the receipt, etc. of the trust money.

(8) The beneficiary certificates shall not be issued unless the total amount of issue price is paid in full in cash or by securities, etc. <Amended by Act No. 6693, Apr. 27, 2002>

(9) If any beneficiary certificate is damaged and becomes unsuitable for circulation, the beneficiary may request to the truster company for an immediate delivery of a new one.

(10) The beneficiary certificates shall have notation of the following matters, and be signed and sealed by the representative director of the truster company: <Amended by Act No. 5740, Feb. 1, 1999>

1. Mark and serial number;

2. Trade names of the truster and trustee companies;

3. Names or titles of the beneficiaries, in a case of the registered ones;

4. Amount of the trust principal and number of the total shares of the beneficial right, at the time when a securities trust contract under Article 2 (1) (hereinafter referred to as a “trust contract”) is concluded;

5. Time and place of the distribution of profits;

6. Methods of the calculation and payment of the trust remuneration and other fees to be paid to the truster and trustee companies, and the methods and time of their payment;

7. Condition of repurchase of the beneficiary certificates, and in a case of issuance under Article 8, the purport to the effect that no request for repurchase may be made;

8. In a case of any open-end investment trust, the maximum amount of the principal to be trusted additionally;

9. In a case of beneficiary certificates under any additional trust, the total amount of the trust principal, including the original trust principal and the additional ones, and the total number of shares of the beneficial right;

10. In case where the truster company agrees to replenish the principal or the shortage of profits under Article 19 (2), the details thereof;

11. Calculation method of the base price of beneficiary certificates; and

12. In case where the period of trust contract is to be fixed, the relevant period of contract.

Article 7(Repurchase of Beneficiary Certificates) #

(1) Any beneficiary may request the truster company which has issued the beneficiary certificates to repurchase them in cash: Provided, That if the truster company is unable to comply with the repurchase due to the dissolution, revocation of permission, suspension of business or any other reason as prescribed by the Presidential Decree (hereafter in this Article referred to as a “dissolution, etc.”), the beneficiary may request it directly to the trustee company under the conditions as determined by the Ordinance of the Ministry of Finance and Economy. <Amended by Act No. 5558, Sep. 16, 1998>

(2) Notwithstanding the provisions of paragraph (1), if the beneficiary certificates are purchased from a selling company, the request for repurchase of relevant beneficiary certificates shall be made to the relevant selling company: Provided, That if the selling company is unable to comply with the relevant repurchase due to a dissolution, etc., under the Securities and Exchange Act or other Acts, the request for repurchase may be made to the truster company.

(3) If the truster company upon receipt of the request for repurchase under the proviso of paragraph (2) is unable to comply with it due to dissolution, etc., the provisions of the proviso of paragraph (1) shall apply mutatis mutandis.

(4) A selling company upon receipt of a request for repurchase under the text of paragraph (2) shall promptly demand the truster company (referring to the trustee company, where it falls under paragraph (3)) to comply with the repurchase. <Amended by Act No. 5558, Sep. 16, 1998>

(5) The truster or trustee company obliged to comply with the repurchase under paragraphs (1) through (4) shall comply with the repurchase only by cash created by a partial termination of a trust. <Newly Inserted by Act No. 5558, Sep. 16, 1998>

(6) Where beneficiary certificates are repurchased under the provisions of paragraphs (1) through (5), the repurchase price shall be the amount computed by the base price under Article 29 (1). <Newly Inserted by Act No. 5558, Sep. 16, 1998>

(7) Where the truster company, trustee company or selling company under receipt of a request for repurchase under paragraphs (1) through (3) has become unable to repurchase the beneficiary certificates not later than the date specified by the terms and conditions of securities investment trust under Article 21 (1) due to such cause as a delay in selling the securities as a trust property, it shall promptly notify the beneficiary thereof. <Newly Inserted by Act No. 5558, Sep. 16, 1998>

Article 8(Issuance of Irredeemable Beneficiary Certificates) #

(1) Notwithstanding the provisions of Article 7, the truster company may issue the irredeemable beneficiary certificates only in the case of an investment trust for which the trust contract period is specified. In this case, no additional trust shall be made.

(2) In case where the truster company issues any irredeemable beneficiary certificates, and where it fails to set up any special method guaranteeing redemption thereof for the beneficiaries in the terms and conditions of a trust under the provisions of Article 21, it shall list the relevant beneficiary certificates on the securities market: Provided, That such listing on the securities market may be waived when necessary for the sale of the beneficiary certificates. <Amended by Act No. 6693, Apr. 27, 2002>

(3) In case where the truster company issues any irredeemable beneficiary certificates, the provisions of Articles 6 (10) 11, 21 (2) 11, and 29 shall not be applicable.

Article 9(Permission, etc. of Truster Company) #

(1) Any person who intends to operate the business of a truster company shall obtain a permission from the Financial Supervisory Commission with respect to the business of a stock company, according to the classification falling under any of the following subparagraphs: <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 5982, May 24, 1999; Act No. 6179, Jan. 21, 2000>

1. Business under Article 10 (1) 1; and

2. Business under Article 10 (1) 1 and (1) 2.

(2) The Financial Supervisory Commission may attach conditions to a permission under paragraph (1). <Amended by Act No. 6179, Jan. 21, 2000>

(3) through (5) Deleted. <by Act No. 6179, Jan. 21, 2000>

Article 9-2(Procedures for Permission) #

(1) Any person who intends to obtain permission under Article 9 (1) shall file an application for such permission with the Financial Supervisory Commission under the conditions as prescribed by the Presidential Decree.

(2) The Financial Supervisory Commission shall, when it has granted such permission under Article 9 (1), publicly announce without delay its content in the Official Gazette, and make it known to the public through the computer communications, etc.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 10(Business of Truster Company) #

(1) The truster company shall carry on the business falling under each of the following subparagraphs: <Amended by Act No. 6179, Jan. 21, 2000>

1. Operation of investment trust:

(a) Establishment and termination of an investment trust;

(b) Instruction of the investment and operation of trust property; and

(c) Other business incidental thereto, and which is determined by the Ordinance of the Ministry of Finance and Economy; and

2. Sale business of beneficiary certificates:

(a) Subscription to and sale of the beneficiary certificates;

(b) Sale and repurchase of the beneficiary certificates; and

(c) Other business incidental thereto, and which is determined by the Ordinance of the Ministry of Finance and Economy.

(2) The truster company may operate the investment advisory business upon registration under Article 70-2 (1) of the Securities and Exchange Act (hereinafter referred to as an “investment advisory business”).

(3) The provisions of Articles 70-3, 70-4, 70-6 and 70-7 of the Securities and Exchange Act shall not be applicable to the case of operating an investment advisory business under paragraph (2): Provided, That the provisions of Article 70-6 shall be applicable only to an investment advisory business from among the business of the truster company.

Article 11(Requirements for Permission) #

(1) Any person who intends to obtain permission under Article 9 (1) shall satisfy the requirements falling under each of the following subparagraphs:

1. Capital shall be valued at not less than 10 billion won;

2. Manpower and physical facilities such as the computer equipments, etc. shall be sufficient to conduct the business of a truster company;

3. Business plans shall be proper and sound; and

4. Major investors prescribed by the Presidential Decree shall be equipped with a sufficient investment capability, a sound financial status and the social credits.

(2) Matters necessary for the detailed requirements for permission under paragraph (1) shall be prescribed by the Presidential Decree.

[This Article Wholly Amended by Act No. 6179, Jan. 21, 2000]

Article 12(Qualifications for Officers) #

(1) Deleted. <by Act No. 5740, Feb. 1, 1999>

(2) Any person falling under any of the following subparagraphs shall not become an officer of a truster company, and he shall lose the relevant office when he comes to fall under it after being appointed as such officer: <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

1. A minor, a person of incompetency or of quasi-incompetency;

2. A person who has been declared bankrupt and not yet reinstated;

3. A person who has been sentenced to imprisonment without prison labor or a heavier punishment, or who has been sentenced to a punishment heavier than a fine under this Act or the finance-related Acts and subordinate statutes as determined by the Presidential Decree (including the foreign Acts and subordinate statutes equivalent to them; hereafter the same shall apply in this Article), and for whom five years have not passed after the relevant execution is terminated (including cases in which the execution is deemed as having been completed) or its non-execution becomes definite;

4. A person who has been sentenced to imprisonment without prison labor or a heavier punishment, and is in a stay of execution of the sentence;

5. Any former officer or employee of a corporation or a company whose permission, authorization or registration, etc. of the business has been cancelled under this Act and other finance-related Acts and subordinate statutes prescribed by the Presidential Decree (limited to those prescribed by the Presidential Decree, who are directly responsible or correspondingly responsible for the occurrence of causes for the revocation of relevant permission, etc.), and for whom five years have yet elapsed from the date of the cancellation with respect to the relevant corporation or company; and

6. A person for whom five years have not passed since he was dismissed or removed from his office under this Act or other finance-related Acts and subordinate statutes as determined by the Presidential Decree.

(3) A standing officer of a truster company shall, in case where the Presidential Decree determines that he is in conflict with the interest of any investor or is likely to impair the sound management of a relevant truster company, not be engaged in the regular works of another company, nor operate its business. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

Article 13(Obligation to Secure Specialized Human Resources) #

(1) In order to increase the specialty investing and operating an investment trust property in securities, etc., a truster company shall secure specialized human resources in operating assets under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

(2) A truster company shall not have any person other than the specialized human resources in operating assets carry out such duties as determined by the Presidential Decree.

(3) The truster company shall register the matters relating to the specialized human resources in the operation of assets under the provisions of paragraph (1) with the Investment Trust Association. <Amended by Act No. 6693, Apr. 27, 2002>

Article 14(Trade Name) #

(1) A truster company shall use in its trade name the letters of “investment trust” (“investment trust operation”, in a case of a truster company which is not engaged in the business under Article 10 (1) 2): Provided, That this shall not apply where a merchant bank under the Merchant Bank Act concurrently operates the business of a truster company.

(2) No person who is not a truster company shall use in his trade name the letters of “investment trust” or “investment trust operation”: Provided, That where a truster company is converted into a securities company under the Securities and Exchange Act, this shall not apply to the relevant securities company during the period specified by the Presidential Decree. <Amended by Act No. 5558, Sep. 16, 1998>

Article 14-2(Internal Control Standards) #

(1) A truster company shall, in order to observe Acts and subordinate statutes, soundly operate its assets and protect the investors, set forth the basic procedures and standards (hereinafter referred to as the “internal control standards”) for its officers and employees to follow when they perform their duties.

(2) A truster company shall appoint one or more persons who are to check whether the internal control standards are observed, and to inspect any violation of the internal control standards and report thereon to the auditor or the inspection committee (hereinafter referred to as a “compliance officer”).

(3) In case where a truster company (excluding domestic branches and other business places of foreign truster company; hereafter in this Article, the same shall apply) intends to appoint or dismiss a compliance officer, it shall go through a resolution of the board of directors. <Newly Inserted by Act No. 6424, Mar. 28, 2001>

(4) A compliance officer shall satisfy the requirements falling under each of the following subparagraphs: <Newly Inserted by Act No. 6424, Mar. 28, 2001>

1. He shall have the career falling under any of the following items:

(a) A person who has the career of having served for 10 years or more in the Bank of Korea or the institution subject to an investigation under Article 38 of the Act on the Establishment, etc. of Financial Supervisory Organizations (including foreign financial institutions equal thereto);

(b) A person who has obtained a degree of a master or higher in a financing-related field and has the career of having served for 5 years or more at posts of a researcher or full-time lecturer or higher in a research institute or a college or university;

(c) A person who is qualified as an attorney-at-law or certified public accountant and has the career of having served for 5 years or more at services related to such qualifications; and

(d) A person who has the career of having served for 5 years or more in the Ministry of Finance and Economy, the Financial Supervisory Commission, the Securities and Futures Commission, or the Financial Supervisory Service, and for whom 5 years have elapsed since he resigned or retired from the relevant agencies;

2. He shall not fall under any subparagraph of Article 12 (2); and

3. He shall not have any facts to have been subjected to the measures falling under the demand of caution or warning from the Financial Supervisory Commission or the Governor of the Financial Supervisory Service during the recent 5 years on account of violating the Acts and subordinate statutes related to financing.

(5) Matters necessary for the internal control standards and compliance officers shall be prescribed by the Presidential Decree. <Newly Inserted by Act No. 6424, Mar. 28, 2001>

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 14-3(Minority Shareholders’ Right) #

(1) A person who has continually held not less than 5/100,000 of total number of the issued stocks of a truster company (limited to a truster company prescribed by the Presidential Decree in consideration of the size, etc. of its trust property; hereafter the same shall apply in this Article) for not less than 6 months under the conditions as prescribed by the Presidential Decree, may exercise the right of a shareholder under the provisions of Article 403 of the Commercial Act (including the case of application mutatis mutandis by Articles 324, 415, 424-2, 467-2 and 542 of the Commercial Act).

(2) A person who has continually held not less than 25/100,000 (25/ 200,000, in a case of a juristic person prescribed by the Presidential Decree) of total number of the issued stocks of a truster company for not less than 6 months under the conditions as prescribed by the Presidential Decree, may exercise the right of a shareholder under the provisions of Article 402 of the Commercial Act. <Amended by Act No. 6424, Mar. 28, 2001>

(3) A person who has continually held not less than 5/10,000 (5/20,000, in a case of a juristic person prescribed by the Presidential Decree) of total number of the issued stocks of a truster company for not less than 6 months under the conditions as prescribed by the Presidential Decree, may exercise the right of a shareholder under the provisions of Article 466 of the Commercial Act. <Newly Inserted by Act No. 6424, Mar. 28, 2001>

(4) A person who has continually held not less than 25/10,000 (25/20,000, in a case of a juristic person prescribed by the Presidential Decree) of total number of the issued stocks of a truster company for not less than 6 months under the conditions as prescribed by the Presidential Decree, may exercise the right of a shareholder under the provisions of Articles 385 (including where applied mutatis mutandis in Article 415 of the Commercial Act) and 539 of the Commercial Act. <Newly Inserted by Act No. 6424, Mar. 28, 2001>

(5) A person who has continually held not less than 5/1,000 (5/2,000, in a case of a juristic person prescribed by the Presidential Decree) of total number of the issued stocks of a truster company for not less than 6 months under the conditions as prescribed by the Presidential Decree, may exercise the right of a shareholder under the provisions of Article 363-2 of the Commercial Act. In this case, in exercising the right of a shareholder under the provisions of Article 363-2 of the Commercial Act, it shall be based upon the voting stocks. <Amended by Act No. 6424, Mar. 28, 2001>

(6) A person who has continually held not less than 15/1,000 (15/2,000, in a case of a juristic person prescribed by the Presidential Decree) of total number of the issued stocks of a truster company for not less than 6 months under the conditions as prescribed by the Presidential Decree, may exercise the right of a shareholder under the provisions of Articles 366 and 467 of the Commercial Act. In this case, in exercising the right of a shareholder under the provisions of Article 366 of the Commercial Act, it shall be based upon the voting stocks.

(7) When the shareholder under paragraph (1) files a lawsuit pursuant to the provisions of Article 403 of the Commercial Act (including the case of application mutatis mutandis by the provisions of Articles 324, 415, 424-2, 467-2 and 542 of the Commercial Act), and wins the case, he may request the truster company for payment of the lawsuit cost and all other expenses incurred by such lawsuit.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 14-4(Appointment of Outside Directors) #

(1) A truster company prescribed by the Presidential Decree in consideration of the size, etc. of its trust property shall appoint not less than 3 outside directors (referring to directors who are not engaged in the regular works of the relevant company, and who do not fall under any subparagraph of Article 54-5 (4) of the Securities and Exchange Act; hereinafter the same shall apply). In this case, the number of outside directors shall be not less than a half of total number of directors.

(2) The provisions of Article 54-5 (2) through (5) of the Securities and Exchange Act shall apply mutatis mutandis to the appointment of outside directors under paragraph (1). In this case, a “securities company” shall be deemed a “truster company”.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 14-5(Establishment of Inspection Committee) #

(1) A truster company prescribed by the Presidential Decree in consideration of the size, etc. of its trust property shall establish an inspection committee (referring to the inspection committee under the provisions of Article 415-2 of the Commercial Act; hereinafter the same shall apply).

(2) The provisions of Article 54-6 (2) through (5) of the Securities and Exchange Act shall apply mutatis mutandis to the establishment of the inspection committee under paragraph (1). In this case, a “securities company” in Article 54-6 (4) of the Securities and Exchange Act shall be deemed a “truster company”.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 15(Matters for Authorization) #

(1) If a truster company falls under any of the following subparagraphs, it shall obtain an authorization from the Financial Supervisory Commission: <Amended by Act No. 5558, Sep. 16, 1998; Act No. 5740, Feb. 1, 1999; Act No. 5982, May 24, 1999>

1. Dissolution or suspension of business; and

2. Merger and transfer or takeover of the whole business (including any equivalent cases).

(2) The Financial Supervisory Committee shall, when it grants authorization under paragraph (1), take into account the matters prescribed by the Presidential Decree. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

[This Article Wholly Amended by Act No. 5505, Jan. 13, 1998]

Article 15-2(Matters for Reports) #

Where a truster company intends to suspend the business of its head office, branches or business places, or to resume it, it shall report thereon to the Financial Supervisory Commission. <Amended by Act No. 5740, Feb. 1, 1999>

[This Article Newly Inserted by Act No. 5505, Jan. 13, 1998]

Article 16 #

Deleted.<by Act No. 5740, Feb. 1, 1999>

Article 17(Management of Trust Property) #

(1) A truster company shall be responsible for managing the trust property as a bona fide manager, and shall protect the interests of the beneficiaries.

(2) A truster company may pay out of the trust property the expenses and remunerations arising out of any legal action concluded for the account of beneficiaries.

(3) A truster company shall not burden any beneficiary with its own debt in his name, nor reimburse it with a trust property.

(4) Any claim to the truster company shall not be offset by any claim belonging to the trust property of the relevant truster company.

(5) A truster company shall entrust a trustee company with the custody of its trust property. In this case, the trustee company shall manage the trust property, expressly indicating that the property is a trust property and the name of such truster company that has entrusted its custody thereon. <Amended by Act No. 6179, Jan. 21, 2000>

(6) A trustee company shall deposit the securities belonging to the trust property whose custody has been entrusted under paragraph (5) with the Korea Securities Depository under Article 173 of the Securities and Exchange Act, under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5558, Sep. 16, 1998>

Article 18(Operation of Trust Property) #

(1) A truster company shall invest and operate a trust property in the methods falling under any of the following subparagraphs: <Amended by Act No. 5740, Feb. 1, 1999; Act No. 6179, Jan. 21, 2000>

1. Selling and buying the securities, etc.; and

2. Futures trading or overseas futures trading under subparagraphs 1 and 2 of Article 3 of the Futures Trading Act.

(2) A truster company may, in operating the trust properties, operate part of them in such a way as determined by the Presidential Decree, so as to secure the smooth repurchase of beneficiary certificates and to efficiently operate the standby fund for investments.

(3) Matters necessary for the methods or limit, etc. of futures trading or overseas futures trading under paragraph (1) 2 shall be prescribed by the Presidential Decree. <Newly Inserted by Act No. 5740, Feb. 1, 1999>

Article 19(Distribution, etc. of Profits) #

(1) A truster company shall distribute the profits to the beneficiaries in cash.

(2) A truster company may, under the approval of the Financial Supervisory Commission, issue beneficiary certificates with provisions to the effect that if any decrease in the principal has been incurred or a predetermined minimum profit has not been earned, the said company shall compensate for such shortfalls in the relevant replenishment or in the profit (hereinafter referred to as “replenishment, etc. of the principal”). <Amended by Act No. 5505, Jan. 13, 1998>

Article 20(Accumulation of Reserves) #

(1) A truster company may accumulate the reserves (hereinafter referred to as “reserves”) for the purpose of a replenishment, etc. of the principal and an equalization of the distribution, under the conditions prescribed by the Presidential Decree.

(2) The Financial Supervisory Commission may, in case where deemed necessary for the purpose of paragraph (1), order a truster company to accumulate the reserves. <Amended by Act No. 5505, Jan. 13, 1998>

(3) The reserves under paragraphs (1) and (2) shall not be spent unless it is based upon the criteria set forth by the Financial Supervisory Commission. <Amended by Act No. 5505, Jan. 13, 1998>

Article 21(Conclusion of Trust Contract) #

(1) A truster company shall, in case where it intends to enter into a trust contract with a trustee company, follow the terms and conditions for a securities investment trust (hereinafter referred to as “terms and conditions for a trust”).

(2) The terms and conditions for a trust shall set forth the following matters: <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

1. Trade names of the truster and trustee companies;

2. Matters related to the business of the truster and trustee companies;

3. Matters concerning the amount of trust principal and the total shares of the beneficial rights;

4. Matters concerning the beneficiary certificates;

5. Matters related to the operation and management of trust properties;

6. Matters related to the distribution of profits and the repurchases;

7. Matters concerning the additional trusts;

8. Matters concerning the calculation method, the time and method of payment, of the trust remunerations and other fees paid to the truster and trustee companies;

9. Matters concerning the termination of trust contracts;

10. Matters concerning the modification of the terms and conditions for a trust;

11. Calculation method of the base price of beneficiary certificates;

12. Trust contract period, when it is fixed; and

13. Other matters as prescribed by the Presidential Decree in order to protect the public interests or the beneficiaries.

Article 22(Report on Terms and Conditions for Trust) #

(1) A truster company shall, in case where it intends to set up the terms and conditions of a trust, report thereon in advance to the Financial Supervisory Commission: Provided, That when a truster company sets up the terms and conditions of a trust in accordance with the standard form determined by the Investment Trust Association pursuant to the provisions of paragraph (2), it shall report thereon to the Investment Trust Association within 7 days from the date of first setting of the relevant investment trusts. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 6424, Mar. 28, 2001; Act No. 6693, Apr. 27, 2002>

(2) The Investment Trust Association is empowered to set up the standard terms and conditions of a trust and shall report thereon to the Financial Supervisory Commission in advance when it sets up such terms and conditions of a trust. <Newly Inserted by Act No. 6693, Apr. 27, 2002>

(3) A truster company shall, in case where it makes a report on the terms and conditions of a trust under paragraph (1), have the terms and conditions of a trust and the documents stating the operational plans for trust properties and for issuance of beneficiary certificates appended to the written report thereon. <Amended by Act No. 6424, Mar. 28, 2001>

(4) In case where intending to modify the terms and conditions of a trust, it shall make a report thereon in advance to the Financial Supervisory Commission: Provided, That if the contents of the terms and conditions of a trust to be modified come to correspond to the standard form, a report thereon shall be made to the Investment Trust Association within 7 days from the date of such modification. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 6424, Mar. 28, 2001; Act No. 6693, Apr. 27, 2002>

(5) A truster company may, notwithstanding the provisions of paragraph (1), set up the terms and conditions of a trust without filing a report thereon, in case where the contents of such terms and conditions of a trust to be newly set up are identical with those of the terms and conditions of a trust already reported to the Financial Supervisory Commission or the Investment Trust Association under the provisions of paragraph (1). In this case, the truster company shall, within a week after an investment trust is established under the relevant terms and conditions of a trust, file a report on the details thereof to the Financial Supervisory Commission or the Investment Trust Commission. <Newly Inserted by Act No. 6179, Jan. 21, 2000; Act No. 6424, Mar. 28, 2001; Act No. 6693, Apr. 27, 2002>

(6) In case where the Financial Supervisory Commission acknowledges the contents of the terms and conditions of a trust or the standard form thereof reported by a truster company or the Investment Trust Association pursuant to the provisions of paragraph (1) through (5) to be in violation of the Acts and subordinate statutes, it may order to amend or supplement the contents thereof. <Newly Inserted by Act No. 6693, Apr. 27, 2002>

(7) A truster company or a selling company shall have the investors peruse its terms and conditions of a trust, under the conditions as prescribed by the Financial Supervisory Commission. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

(8) Matters to be contained in the standard form of terms and conditions of a trust and other necessary matters with regard to the establishment, amendment, etc. of terms and conditions of a trust or standard form thereof shall be prescribed by the Presidential Decree. <Newly Inserted by Act No. 6693, Apr. 27, 2002>

Article 23(Approval of Termination of Trust Contract) #

(1) A truster company may terminate a trust contract with the approval of the Financial Supervisory Commission: Provided, That if it is not apprehended to be detrimental to the beneficiaries’ interest and prescribed by the Presidential Decree, the trust contract may be terminated without any approval of the Financial Supervisory Commission. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 6693, Apr. 27, 2002>

(2) A truster company may terminate part of the trust under the conditions as prescribed by the Presidential Decree.

(3) A truster company may, in case where it terminates a trust contract under paragraph (1), provide the securities, etc. forming a trust property to the relevant beneficiaries under the conditions as determined by the terms and conditions for a trust. <Newly Inserted by Act No. 5558, Sep. 16, 1998>

Article 24(Instruction for Acquisition, Sale, etc. of Securities, etc.) #

A truster company shall give the instructions necessary for an acquisition, sale, etc. of the securities, etc. to the trustee company, and the latter shall comply with the relevant instructions of the former.

Article 25(Exercise, etc. of Rights to Trust Property) #

(1) A truster company may exercise whole rights, such as the voting rights related to the securities forming the trust property: Provided, That the rights other than the voting rights shall be exercised through the trustee company.

(2) A truster company shall, when it exercises whole rights such as voting rights under paragraph (1), exercise them in accordance with the principle of trust and good faith for the beneficiaries.

(3) A truster company shall record and maintain documents, in accordance with the prescriptions of the Presidential Decree, whether it has exercised the voting rights and how it has exercised them (if declined to excercise its voting rights, the causes thereof) over the corporation (hereinafter referred to as the “corporation being the object of public announcement whether the voting rights have been exercised thereupon”) that issued the stocks held, in excess of the rate or amount prescribed by the Presidential Decree, by each trust property. <Newly Inserted by Act No. 6693, Apr. 27, 2002>

[This Article Wholly Amended by Act No. 5558, Sep. 16, 1998]

Article 25-2(Restriction on Exercise of Voting Rights concerning Trust Property) #

(1) A truster company shall, in case where it falls under any of the following subparagraphs, exercise its voting rights, notwithstanding the provisions of Article 25 (1), so that they do not affect the contents of a resolution passed by the number of stocks arrived at by subtracting the number of stocks forming a trust property from the number of stocks attending a general meeting of stockholders of a corporation, which has issued the stocks forming a trust property: Provided, That the same shall not apply to the case where it is obviously expected to incur a loss to the trust property due to merger, transfer or takeover of business, appointment or dismissal of officers, amendment of the articles of incorporation of a corporation that issued the stocks forming a trust property of a truster company, or other equivalent matters: <Amended by Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

1. Where a person falling under any of the following items intends to incorporate a corporation, which has issued the stocks forming the relevant trust property, into an affiliate (hereinafter referred to as an “affiliate”) under subparagraph 3 of Article 2 of the Monopoly Regulation and Fair Trade Act:

(a) A truster company or a person who has an interest prescribed by the Presidential Decree in the said company; and

(b) A person who exercises a de facto control over a truster company, and is prescribed by the Presidential Decree;

2. A corporation which has issued the stocks forming the relevant trust property is in a relation falling under any of the following items with the relevant truster company:

(a) Where having a relation of an affiliate; and

(b) Where having a relation as prescribed by the Presidential Decree, which is a relation exercising a de facto control over a truster company; and

3. Where there exist some concerns about inflicting harms on the protection of beneficiaries or the proper operation of trust properties, as determined by the Presidential Decree.

(2) A truster company shall not exercise the voting rights related to the relevant stocks, if the stocks forming a trust property fall under any of the following subparagraphs: <Amended by Act No. 6179, Jan. 21, 2000>

1. Stocks acquired in excess of the limit, etc. under Article 33 (1) 1, 2, 2-2, 4, 8, 9 or 11; or

2. Stocks of the relevant corporation, which the corporation issuing the stocks forming a trust property has had a truster company acquire, pursuant to the terms and conditions for a trust in order to secure its own stocks.

(3) A truster company shall not perform the acts for evading the application of paragraphs (1) and (2), such as exercising a cross-voting under a contract, etc. with the third party.

(4) The Financial Supervisory Commission may, in case where a truster company has exercised the voting rights related to the stocks forming a trust property, in contravention of paragraphs (1) through (3), order the disposition of the relevant stocks.

(5) The provisions of proviso of paragraph (1) shall not apply to a truster company belonging to an enterprise group restricted within the narrow mutual contribution limits (hereafter in this Article, referred to as the “enterprise group restricted within the narrow mutual contribution limits”) under the provisions of Article 9 (1) of the Monopoly Regulation and Fair Trade Act: Provided, That if the truster company, belonging to an enterprise group restricted within the narrow mutual contribution limits, holds stocks, as its trust property, issued by a corporation affiliated with itself (limited to the listed or Association registered corporations pursuant to the Securities and Exchange Act), and it predicts that the exercise of voting rights pursuant to the provisions of main sentence of paragraph (1) on the matters falling under one of the following subparagraphs will unmistakably invite loss to the trust property concerned, it may exercise its voting rights pursuant to the provisions of proviso of paragraph (1), and in this case the number of stocks which enables the excercise of voting rights shall not exceed 30/100 of the total stocks issued by the corporation concerned, adding up the number of stocks with which the specially related persons pursuant to the provisions of Article 7 (1) 5 (a) of the Monopoly Regulation and Fair Trade Act are entitled to exercise: <Amended by Act No. 6693, Apr. 27, 2002>

1. Merger of the corporation with other corporations, transfer of whole or main part of business of the corporation to other corporations;

2. Appointment and dismissal of officers of the corporation; or

3. Amendment of the articles of incorporation of the corporation.

[This Article Newly Inserted by Act No. 5558, Sep. 16, 1998]

Article 25-3(Public Announcement on Excercise of Voting Rights) #

(1) A truster company shall announce in public the matters concerning whether to excercise its voting rights in accordance with the classification of the following subparagraphs. In this case, the necessary matters such as public announcement, etc. shall be prescribed by the Presidential Decree:

1. In case where it has exercised its voting rights over the matters relating to the change of operating rights such as merger, transfer or takeover of business, appointment and dismissal of officers, amendment of the articles of incorporation, etc.: the definite contents of how the voting rights have been exercised;

2. In case where the voting rights have been exercised over the corporation being the object of public announcement whether the voting rights have been exercised thereupon: the definite contents of how the voting rights have been exercised; and

3. In case where the voting rights have not been exercised over the corporation being the object of public announcement whether the voting rights have been exercised thereupon, the definite reason why the voting right have not been exercised.

(2) A truster company shall, when it announces in public the matters, etc. concerning whether it has exercised its voting rights under paragraph (1), announce all together the data, prescribed by the Presidential Decree, necessary for the beneficiaries to identify the appropriateness, etc. of such excercise of voting rights.

[This Article Wholly Amended by Act No. 6693, Apr. 27, 2002]

Article 26(Report and Public Announcement, etc. on Trust Property) #

(1) A truster company shall submit a business report and an annual operational report to the Financial Supervisory Commission and the Investment Trust Association under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 5740, Feb. 1, 1999; Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

(2) The Financial Supervisory Commission and the Investment Trust Association shall provide the documents under paragraph (1) to the public for their perusal. <Newly Inserted by Act No. 5740, Feb. 1, 1999; Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

(3) The Investment Trust Association shall compare the operational records including the details of fluctuations in the net value of each trust property, and make a public announcement of the results thereof, under the conditions as prescribed by the Presidential Decree. <Newly Inserted by Act No. 5740, Feb. 1, 1999>

Article 26-2(Auditing of Trust Property) #

(1) A truster company shall undergo an auditing with respect to each trust property by an auditor under Article 3 (1) of the Act on External Audit of Stock Companies (hereinafter referred to as the “auditor”): Provided, That the same shall not apply to the case as prescribed by the Presidential Decree.

(2) The Financial Supervisory Commission may, in case where deemed necessary to protect the public interests or the investors, order the auditor to furnish the data and to file a report with respect to the auditing of trust properties, and other necessary measures.

(3) The provisions of Article 9 of the Act on External Audit of Stock Companies shall apply mutatis mutandis to the auditing of trust properties under paragraph (1).

(4) Matters necessary for the appointment of auditor, audit standards, power of auditor, standards for accounting settlements, submission of an audit report and public announcement shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 26-3(Auditor’s Liability for Damages) #

(1) An auditor shall, in case where he fails to enter important matters as a result of an auditing under Article 26-2 (1) on his audit report, or make a false entry thereof, and thus has caused damages to the beneficiaries who have utilized them, have a liability to compensate the relevant beneficiaries for such damages. In this case, if an auditor is an audit team, those who have participated in the audit of the relevant trust properties shall have a joint and several liability to compensate for damages.

(2) Where an auditor is liable to compensate a beneficiary of trust property for damages, if any director or auditor of the relevant truster company (referring to members of the inspection committee if such committee is established; hereafter the same shall apply in this paragraph) is also liable to do so, the relevant auditing person, the director or auditor shall have a joint and several liability to compensate for damages.

(3) The provisions of Article 17 (5) through (7) of the Act on External Audit of Stock Companies shall apply mutatis mutandis to the case of paragraphs (1) and (2).

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 27(Compilation and Supply of Explanatory Statement, etc. on Investment Trust) #

(1) A truster company shall, where it intends to solicit acquisition of the beneficiary certificates, compile an explanatory statement on investment trust, and furnish it in advance to the Financial Supervisory Commission: Provided, That if it intends to solicit acquisition of the beneficiary certificates issued in accordance with the standard terms and conditions of a trust, it shall furnish the explanatory statement on investment trust to the Investment Trust Association. <Amended by Act No. 6693, Apr. 27, 2002>

(2) The truster and selling companies shall, in inducing the acquisition of beneficiary certificates, furnish the prospective buyers with an explanatory statement on investment trust, and explain its major contents to them.

(3) The truster and selling companies may, if necessary, use a simple explanatory statement on investment trust summarizing major points of the explanatory statement on investment trust, notwithstanding the provisions of paragraph (2). In this case, when any prospective buyer furnished with a simple explanatory statement on investment trust acquires beneficiary certificates, he shall be furnished with the explanatory statement on investment trust.

(4) A truster company shall compile a report on the operation of trust property, and supply it to the beneficiaries of relevant trust property.

(5) Matters necessary for the matters to be entered in an explanatory statement on investment trust, a simple explanatory statement on investment trust and a report on the operation of trust property under the provisions of paragraphs (1), (3) and (4), and the method of furnishing them, etc. shall be prescribed by the Presidential Decree.

[This Article Wholly Amended by Act No. 6179, Jan. 21, 2000]

Article 27-2(Content of Advertisements on Sale Inducement) #

Matters to be included in any advertisement used by the truster and selling companies for the inducement of acquisition of beneficiary certificates shall be prescribed by the Presidential Decree: Provided, That if there exist the important indications and advertisement matters under Article 4 (1) of the Act on Fair Indication and Advertisement, the relevant Act shall govern.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 28(Accounting Settlement on Trust Property, etc., and Books and Documents) #

(1) Deleted. <by Act No. 5740, Feb. 1, 1999>

(2) A beneficiary may, during business hours, request a truster or selling company for a perusal of books and documents on a trust property related to the relevant beneficiary, and for a delivery of certified or abridged copies thereof, and such truster or selling company shall not refuse it without justifiable reasons. <Amended by Act No. 6179, Jan. 21, 2000>

(3) Matters necessary for the scope, etc. of books and documents that are subject to the request for a perusal or a delivery of certified or abridged copies pursuant to the provisions of paragraph (2) shall be determined by the Financial Supervisory Commission. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

Article 29(Public Notice of Price of Beneficiary Certificates) #

(1) A truster company shall publicly notify every day the base price of beneficiary certificates.

(2) The base price under paragraph (1) shall be evaluated by the market value, under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5558, Sep. 16, 1998>

Article 30 #

Deleted.<by Act No. 5558, Sep. 16, 1998>

Article 31(Termination, etc. of Trust Contract) #

(1) If a truster or trustee company falls under any of the following subparagraphs, the truster company shall terminate without delay the trust contract related to the relevant trustee company: <Amended by Act No. 5257, Jan. 13, 1997>

1. Where the permission to the truster company on the business under Article 10 (1) 1 is revoked under Article 45;

2. Where the truster company is dissolved;

3. Where the truster company discontinues the business under Article 10 (1) 1;

4. Where the truster company is converted into a different financial institution under the Act on the Structural Improvement of Financial Industry, and fails to obtain a permission on the business under Article 10 (1) 1; and

5. Where the trustee company comes not to correspond to a trust company under the Trust Business Act or a financial institution concurrently operating the trust business, due to a revocation of the business permit or other reasons.

(2) The provisions of paragraph (1) shall not be applicable in any of the following cases: <Amended by Act No. 5257, Jan. 13, 1997; Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 5982, May 24, 1999; Act No. 6179, Jan. 21, 2000>

1. Where a truster or trustee company falls under paragraph (1) 1 or 5, and is instructed to transfer or continue the business related to the trust contract under Article 46 (1) or (2);

2. Where a truster company obtains the authorization for a transfer of business under Article 15 (1) 2. In this case, it shall be limited to the business whose transfer is authorized;

3. Where a surviving company after a merger of a truster company is a truster company;

4. Where a company established by a merger of the truster company obtains without delay a permission under Article 9; and

5. Where a truster company is converted into a different financial institution under the Act on the Structural Improvement of Financial Industry, and where it transfers its business to another truster company within the period fixed by the Financial Supervisory Commission.

(3) Deleted. <by Act No. 5740, Feb. 1, 1999>

Article 32(Restriction on Act of Truster Company) #

(1) In order to protect the public interests and the beneficiaries, the Financial Supervisory Commission may order any truster company which commits any act of the following subparagraphs detrimental to the fair trade of securities, etc. to take the measures under Article 45 (2): <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 5740, Feb. 1, 1999; Act No. 6179, Jan. 21, 2000>

1. An act of putting a trust property to the benefit of a person other than the relevant beneficiary;

2. An act of making a deal under unfair conditions which are significantly different from the ordinary trade terms and conditions;

3. An act of putting the securities, etc. in a short-term trade for the purpose of increasing the commission on sales for the related securities company prescribed by the Presidential Decree (hereinafter referred to as the “related securities company”);

4. An act of having any one acquire the securities, etc. which remain after a related securities company takes over;

5. An act of putting the related securities company trade in the relevant stocks, etc., in order to form the artificial market price with respect to the stocks, etc. of an enterprise taking charge of the manager company as prescribed by the Presidential Decree (including the debentures capable of accepting the stocks or with the right to convert into stocks; hereinafter the same shall apply); and

6. Other acts which correspond to those under subparagraphs 1 through 5, and which are prescribed by the Presidential Decree.

(2) A truster company shall operate its own property for the purpose of maintaining the soundness in management and protecting the beneficiaries, under the conditions as prescribed by the Presidential Decree. <Newly Inserted by Act No. 5558, Sep. 16, 1998>

Article 33(Restriction on Instruction in Operation of Trust Property) #

(1) A truster company shall not give a trustee company an instruction falling under any of the following subparagraphs: Provided, That this shall not apply to the case where it is not likely to harm the protection of beneficiaries or the operation of trust properties, and where determined by the Presidential Decree: <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000; Act No. 6424, Mar. 28, 2001; Act No. 6693, Apr. 27, 2002>

1. An act of making investment in the securities, etc. of the same issue (excluding the securities pursuant to the provisions of any of the subparagraphs of Article 2 (3)) in excess of the ratio prescribed by the Presidential Decree within 10/100 of total asset value of each trust property. In this case, the securities, etc. except stocks from (among) the securities, etc. issued by the same company shall be deemed to be the same issue;

1-2. An act of investment where the risk amount of each mode of transaction and the total risk amount ensuing the securities option transaction of the same issue exceed 10/100 of total asset amount of each trust property, in case where a truster company invests in the transaction of rights (hereinafter referred to as the “securities option transaction”) which can conclude a deal of stock certificates between the contracting parties by declaration of intent of one of the contracting parties in accordance with the standards and methods prescribed by the Korea Stock Exchange (hereinafter referred to as the “Stock Exchange”) pursuant to the provisions of Article 71 of the Securities and Exchange Act. In this case, the method of calculating the risk amount of each mode of transaction and the total risk amount shall be prescribed by the Financial Supervisory Commission;

2. An act of making investment in excess of 20/100 of total number of stocks issued by the same company, by using the asset value of the entire trust properties operated by a truster company;

2-2. An act of making investment in excess of 10/100 of total number of stocks issued by the same company, by using the asset value of each trust property operated by a truster company;

3. Deleted; <by Act No. 5558, Sep. 16, 1998>

4. An act of acquiring beneficiary certificates or stocks falling under any of the following items in excess of the rate prescribed by the Presidential Decree (limited to investment trust other than indirect investment trust):

(a) Beneficiary certificates (excluding the beneficiary certificates issued for cases falling under Article 3) pursuant to the provisions of Article 2 (3) 1 and foreign beneficiary certificates pursuant to the provisions of subparagraph 2 of the same paragraph; and

(b) Stocks pursuant to the provisions of Article 2 (3) 3 and 4 of the same paragraph;

5. An act of acquiring, as a trust property, any truster company’s own property or any securities, etc. held by any specially related person as prescribed by the Presidential Decree (hereinafter referred to as a “specially related person”);

6. An act of acquiring or leasing, as its own property, any securities forming a trust property of the truster company, or having such securities sold or lent to any specially related person;

7. An act of trading any securities with the intention of benefiting a different trust property while harming the profits of specified trust property;

8. An act as prescribed by the Presidential Decree which is likely to be detrimental to the protection of beneficiaries or the proper operation of trust properties, such as any transactions with an affiliate of the truster company, or an act of excessively acquiring the securities issued by the affiliate;

9. An act as prescribed by the Presidential Decree that it is likely to inlict harms on the proper operation of trust properties by excessively acquiring the securities, etc. issued by a person who exercises a de facto control over a truster company, and prescribed by the Presidential Decree;

10. An act by a truster company of making a cross investment in the securities, etc. by means of contract or collusion, etc. with a third party; and

11. An act as prescribed by the Presidential Decree that it is likely to be detrimental to the protection of beneficiaries and the investment stability of trust properties, etc.

(2) The provisions of paragraph (1) 1, 2, 2-2 and 4 and Article 8 (2) shall not apply to a trust property composed of the beneficiary certificates, issued only by other methods than solicitation or sale under Article 2 (3) and (4) of the Securities and Exchange Act, whose beneficiaries are less than the number prescribed by the Presidential Decree. <Newly Inserted by Act No. 5558, Sep. 16, 1998; Amended by Act No. 5740, Feb. 1, 1999; Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

(3) In case where it inevitably exceeds the investment limit under any subparagraph of paragraph (1) due to the causes prescribed by the PresIdential Decree, such as the fluctuations in the price of securities, etc. forming a trust property and the partial termination of trust properties, etc., it shall be deemed to be compatible with the relevant investment limit. In this case, the truster company shall make it compatible with the relevant investment limit within 6 months. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

Article 34(Prohibition on Use of Undisclosed Trust Property Operation Information) #

(1) Officers and employees of a truster company shall be prohibited from performing the act of trading the securities, etc. by making use of undisclosed operational information pertaining to the trust property operated by the relevant truster company, or from allowing other persons to make use of such information.

(2) Necessary matters such as the scope, etc. of undisclosed operational information pertaining to the trust property under paragraph (1) shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 34-2(Restrictions on Trade, etc. of Securities by Officers and Employees) #

No officers and employees of a truster company shall trade or consign the securities for their own accounts no matter what names are used, unless otherwise determined by the Presidential Decree.

[This Article Newly Inserted by Act No. 5558, Sep. 16, 1998]

Article 34-3(Liabilities of Truster Company, etc.) #

(1) In case where a truster company incurs the losses by committing an act violating Acts and subordinate statutes or the terms and conditions for a trust or by neglecting its duties, it shall be liable for compensating the beneficiary of the relevant trust property for such losses.

(2) In case where a truster company assumes the liability for compensating a beneficiary or a third party for the losses, if the relevant director, auditor (including the member of the auditing committee), trustee company, or distributor has also the causes imputable to itself, they shall jointly and severally assume the liability for compensating for the losses.

[This Article Newly Inserted by Act No. 6424, Mar. 28, 2001]

Article 35(Restriction on Interchanges, etc. of Personnel or Information, etc.) #

(1) A truster company shall not be engaged in an interchange, etc. falling under any of the following subparagraphs with an affiliate or a selling company: <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

1. Concurrent holding of offices by officers and employees, and their dispatches;

2. Joint activities;

3. Provision of information; and

4. Other acts similar to subparagraphs 1 through 3, and which are determined by the Presidential Decree.

(2) The detailed scope of restrictions on the interchange, etc. under the provision of paragraph (1) shall be prescribed by the Presidential Decree. <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

Article 36 #

Deleted.<by Act No. 5558, Sep. 16, 1998>

Article 37(Restrictions on Concurrent Business Operation) #

(1) A truster company shall not concurrently run any other business than those falling under any of the following subparagraphs:

1. Financial business (referring to the business prescribed by the financerelated Acts and subordinate statutes under Article 12 (2) 3; hereafter the same shall apply in this Article) which is permitted by other Acts and subordinate statutes; and

2. Such business authorized by the Financial Supervisory Commission as has no problems for the protection of beneficiaries and a financial soundness of a truster company, even if it is run by a truster company from among the financial business as determined by the Presidential Decree.

(2) Any financial business under paragraph (1) 2 for which a truster company has obtained permission or authorization, etc. from the Financial Supervisory Commission, or filed a registration, etc. with the said Commission pursuant to other Acts and subordinate statutes, shall be deemed to be authorized by the Financial Supervisory Commission under paragraph (1) 2.

[This Article Wholly Amended by Act No. 6179, Jan. 21, 2000]

Article 38(Business of Trustee Company) #

A trustee company shall carry on the following business according to the instruction of a truster company under Article 24:

1. Payment of the purchase price of the securities, etc.;

2. Delivery of the instruments following the sale of securities, etc.;

3. Receipt of interests and dividends related to the invested securities, etc.;

4. Payment of the repurchase price and profits of the beneficiary certificates; and

5. Other businesses as prescribed by the Presidential Decree.

Article 39(Prohibition of Use, etc. for Trustee Company’s Own Property) #

(1) A trustee company shall not make use of the trust property entrusted for its own property.

(2) A trustee company may not, in case where a truster company instructs a trade of a trust property, achieve its purposes by means of trading the relevant trustee company’s own property or other trust properties.

Article 40(Division and Management of Trust Property) #

(1) Deleted. <by Act No. 5740, Feb. 1, 1999>

(2) A trustee company shall not become a selling company of the relevant trust property duly entrusted, without the approval of the Financial Supervisory Commission. <Newly Inserted by Act No. 5558, Sep. 16, 1998>

Article 41(Request, etc. for Alterations in Operational Instruction of Trust Property) #

(1) A trustee company shall, in case where any operational instructions of the relevant truster company with respect to a trust property are in contravention of the Acts and subordinate statutes, the terms and conditions of a trust, or the explanatory statement of an investment trust, request the truster company to withdraw, alter or correct the relevant operational instructions. <Amended by Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

(2) A trustee company may, in case where the truster company fails to comply with its request under paragraph (1), raise an objection to the Financial Supervisory Commission, and make a public announcement of the related contents under the conditions as determined by the Financial Supervisory Commission. In this case, the truster company and the trustee company shall follow any decisions made by the Financial Supervisory Commission according to the criteria as prescribed by the Presidential Decree. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

(3) In case where a trustee company requests the furnishing of the books or documents required for making a request under paragraph (1), the truster company shall comply with it unless there exist any justifiable grounds. <Newly Inserted by Act No. 6424, Mar. 28, 2001>

Article 41-2(Registration of Selling Companies) #

Any person falling under any of the subparagraphs of Article 2 (7) shall, in case where he intends to operate a sales business of beneficiary certificates, register with the Financial Supervisory Commission, under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 6693, Apr. 27, 2002>

[This Article Newly Inserted by Act No. 5558, Sep. 16, 1998]

Article 42(License, etc. of Foreign Truster Company) #

(1) A foreign truster company (referring to a person engaged in the business of a truster company in a foreign country pursuant to foreign Acts and subordinate statutes; hereinafter the same shall apply) shall, in case where it intends to establish a branch office and other business places in order to operate the business of a truster company in Korea, obtain a license from the Financial Supervisory Commission under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 5982, May 24, 1999; Act No. 6179, Jan. 21, 2000>

(2) Any foreign truster company that has failed to obtain a license under paragraph (1) shall be prohibited from running a truster company for domestic residents. <Amended by Act No. 6179, Jan. 21, 2000>

(3) Any branch office or business place that has been granted a license under paragraph (1) shall be deemed a domestic truster company incorporated under this Act. <Amended by Act No. 6179, Jan. 21, 2000>

(4) Where a branch office or business place of a foreign truster company in Korea is liquidated, or goes bankrupt, its assets held in Korea shall be appropriated by priority to the repayment of any obligation of persons having their domiciles or residences in Korea. In this case, the scope of such assets held in Korea shall be determined by the Presidential Decree. <Amended by Act No. 6179, Jan. 21, 2000>

(5) Where it is deemed difficult for a domestic branch and other business place of a foreign truster company to conduct business due to the violation of this Act, any order or disposition under this Act, or any foreign Acts and subordinate statutes, the Financial Supervisory Commission may cancel permission, suspend the business, or take other necessary measures in order to protect the public interest or the investors. This shall also apply where it is deemed difficult for a domestic branch and other business place of a foreign truster company to conduct business due to the violation of foreign Acts and subordinate statutes, etc. by the foreign truster company concerned. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 5982, May 24, 1999; Act No. 6179, Jan. 21, 2000>

(6) Any business fund of the domestic branch and other business place that has been granted a license under paragraph (1) shall be deemed its capital, in applying this Act. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

(7) The Financial Supervisory Commission may attach any conditions to the license under paragraph (1). <Newly Inserted by Act No. 6179, Jan. 21, 2000>

(8) Other matters necessary for the domestic business, etc. of a foreign truster company shall be prescribed by the Presidential Decree.

Article 42-2(Procedures for License) #

The provisions of Article 9-2 shall apply mutatis mutandis to a license for the domestic branch and other business place of a foreign truster company.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 42-3(Requirements for License) #

(1) Any person who intends to obtain a license under Article 42 (1) shall satisfy requirements falling under each of the following subparagraphs:

1. Business fund of his domestic branch and other business place shall be not less than 3 billion won;

2. Manpower and such physical facilities as computer equipment, etc. shall be equipped for a sufficient performance of business of his truster company;

3. Business plans shall be appropriate and sound;

4. Status of assets, soundness of finance and business of a foreign truster company are sufficient to carry on the business of a truster company in Korea, and it shall have a high international credit rating; and

5. A foreign truster company intending to establish a domestic branch and other business place is currently running a truster company pursuant to the foreign Acts and subordinate statutes.

(2) Matters necessary for detailed requirements for the license under paragraph (1) shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 6179, Jan. 21, 2000]

Article 42-4(Domestic Sale of Foreign Beneficiary Certificates) #

(1) Where a foreign truster company intends to sell in Korea the beneficiary certificates issued in a foreign country under the foreign Acts and subordinate statutes (hereinafter referred to as “foreign beneficiary certificates”), it shall report thereon to the Financial Supervisory Commission, under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5558, Sep. 16, 1998>

(2) The provisions of Articles 27, 28 (2) and (3), 29 (1) and 31 shall apply mutatis mutandis to the domestic sale of foreign beneficiary certificates. In this case, the term “truster company”, “trustee company” and “beneficiary certificates” shall be deemed to read “foreign truster company”, “foreign trustee company” and “foreign beneficiary certificates”, respectively. <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

(3) Where a truster company sells, as an agent, the foreign beneficiary certificates, the relevant truster company shall be deemed a selling company, in applying Articles 7 and 43. <Amended by Act No. 5558, Sep. 16, 1998>

(4) Methods of a domestic sale of the foreign beneficiary certificates and other necessary matters shall be prescribed by the Presidential Decree. <Amended by Act No. 5558, Sep. 16, 1998>

[This Article Newly Inserted by Act No. 5505, Jan. 13, 1998]

Article 42-5(Establishment of Exchange-Traded Fund) #

(1) A truster company may, when a new or additional establishment of exchange-traded fund is requested by designated selling companies under the provisions of Article 42-6 (hereinafter referred to as a “designated selling company”), establish an exchange-traded fund as stipulated by the terms and conditions of a trust.

(2) When a designated selling company intends to request a new or additional establishment of exchange-traded fund pursuant to the provisions of paragraph (1), it shall convert cash, securities, etc. received directly from investors or through selling companies (hereinafter referred to as the “trust money, etc.”) into assets equivalent to the certain units (hereinafter referred to as the “establishment unit”) prescribed by the Presidential Decree.

(3) Necessary matters concerning the payment of trust money, etc. and the establishment of an exchange-traded fund shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 6693, Apr. 27, 2002]

Article 42-6(Designated Selling Company) #

(1) A truster company of an exchange-traded fund shall, when establishing an exchange-traded fund, designate one out of the selling companies, which is engaged in the operation of securities business under Article 2 (8) 1 and 2 of the Securities and Exchange Act, in order to let it undertake the business of conversion of assets, etc.

(2) A designated selling company shall perform the businesses of the following subparagraphs:

1. Requesting the truster company to establish an exchange-traded fund;

2. Requesting the truster company to terminate an exchange-traded fund;

3. Sale and Purchase, and entrusted sale and purchase of securities, etc. in order to convert the trust money, etc. into assets equivalent to the establishment unit; and

4. Other businesses equal to those of subparagraphs 1 through 3 and prescribed by the Presidential Decree.

(3) Where a designated selling company engages in the sale and purchase, and entrusted sale and purchase, of securities, etc. in order to convert the trust money into assets equivalent to the establishment unit, it shall be deemed to have registered the discretionary investment business under the provisions of Article 70-2 (2) of the Securities and Exchange Act in respect of such business activity.

(4) The designated selling company shall, through the businesses of the subparagraphs of paragraph (2), exert to conform the market price of beneficiary certificates of exchange-traded fund traded in the securities market or the Association brokerage market to the net asset value of each share of the beneficiary certificates concerned, and let the beneficiary certificates concerned traded in the market smoothly.

[This Article Newly Inserted by Act No. 6693, Apr. 27, 2002]

Article 42-7(Redemption of Beneficiary Certificates of Exchange-Traded Fund) #

(1) Beneficiaries of an exchange-traded fund may request the selling company of the beneficiary certificates concerned (excluding the designated selling company; hereafter in this Article, the same shall apply), or the designated selling company of the beneficiary certificates concerned (limited to the case where the company that sold the beneficiary certificates was a designated selling company) to redeem beneficiary certificates by the establishment unit: Provided, That if the selling company of the beneficiary certificates concerned fails to respond to redemption due to dissolution, revocation of license, suspension of business and other causes prescribed by the Presidential Decree (hereafter in this Article, referred to as the “dissolution, etc.”), they may request for the redemption thereof to the designated selling company.

(2) The selling company requested for the redemption of beneficiary certificates of exchange-traded fund pursuant to the provisions of main sentence of paragraph (1) shall demand the designated selling company to redeem the beneficiary certificates concerned: Provided, That if the designated selling company fails to perform the business relating to redemption due to dissolution, etc., the selling company may demand the truster company to respond to the redemption of the beneficiary certificates at firsthand.

(3) The beneficiaries of beneficiary certificates of exchange-traded fund may, in case where the designated selling company whom they intend to request for the redemption of beneficiary certificates of exchangetraded fund fails to perform the business relating to the redemption of the beneficiary certificates concerned due to dissolution, etc., request directly the truster company for the redemption of beneficiary certificates.

(4) The designated selling company requested or demanded for the redemption of beneficiary certificates of exchange-traded fund pursuant to the provisions of main sentences of paragraphs (1) and (2) shall, without delay, demand the truster company to respond to the redemption thereof.

(5) In case where the beneficiaries of beneficiary certificates of exchangetraded fund, the selling company or the designated selling company intends to request redemption pursuant to the provisions of paragraphs (2) through (4) and where the truster company, who is obliged to respond to redemption, fails to respond to redemption due to dissolution, etc., it may request directly the trustee company pursuant to the prescriptions of the Ordinance of the Ministry of Finance and Economy.

(6) The truster company or trustee company obliged to respond to redemption pursuant to the provisions of paragraphs (2) through (5) shall respond to redemption with securities, etc. (excluding the cases are prescribed by the Presidential Decree) by means of termination of part of exchange-traded fund. In this case, the redemption shall be based on the assets held by the trust property concerned after closure of operation of the trust property on the day the request for redemption was made.

(7) In case where the redemption of beneficiary certificates is impossible within the time frame fixed by the terms and conditions of a trust due to a natural disaster or other causes equivalent thereto, the selling company, designated selling company, truster company or trustee company, who has been requested for redemption pursuant to the provisions of paragraphs (1) through (6), shall inform the beneficiaries of such fact without delay.

[This Article Newly Inserted by Act No. 6693, Apr. 27, 2002]

Article 42-8(Delisting or Revocation of Registration of Exchange-Traded Fund, etc.) #

(1) The Stock Exchange or the Korea Securities Dealers Association (hereinafter referred to as the “Securities Dealers Association”) pursuant to the provisions of Article 162 of the Securities and Exchange Act shall, in case where a cause falling under any of the following subparagraphs regarding the beneficiary certificates of exchange-traded fund occurs, delist or revoke the registration of such beneficiary certificates:

1. Cases where the difference (hereinafter referred to as the “pursued margin of error”) between the fluctuation rate of net asset value of each share of beneficiary certificates of exchange-traded fund and the fluctuation rate of the indexes targeted by the exchange-traded fund exceeds the rate prescribed by the Presidential Decree and holds out for the period of time prescribed by the Presidential Decree;

2. Cases where the target indexes aimed by the exchange-traded fund are incalculable or unable to be utilized; or

3. Other cases where it is apprehended to be detrimental to the protection of beneficiaries and the sound operation of trust property, and prescribed by the Presidential Decree.

(2) A truster company shall, in case where the beneficiary certificates of exchange-traded fund were delisted or the registration thereof with the Association brokerage market was revoked, terminate the trust contract within the time frame prescribed by the Presidential Decree from the day of delisting or registration revocation. In this case, the provisions of Article 23 (1) shall not apply.

(3) Where the truster company has terminated the trust contract pursuant to the provisions of paragraph (2), it shall report the Financial Supervisory Commission within seven days from the date of such termination of the trust contract.

[This Article Newly Inserted by Act No. 6693, Apr. 27, 2002]

Article 42-9(Public Announcement, etc. of Assets Held by Trust Property) #

(1) A truster company shall announce everyday in public the contents, etc. of asset composition of property of exchange-traded fund as of one day before the announcement through the securities market or the Association brokerage market.

(2) The Stock Exchange or the Securities Dealers Association shall, as prescribed by the Presidential Decree, announce in public the net asset value of the exchange-traded fund property and the pursued margin of error.

(3) Necessary matters relating to the contents, procedures, etc. pursuant to the provisions of paragraph (1) shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 6693, Apr. 27, 2002]

Article 42-10(Exceptions to Restriction on Instruction in Operation of Exchange-Traded Fund) #

(1) In applying the provisions of Article 33 (1) 1 to the exchange-traded fund, “10/100” shall be regarded as “30/100”.

(2) The provisions of Article 33 (1) 2-2, 5, 6, 8 and 9 shall not apply to the exchange-traded fund.

[This Article Newly Inserted by Act No. 6693, Apr. 27, 2002]

Article 42-11(Exclusion of Application to Exchange-Traded Fund) #

(1) The provisions of Article 7, the provisos of Article 25-2 (1) and (5), and the provisions regarding the operation report of trust property in Article 27 (4) and (5) shall not apply to the exchange-traded fund.

(2) Article 54-3 (1) 1 and 4, and Article 189-2 of the Securities and Exchange Act shall not apply to the exchange-traded fund.

[This Article Newly Inserted by Act No. 6693, Apr. 27, 2002]

Article 42-12(Restrictions on Instruction in Operation of Indirect Investment Trust, etc.) #

(1) A truster company of an indirect investment trust shall not give a trustee company instructions of the following subparagraphs: Provided, That if there is no apprehension of any detriment to the protection of beneficiaries or the sound operation of trust property and prescribed by the Presidential Decree, this shall not apply:

1. An act to invest in an investment trust (including the securities investment company, for which the asset management company operates the asset management business, in case where the truster company is concurrently engaged in the business of an asset management company pursuant to the Securities Investment Act) operated by the same truster company in excess of 50/100 of total asset amount of indirect investment trust property;

2. An act to invest in excess of 20/100 of total asset amount of indirect investment trust property in the same beneficiary certificates (including foreign beneficiary certificates) issued by a truster company (including foreign truster company) under this Act and a trust business company under the Trust Business Act, or in the stocks issued by the same securities investment company (including foreign securities investment company pursuant to the provisions of Article 80 (1) of the Securities Investment Company Act); and

3. Other acts apprehended to be detrimental to the protection of beneficiaries and the stability of trust property, and prescribed by the Presidential Decree.

(2) Remuneration for trust business, etc., and the matters necessary for the operation of indirect investment trust shall be prescribed by the Presidential Decree.

[This Article Newly Inserted by Act No. 6693, Apr. 27, 2002]

Article 43(Supervision, Inspection, etc.) #

(1) The Financial Supervisory Commission may, in case where deemed inevitable for protecting the public interest or beneficiaries, order the truster, trustee or selling company to submit the data of or to make a report on the business and property of the truster or selling company. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

(2) The Governor of the Financial Supervisory Service may make an inspection on the business and property of the truster or selling company. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998>

(3) The Governor of the Financial Supervisory Service may, in case where deemed necessary for the inspection, request the truster, trustee or selling company to submit the data on the business and property of the truster or selling company, or to have the related persons attend and state their opinions. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998>

(4) A person who conducts the inspection under paragraph (2) shall present the certificate indicating his authority to the interested person.

(5) The Governor of the Financial Supervisory Service shall, when he has conducted an inspection under paragraph (2), report its results to the Financial Supervisory Commission. In this case, he shall, in case where there exists a violation of this Act or the Acts and subordinate statutes prescribed by the Presidential Decree, or of a disposition under this Act, recommend the required measures to the Financial Supervisory Commission along with a statement of his opinion thereof. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

(6) The Financial Supervisory Commission may set forth the necessary matters concerning the method of and procedures for the inspection under paragraph (2), the criteria for the measures for the results of such inspection and other inspection business. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

(7) Deleted. <by Act No. 5558, Sep. 16, 1998>

Article 44(Share of Expenses) #

(1) The truster and selling companies undergoing the inspections by the Governor of the Financial Supervisory Service shall pay to the Financial Supervisory Service their shares for appropriation to the inspection expenses. <Amended by Act No. 5558, Sep. 16, 1998>

(2) Ratio and limit of the share of expenses in accordance with paragraph (1) and other necessary matters for its payment shall be prescribed by the Presidential Decree.

[This Article Wholly Amended by Act No. 5505, Jan. 13, 1998]

Article 45(Revocation, etc. of Permission) #

(1) The Financial Supervisory Commission may, in case where a truster company falls under any of the following subparagraphs, cancel its permission: <Amended by Act No. 5558, Sep 16, 1998; Act No. 5982, May 24, 1999>

1. Where it obtains a permission by falsity and other unlawful means;

2. Where it violates this Act, an order or disposition under this Act, or the Acts and subordinate statutes related to the trust, securities and other investment trust;

3. Where it violates the contents or conditions of permission;

4. Where deemed that it is unable to continue the business as the content of its property is extremely insufficient; and

5. Where deemed that it inflicts harms on the public interest or runs counter to the protection of beneficiaries by incurring serious losses to the trust property through the improper operation of its business.

(2) The Financial Supervisory Commission may, in case where a truster company falls under any subparagraphs of paragraph (1), take a disposition, etc. falling under any of the following subparagraphs: <Newly Inserted by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 5740, Feb. 1, 1999; Act No. 5982, May 24, 1999>

1. Deleted; <by Act No. 5982, May 24, 1999>

2. Suspension of all or part of the business;

3. Order for restricting any additional trust to the principal for the relevant trust contract or a conclusion of a new trust contract;

4. Order to terminate a trust contract under the terms and conditions of the relevant trust, or to modify the terms and conditions of trust;

5. Order to have the business related to the relevant trust contract transferred to the relevant truster company, after the Financial Supervisory Commission obtains in advance the consent of the trustee company which is a counterpart of the relevant trust contract, and of other truster company; and

6. Request for a removal of officers and other measures as prescribed by the Presidential Decree.

(3) The Financial Supervisory Commission may, in case where a selling company has violated this Act or the order or disposition under this Act, revoke a registration or order a suspension of the selling business of beneficiary certificates. <Amended by Act No. 5558, Sep. 16, 1998>

(4) When the permission of a truster company is cancelled pursuant to the provisions of paragraph (1), it shall be dissolved. <Newly Inserted by Act No. 6179, Jan. 21, 2000>

(5) The provisions of Article 9-2 (2) shall apply mutatis mutandis to the revocation of a permission under the provisions of paragraph (1). <Newly Inserted by Act No. 6179, Jan. 21, 2000>

Article 46(Order to Transfer Trust Contract) #

(1) The Financial Supervisory Commission may, in taking a disposition of revoking the authorization or permission to a truster or trustee company, and in case where deemed necessary for the purpose of protecting the public interest or beneficiaries to maintain a trust contract concluded by the truster or trustee company, order the relevant truster or trustee company, after it obtains the consent of the truster or trustee company which is a counterpart of the relevant trust contract and other truster or trustee company, to transfer the business related to the relevant trust contract to another truster or trustee company consented thereto. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 5982, May 24, 1999>

(2) The Financial Supervisory Commission may, in case where it is unable to obtain under paragraph (1) the consent of a trustee company which is the counterpart of the trust contract or other truster company, have the relevant truster company subjected to the disposition of revoking a permission continue to carry on the business with fixing a condition on the duration, etc. of such trust contract. In this case, the relevant truster company shall be considered not subjected to the disposition of revoking a permission within such a scope. <Amended by Act No. Sep. 16, 1998; Act No. 5982, May 24, 1999>

Article 47(Order of Public Notice) #

The Financial Supervisory Commission may, in case where a truster or trustee company falls under any of the following subparagraphs, and where deemed inevitable for protecting the public interest or beneficiaries, order the relevant truster or trustee company to notify its contents publicly on two or more daily newspapers: Provided, That such public notice may be made in summary with an approval of the Financial Supervisory Commission: <Amended by Act No. 5505, Jan. 13, 1998; Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

1. If any modification of the terms and conditions of trust is reported under Article 22 (4), such modified matters; and

2. If a report on the trust property under Article 26 is received, the matters stated in the report.

Article 48(Supervisory Order by Financial Supervisory Commission) #

The Financial Supervisory Commission may order the truster, trustee or selling company to deposit property under Article 16 of the Trust Business Act, to alter the business execution methods, or other necessary matters, in case where deemed that it is likely to inflict harms on the rights and interests of beneficiaries as its business operation is not proper or its status of property is inferior. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5740, Feb. 1, 1999>

Article 49(Establishment, etc. of Investment Trust Association) #

(1) The Investment Trust Association shall be established for the purpose of maintaining a smooth cooperation among members in their business and its order, of protecting the beneficiaries, and of ensuring a sound development of the investment trust. <Amended by Act No. 6693, Apr. 27, 2002>

(2) Except as otherwise provided by this Act, the provisions of the Civil Act concerning a corporate juristic person shall be applicable mutatis mutandis to the Investment Trust Association. <Amended by Act No. 6693, Apr. 27, 2002>

Article 50(Members) #

The regular members of the Investment Trust Association shall be the truster companies, and the trustee and selling companies shall be its associate members. <Amended by Act No. 6693, Apr. 27, 2002>

Article 51(Affairs) #

(1) The Investment Trust Association shall carry out the following affairs in accordance with the provisions of its articles of association: <Amended by Act No. 5740, Feb. 1, 1999; Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

1. Affairs of maintaining a sound order in business among members, and of protecting beneficiaries;

2. Maintenance of a stability in the operation of trust properties;

3. Affairs concerning a registration of specialized human resources in operating assets;

4. Survey and research, etc. of the investment trust system;

5. Management and operation of the investment trust stabilization fund under Article 52-2;

6. Affairs entrusted under this Act or other Acts and subordinate statutes in relation to the protection of beneficiaries;

6-2. Education to investors; and

7. Affairs incidental to those under subparagraphs 1 through 6 and 6-2.

(2) Deleted. <by Act No. 5558, Sep. 16, 1998>

Article 52(Articles of Association of Investment Trust Association and Rules thereof) #

(1) Where the Investment Trust Association intends to alter the matters prescribed by the Presidential Decree in the articles of association, it shall obtain authorization from the Financial Supervisory Commission. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5740, Feb. 1, 1999; Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

(2) The articles of association shall include the following matters: <Amended by Act No. 6693, Apr. 27, 2002>

1. Purpose;

2. Title;

3. Location of the office;

4. Eligibility for the membership;

5. Self-discipline over the members; and

6. Other matters concerning the operation of the Investment Trust Association.

(3) Where the Investment Trust Association establishes or modifies regulations relating to its affairs, it shall report thereon to the Financial Supervisory Commission. <Newly Inserted by Act No. 5740, Feb. 1, 1999; Act No. 6693, Apr. 27, 2002>

Article 52-2(Establishment of Investment Trust Stabilization Fund) #

(1) The Investment Trust Association may establish a fund contributed by members for the purpose of mutual aids among themselves (hereinafter referred to as the “investment trust stabilization fund”). <Amended by Act No. 6693, Apr. 27, 2002>

(2) The Investment Trust Association may provide funds to any members who are short of funds due to a request, etc. for repurchases from the beneficiaries at the account of the investment trust stabilization fund. <Amended by Act No. 6693, Apr. 27, 2002>

(3) The Investment Trust Association may, in case where deemed necessary to protect the public interest and beneficiaries, recommend the members to contribute to the investment trust stabilization fund. <Amended by Act No. 6693, Apr. 27, 2002>

(4) Matters necessary for the management and operation of the investment trust stabilization fund shall be determined by the Investment Trust Association. <Amended by Act No. 6693, Apr. 27, 2002>

[This Article Newly Inserted by Act No. 5740, Feb. 1, 1999]

Article 53 #

Deleted.<by Act No. 5740, Feb. 1, 1999>

Article 54(Applicable Provisions) #

The provisions of Articles 12, 43, 45 and 48 shall apply mutatis mutandis to the Investment Trust Association. <Amended by Act No. 6693, Apr. 27, 2002>

Article 55(Dissolution and Liquidation of Truster Company) #

Except as provided by this Act, the provisions concerning the dissolution and liquidation of the trust company from among the Trust Business Act shall be applicable mutatis mutandis to the dissolution and liquidation of the truster company.

Article 56 #

Deleted.<by Act No. 5558, Sep. 16, 1998>

Article 57(Securities Saving Service, etc.) #

(1) Notwithstanding the provisions of Article 37, a truster company (excluding those not operating the business under Article 10 (1) 2; hereafter the same shall apply in this Article) may carry the business of accepting any trust of money or securities (including the beneficiary certificates; hereafter the same shall apply in this paragraph), and investing and operating it in the securities, etc. (hereinafter referred to as a “securities saving service”). In this case, the provisions of the Trust Business Act shall not be applicable.

(2) A truster company shall operate the service under paragraph (1) according to the terms and conditions of securities savings.

(3) Where a truster company sets forth or modifies the terms and conditions of securities savings under paragraph (2), it shall report thereon in advance to the Financial Supervisory Commission. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5740, Feb. 1, 1999>

(4) The terms and conditions of securities savings under paragraph (2) may, in case where it causes a decrease in the principal or fails to earn the predetermined minimum profits, set forth the methods capable of replenishing the relevant principal, etc.

Article 58(Hearing) #

Where the Financial Supervisory Commission intends to take a disposition falling under any of the following subparagraphs, it shall hold a hearing: <Amended by Act No. 5982, May 24, 1999>

1. Revocation of permission on a truster company under Article 45 (1); and

2. Revocation of registration for a selling company under Article 45 (3).

[This Article Wholly Amended by Act No. 5558, Sep. 16, 1998]

Article 58-2(Entrustment of Business Operations) #

The Financial Supervisory Commission may entrust part of the business under this Act to the Governor of the Financial Supervisory Service or the Investment Trust Association under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

[This Article Newly Inserted by Act No. 5740, Feb. 1, 1999]

Article 59(Penal Provisions) #

Any person who falls under any of the following subparagraphs shall be punished by imprisonment for not more than five years or a fine not exceeding 30 million won: <Amended by Act No. 5505, Jan. 13, 1998; Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000; Act No. 6693, Apr. 27, 2002>

1. A person who has violated the provisions of Article 4;

2. Deleted; <by Act No. 5740, Feb. 1, 1999>

3. A person who has carried out the business of a truster company without obtaining the permission under Article 9 (1);

4. A person who has obtained the permission under Article 9 (1) by deceit and other unlawful way;

4-2. A person who has exercised voting rights in violation of the provisions of Article 25-2 (1) through (3);

5. A person who has violated the provisions of Articles 32, 33, 42-10 (1), or 42-12 (1);

5-2. A person who has engaged in transactions making use of undisclosed information pertaining to the operation of trust property or allowed other persons to make such use, in contravention of the provisions of Article 34 (1);

6. A person who has established a branch or business office without obtaining the permission under Article 42 (1); and

7. A person who has obtained the permission under Article 42 (1) by deceit and other unlawful means.

Article 60(Penal Provisions) #

Any person who falls under any of the following subparagraphs shall be punished by imprisonment for not more than three years or a fine not exceeding 20 million won: <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000>

1. A person who has violated the order under Article 20 (2);

1-2. A person who has violated the order for disposal of stocks under Article 25-2 (4);

1-3. A person who has failed to undergo the auditing under Article 262 (1) without any justifiable reasons;

1-4. A person who has divulged secrets of the auditing on trust property, in contravention of Article 26-2 (3);

2. A person who has violated Article 35;

3. Deleted; <by Act No. 5558, Sep. 16, 1998>

4. A person who has violated Article 39;

4-2. A person who has failed to ask for withdrawal, alteration or correction thereof, in contravention of Article 41 (1);

4-3. A person who has made a domestic sale of foreign beneficiary securities without filing a report, in contravention of Article 42-4 (1); and

5. A person who has violated the order under Article 48 (including a case where applicable under Article 54).

Article 61(Penal Provisions) #

Any person who falls under any of the following subparagraphs shall be punished by imprisonment for not more than one year or a fine not exceeding 5 million won: <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6179, Jan. 21, 2000; Act No. 6424, Mar. 28, 2001; Act No. 6693, Apr. 27, 2002>

1. A person who has complied with a request for repurchase, in contravention of Article 7 (5);

1-2. A person who has violated Article 14 (2);

2. A person who has violated Article 17 (5);

2-2. A person who has failed to deposit securities in the Securities Depository in contravention of Article 17 (6);

3. A person who has violated Article 20 (3);

4. A person who has set up or altered the terms and conditions of trust without making a report on the matters in the main sentence of Article 22 (1) or the main sentence of paragraph (4) of the same Article;

4-2. A person who has failed to report the contents of the establishment of trust property, in contravention of Article 22 (5);

5. A person who has terminated a trust contract without obtaining the approval under Article 23;

6. A person who has made a report under Article 22 (1) or 22 (4) or obtained approval under Article 23, by deceit and other unlawful means;

6-2. A person who has not recorded and kept documents whether he exercised the voting rights, or recorded and kept documents fraudulently in violation of the provisions of Article 25 (3);

6-3. A person who has not announced in public whether he exercised the voting rights, or has announced in public fraudulently in violation of the provisions of Article 25-3;

6-4. A person who has refused, obstructed or evaded an order given by the Financial Supervisory Commission under Article 26-2 (2) to furnish data and file a report, or furnished the false data;

7. A person who has failed to file an explanatory statement on investment trust under Articles 27 (2), (3) and (5), and 42-4 (2), or compiled and furnished a false explanatory statement on investment trust or a false simple explanatory statement on investment trust;

7-2. A person who has failed to file a report on the operation of trust property under Articles 27 (4) and 42-4 (2), or compiled and furnished a false report thereof;

7-3. A person who has failed to enter matters to be entered in an advertisement for sale inducement, in contravention of Article 27-2;

8. A person who has violated Article 31 (1);

8-2. A person who has traded or consigned the securities, in contravention of Article 34-2;

9. A person who has violated Article 40; and

10. A person who has violated the conditions under Article 46 (2).

Article 62(Penal Provisions) #

Any person who falls under any of the following subparagraphs shall be punished by a fine not exceeding 3 million won: <Amended by Act No. 5558, Sep. 16, 1998; Act No. 6693, Apr. 27, 2002>

1. Deleted; <by Act No. 5558, Sep. 16, 1998>

2. A person who has violated Article 17 (3) or (4);

3. A person who has set up or altered the terms and conditions of trust without making a report under the proviso of Article 22 (1) or the proviso of paragraph (4) of the same Article, or who makes a false report thereon; and

4. and 5. Deleted. <by Act No. 5740, Feb. 1, 1999>

Article 63(Joint Penal Provisions) #

If a representative of a juristic person, or an agent, servant or other employee of a juristic person or an individual, commits the offense prescribed in Articles 59 through 62 in connection with the affairs of the juristic person or the individual, the fine prescribed in the respective Article shall also be imposed on such a juristic person or individual, in addition to the punishment of the offender.

Article 64(Fine for Negligence) #

(1) A person who falls under any of the following subparagraphs shall be punished by a fine for negligence not exceeding 10 million won: <Amended by Act No. 6179, Jan. 21, 2000>

1. Deleted; <by Act No. 5740, Feb. 1, 1999>

2. A person who violates Article 26;

3. A person who violates Article 28;

4. Deleted; <by Act No. 5740, Feb. 1, 1999>

5. A person who fails to submit the data or report under Article 43 (1) and (3) (including a case where it is applicable under Article 54), or who submits the false data or report; and

6. A person who refuses, obstructs or evades the inspection under Article 43 (2) (including a case where applicable under Article 54).

(2) A person who falls under any of the following subparagraphs shall be punished by a fine for negligence not exceeding five million won: <Newly Inserted by Act No. 6693, Apr. 27, 2002>

1. A person who violates the provisions of Article 14-4; or

2. A person who violates the provisions of Article 14-5.

(3) The fine for negligence under paragraph (1) or (2) shall be imposed and collected by the Financial Supervisory Commission, under the conditions as prescribed by the Presidential Decree. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 6693, Apr. 27, 2002>

(4) Any person who is dissatisfied with the disposition of the fine for negligence under paragraph (3) may file an objection with the Financial Supervisory Commission within thirty days from the date when he is informed of the disposition. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 6693, Apr. 27, 2002>

(5) If a person who is subject to the disposition of fine for negligence under paragraph (3) has filed the objection under paragraph (4), the Financial Supervisory Commission shall notify without delay the competent court, and the court so notified shall bring the case of fine for negligence into a trial under the Non-Contentious Case Litigation Procedure Act. <Amended by Act No. 5505, Jan. 13, 1998; Act No. 6693, Apr. 27, 2002>

(6) If no objection is filed or no fine for negligence is paid within the period of time pursuant to paragraph (4), the fine shall be collected in accordance with the examples of disposition of national taxes in arrears. <Amended by Act No. 6693, Apr. 27, 2002>