Open Decision Ledger · Capital markets & finance
Whether the fire loss of a subsidiary and the occurrence of a year-end deficit constitute material information subject to insider trading regulation
Translated from the Korean original. Read the Korean
Supreme Court, June 30, 1995, 94Do2792 (judgment)
Case name: 증권거래법위반
Official text on the National Law Information Center
Question
If the fact of the loss caused by a fire at a subsidiary and the occurrence of a deficit upon the year-end settlement of accounts has not yet been disclosed, does it constitute information that may have a significant effect on investment judgment under Article 188-2 of the Securities and Exchange Act?
Holding
Such information constitutes information which, among facts having a significant effect on the management of a corporation, a reasonable investor, weighing materiality against the likelihood of occurrence, would regard as having important value for the decision whether to trade. The Supreme Court held that, where the fire loss of approximately KRW 2 billion at the subsidiary of a company with capital of approximately KRW 10.1 billion and the deficit of approximately KRW 3.5 billion upon settlement of accounts had not yet been disclosed, this information fell within that category, and maintained the guilty determination.
Summary of the holding, verbatim
합리적인 투자자라면 그 정보의 중대성과 사실이 발생할 개연성을 비교 평가하여 판단할 경우 유가증권의 거래에 관한 의사를 결정함에 있어서 중요한 가치를 지닌다고 생각하는 정보를 가리키는 것이다.
Unofficial English translation
It refers to information that a reasonable investor, when making a comparative assessment between the significance of the information and the likelihood of the fact occurring, would consider to be of important value in deciding whether to enter into a transaction in securities.
Disposition
Dismissed Stated in the decision
상고를 기각한다.
Unofficial English translation
The appeal is dismissed.
Form of the test
Existing test applied Stated in the decision
그 공개 전의 내부자거래는 증권거래법이 규제하는 대상에 해당한다고 한 사례
Unofficial English translation
A case holding that insider trading prior to such disclosure falls within the scope regulated by the Securities and Exchange Act
Factors
- 합리적인 투자자라면 그 정보의 중대성과 사실이 발생할 개연성을 비교 평가하여 판단할 경우
- 유가증권의 거래에 관한 의사를 결정함에 있어서 중요한 가치를 지닌다고 생각하는 정보
- 자회사에서 화재가 발생하여 약 20억 원의 손실을 입은 것을 비롯하여 연도말 결산 결과 약 35억 원의 적자가 발생한 것
- 그와 같은 내용이 아직 공개되지 아니하고 있었다면
Unofficial English translation
• when a reasonable investor makes a determination by comparing and evaluating the significance of the information and the likelihood of the fact occurring
• information that is considered to be of important value in deciding whether to enter into a transaction in securities
• a fire occurred at a subsidiary, causing a loss of approximately KRW 2 billion, and, among other things, the year-end settlement results showed a deficit of approximately KRW 3.5 billion
• if such content had not yet been disclosed
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 1994.4.26. 선고 93도695 판결
Unofficial English translation
Supreme Court Decision 93Do695 decided April 26, 1994
Decisions referred to
가. 대법원 1994.4.26. 선고 93도695 판결(공1994상,1563)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
Where the magnitude of the loss is far smaller relative to the capital than in this Case, where is the boundary at which the information may still be regarded as material information under the reasonable investor standard?
If the definition of material information, or the decision standard, under the current Financial Investment Services and Capital Markets Act governing the use of undisclosed material information changes, we will re-examine this reading.
Cross-family AI independent reading & axis check
7 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-16
In comparison with an independent reading by another AI (GPT-6 Astra), which read only the original decision without seeing the primary reading, 7 of the 8 axes agreed, and the readings diverged on Axis 4 (Form of the test).
Axis 4 (Form of the test): Primary “Existing test applied” vs Independent “Elements stated”
Because the original decision states a general decision standard for material information while applying it to the specific information about the loss and deficit, the primary reading may emphasize Existing test applied, whereas the independent reading may emphasize Elements stated.
합리적인 투자자라면 그 정보의 중대성과 사실이 발생할 개연성을 비교 평가하여 판단할 경우 유가증권의 거래에 관한 의사를 결정함에 있어서 중요한 가치를 지닌다고 생각하는 정보Raw responses and comparison record: Protocol · Blind readings (JSONL) · Axis comparison (JSONL) · SHA-256 (JSON)
Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The court below (Seoul Criminal District Court, 93No1491) treated as insider trading a transaction made by the defendant at a time when, although a loss of approximately KRW 2 billion had been incurred by a fire at the Saipan subsidiary of Daemi Industrial Co., Ltd., which the defendant managed, and a deficit of approximately KRW 3.5 billion had emerged as a result of the December 1991 settlement of accounts, these facts had not yet been disclosed, and found the defendant guilty. The specific process by which the court below found the facts is not separately confirmed in the Reasons.
Supreme Court standard: The Supreme Court applied without change the standard of its earlier decisions concerning the meaning of information that may have a significant effect on investment judgment, and held that the information in this Case constituted material information. It held that the circumstances advanced by the defendant did not impede the establishment of the offense, and thus rejected the arguments based on the principle of legality in criminal law and on an erroneous application of the legal principles of the Securities and Exchange Act, and dismissed the final appeal.
Distinguishing conditions
- Where the fact of the loss or the deficit had already been disclosed to the public, such as through disclosure, before the transaction
- Where, given the company's capital or financial condition, the magnitude of the loss does not have important value for the transaction judgment of a reasonable investor
- Where the person who traded is neither an insider nor a recipient of the information and therefore is not a subject of the prohibition
Record verification notes
Before asserting the same conclusion, check with disclosure materials whether the information was in fact not disclosed at the time of the transaction, and whether the magnitude of the loss and the deficit is material in light of the company's size.
From the official text
Points at issue
가. 증권거래법 제188조의2 소정의 “투자자의 투자판단에 중대한 영향을 미칠 수 있는 정보“의 의미 나. 자회사의 화재로 손실을 입고 연도말 적자가 발생한 사실이 공개되기 전에는 “가"항의 정보에 해당한다고 한 사례
Unofficial English translation
a. The meaning of "information that may have a significant impact on an investor's investment decision" as used in Article 188-2 of the Securities and Exchange Act. b. A case holding that the fact that a subsidiary suffered losses from a fire and a deficit arose at the end of the year corresponds to the information of subparagraph "a" before it was disclosed
Summary of the holding
가. 증권거래법 제188조의2에 규정한 “투자자의 투자판단에 중대한 영향을 미칠 수 있는 정보"라 함은 구 증권거래법(1994.1.5. 법률 제4701호로 개정되기 전의 것) 제186조 제1항 제1호 내지 제11호에 그 유형이 개별적으로 예시되고 나아가 제12호에 포괄적으로 규정되어 있는 “법인 경영에 관하여 중대한 영향을 미칠 사실"들 가운데, 합리적인 투자자라면 그 정보의 중대성과 사실이 발생할 개연성을 비교 평가하여 판단할 경우 유가증권의 거래에 관한 의사를 결정함에 있어서 중요한 가치를 지닌다고 생각하는 정보를 가리키는 것이다. 나. 자본금이 101억여 원인 회사의 자회사에서 화재가 발생하여 약 20억 원의 손실을 입은 것을 비롯하여 연도말 결산 결과 약 35억 원의 적자가 발생한 것이 드러났고, 그와 같은 내용이 아직 공개되지 아니하고 있었다면, 그와 같은 정보는 “가"항의 중요한 정보로서 그 공개 전의 내부자거래는 증권거래법이 규제하는 대상에 해당한다고 한 사례.
Order
상고를 기각한다.
Unofficial English translation
The appeal is dismissed.
Provisions referred to
증권거래법 제188조의2 , 제208조 제6호 , 구 증권거래법(1994.1.5. 법률 제4701호로 개정되기 전의 것) 제186조 제1항 제12호
Read 2026-10-16 · Cross-read 2026-10-16. All quotes matched against the official text. The Chinese-character placeholders the court used for anonymised parties are given in their Korean readings, and parenthetical Chinese-character glosses are omitted.
Every entry is published only after all quotes have been matched character by character against the official text, and audited by an independent second reading from a different model family across all eight axes. Both agreed axes and text-grounded interpretive divergences are recorded openly. The ledger is a research record, not an assessment of the court or advice on any matter.
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