Open Decision Ledger · Capital markets & finance
Purpose of the Short-Swing Profit Disgorgement System and the Requirements for an Insider Subject to the Disgorgement Obligation (Equating Trades Through Borrowed-Name Accounts)
Translated from the Korean original. Read the Korean
Supreme Court, Nov. 30, 2007, 2007Da24459 (judgment)
No holding summary · checked against points at issue. The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Case name: 단기매매차익반환청구
Official text on the National Law Information Center
Question
Even where a person other than the insider himself or herself traded shares on a short-term basis, does the insider bear the obligation to disgorge short-swing profits under Article 188 (2) of the Securities and Exchange Act?
Holding
For the disgorgement obligation to be borne, the insider must be the direct party to the stock trade or, where the insider is not that party, the conduct of that party must be capable of being equated with the conduct of the insider. The Supreme Court affirmed the judgment of the court below, which held that, because the defendant, as the beneficial owner of a borrowed-name account in the name of his wife's older sister, had entrusted the trades to his wife, the wife's short-term trading could be equated with the defendant's own conduct.
Points at issue, verbatim
단기매매차익 반환의무를 부담하는 내부자에 해당하기 위한 요건
Unofficial English translation
The requirements for qualifying as an insider who bears the obligation to disgorge short-swing profits
Disposition
Dismissed Stated in the decision
상고를 기각한다.
Unofficial English translation
The appeal is dismissed.
Form of the test
Elements stated Stated in the decision
그 내부자가 그러한 주식거래의 직접적인 주체이거나, 그 주체가 아닌 경우에는 그 주체의 행위를 그 내부자의 행위와 동일시할 수 있는 경우에 해당하여야 한다고 봄이 상당하다.
Unofficial English translation
it is reasonable to view that the insider must be the direct actor of such stock trading, or, where the insider is not the actor, the case must be one in which the actor's conduct may be identified with the conduct of that insider.
Factors
- 증권거래법 제188조 제2항에 정한 단기매매차익 반환제도의 규정 취지
- 단기매매차익 반환의무를 부담하는 내부자
- 내부자에 해당하기 위한 요건
Unofficial English translation
• The purpose of the short-swing profit disgorgement system prescribed in Article 188 (2) of the Securities and Exchange Act
• An insider who bears the obligation to disgorge short-swing profits
• The requirements for qualifying as an insider
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2004. 5. 28. 선고 2003다60396 판결
Unofficial English translation
Supreme Court Decision 2003Da60396 decided May 28, 2004
Decisions referred to
대법원 2004. 2. 13. 선고 2001다36580 판결(공2004상, 451), 대법원 2004. 5. 28. 선고 2003다60396 판결(공2004하, 1061)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
Beyond the circumstance that the insider provided the funds or that there is a family relationship, what circumstances must be present before another person's trades may be equated with the conduct of the insider?
This reading will be re-examined if the short-swing profit disgorgement provision of the Financial Investment Services and Capital Markets Act, which succeeded Article 188 (2) of the Securities and Exchange Act, is amended, or if subsequent decisions concerning the criteria for equating conduct are handed down.
Cross-family AI independent reading & axis check
8 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-16
When compared with an independent reading of the original text alone by another AI (GPT-6 Astra), which did not see the initial reading, all eight axes matched.
Raw 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, comprehending the facts admitted on the evidence it adopted, held that the defendant was merely the beneficial owner of a borrowed-name account in the name of Non-party 2, the older sister of his wife, and that he had entrusted stock trades using that account to Non-party 1, his wife; that the short-swing trading of Non-party 1 could therefore be equated with the defendant's conduct; and it accordingly recognized the defendant's obligation to disgorge the profits.
Supreme Court standard: The Supreme Court considered that the judgment of the court below was founded on the legal principle that one must be the direct party to the trade, or that the conduct of that party must be capable of being equated with the conduct of the insider. It held that the first ground of final appeal, which proceeded on the premise that the court below had expanded the scope of insiders solely on the basis of the source of the funds and the marital relationship, rested on a misunderstanding of the judgment of the court below; it likewise did not accept the allegation of a violation of the rules of evidence, and it dismissed the final appeal.
Distinguishing conditions
- Where it is shown that the person in whose name the trade was placed traded independently of the insider, on his or her own judgment and for his or her own account, so that the trades cannot be equated with the conduct of the insider
- Where the only circumstances present are that the insider provided the purchase funds or is in a family relationship with the trader, and neither substantial control over the account nor entrustment of the trades is confirmed
- Where the purchases and sales in question do not constitute short-term trading within six months
Record verification notes
Before attributing trades made in another person's name to the insider, one must first check from the Records whether the insider, as the beneficial owner of the account, entrusted the trades, and whether the person in whose name the trade was placed bore the profits and losses independently.
From the official text
Points at issue
증권거래법 제188조 제2항에 정한 단기매매차익 반환제도의 규정 취지 및 단기매매차익 반환의무를 부담하는 내부자에 해당하기 위한 요건
Unofficial English translation
The purpose of the short-swing profit disgorgement system prescribed in Article 188 (2) of the Securities and Exchange Act, and the requirements for qualifying as an insider who bears the obligation to disgorge short-swing profits
Summary of the holding
The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Order
상고를 기각한다. 상고비용은 피고가 부담한다.
Unofficial English translation
The appeal is dismissed. The costs of the final appeal shall be borne by the defendant.
Provisions referred to
증권거래법(2007. 8. 3. 자본시장과 금융투자업에 관한 법률 부칙 제2조 제1호로 폐지) 제188조 제2항
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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