Open Decision Ledger · Capital markets & finance
Whether the Use of a Securities Registration Statement Containing False Financial Statements Constitutes an Unfair Trading Practice and the Standard for Calculating Profits from Market Manipulation
Translated from the Korean original. Read the Korean
Supreme Court, Aug. 29, 2016, 2016Do6297 (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: 자본시장과금융투자업에관한법률위반·특정경제범죄가중처벌등에관한법률위반(횡령)
Official text on the National Law Information Center
Question
Does the act of utilizing a securities registration statement, etc., containing financial statements in which false sales were recorded, for a paid-in capital increase constitute an unfair trading practice under Article 178 (1) of the former Financial Investment Services and Capital Markets Act, and is causation with another person's misapprehension required for its establishment?
Holding
If a false financial statement concerning a material matter is actively used as an opportunity to obtain a pecuniary benefit while knowing of its potential to cause misapprehension, this constitutes the use of a document under Article 178 (1), subparagraph 2, and an actual misapprehension or the actual accrual of a benefit, or causation therebetween, is not required. The Supreme Court held that profits obtained through the violation are profits for which causation is recognized, that the burden of proof lies with the prosecution, and that the profits acquired by all accomplices are the standard, and thereby upheld the judgment of the court below.
Points at issue, verbatim
중요사항에 관하여 허위 또는 부실 표시된 재무제표가 구체적인 상황에서 투자자의 투자 판단에 영향을 미칠 수 있는 사항에 관하여 오해를 유발할 수 있음을 알면서도, 이를 재산상의 이익을 얻는 기회로 삼기 위하여 적극적으로 활용하는 행위가 구 자본시장과 금융투자업에 관한 법률 제178조 제1항 제2호에서 정한 ‘문서의 사용행위’에 포함되는지 여부(적극)
Unofficial English translation
Whether an act of actively using financial statements containing false or incomplete indications of material matters, knowing that they may cause misunderstanding as to matters capable of affecting an investor's investment decision under the specific circumstances, by taking the opportunity to obtain a property benefit falls within the 'act of using a document' provided in Article 178 (1) 2 of the former Financial Investment Services and Capital Markets Act (affirmative)
Disposition
Dismissed Stated in the decision
상고를 모두 기각한다.
Unofficial English translation
All appeals are dismissed.
Form of the test
Elements stated Stated in the decision
문서의 사용행위로 인하여 실제로 타인에게 오해를 유발하거나 금전, 그 밖의 재산상의 이익을 얻을 필요는 없다
Unofficial English translation
there is no need for the act of using a document to actually cause another person to misunderstand, or to obtain money or other property benefits
Factors
- ‘부정한 수단, 계획 또는 기교’ 및 ‘중요사항’의 의미
- ‘거짓의 기재 또는 표시를 한 문서의 사용행위’와 ‘타인의 오해’ 사이에 인과관계가 있어야 하는지 여부(소극)
- ‘위반행위로 얻은 이익’의 의미 및 그 산정 방법과 증명책임 소재(=검사)
- 범행에 가담한 공범 전체가 취득한 이익
Unofficial English translation
• The meanings of 'unfair means, scheme or artifice' and 'material matters'
• Whether a causation must exist between the 'act of using a document bearing false entries or indications' and the 'misunderstanding of another person' (negative)
• The meaning of 'profits gained from the violation' and the method of calculating it, and where the burden of proof lies (= prosecutor)
• Profits acquired by all accomplices who participated in the offense
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2011. 10. 27. 선고 2011도8109 판결
Unofficial English translation
Supreme Court Decision 2011Do8109 decided October 27, 2011
Decisions referred to
[1][3] 대법원 2011. 10. 27. 선고 2011도8109 판결(공2011하, 2504) / [1] 대법원 2014. 1. 16. 선고 2013도9933 판결(공2014상, 439), 대법원 2014. 2. 13. 선고 2013도1206 판결 / [2] 대법원 2006. 4. 14. 선고 2003도6759 판결(공2006상, 831), 대법원 2015. 1. 15. 선고 2014도9691 판결 / [3] 대법원 2012. 6. 28. 선고 2012도3782 판결, 대법원 2013. 4. 11. 선고 2012도14446 판결
Burden of proof
The prosecution Stated in the decision
그 산정 방법과 증명책임 소재(=검사)
Unofficial English translation
the method of calculating it, and where the burden of proof lies (= prosecutor)
Open question and revisit condition
Within what scope are the gains from the sale of shares acquired prior to the commencement of the market manipulation to be regarded as profits causally connected with the violation, and what specifically are the circumstances that make the usual calculation of net trading profits unjust?
This reading will be re-examined if the profit calculation provisions of Article 178 or Article 443 of the former Financial Investment Services and Capital Markets Act are amended, or if a new Supreme Court decision on the method of calculating unjust enrichment is handed down.
Cross-family AI independent reading & axis check
6 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-16
Compared with an independent reading by another AI (GPT-6 Astra), which read only the original text without seeing the initial reading, 6 of the 8 axes agreed, while the readings diverged on the fifth axis (Factors) and the eighth axis (Open question and revisit condition).
Axis 5 (Factors): Primary “The meaning of ‘unfair means, plans, or techniques’ and of ‘material matter’ / whether causation must exist between the ‘use of a document bearing false entries or indications’ and ‘another person's misapprehension’ (negative) / the meaning of ‘profits obtained through the violation’ and the method of calculating them, and where the burden of proof lies (= the prosecution) / the profits acquired by all accomplices who participated in the offense” vs Independent “Financial statements falsely or incompletely presented with respect to a material matter / matters capable of affecting an investor's investment decision / while knowing that they may cause misapprehension / an act of actively using them in order to take them as an opportunity to obtain a pecuniary benefit / the profits acquired by all accomplices who participated in the offense”
The initial reading places weight on causation with the misapprehension and on the calculation of profits and the burden of proof, whereas the independent reading focuses on the materiality of the false financial statements, the awareness of the possibility of misapprehension, and active use, so that the central factors and the area of overlap differ.
중요사항에 관하여 허위 또는 부실 표시된 재무제표가 구체적인 상황에서 투자자의 투자 판단에 영향을 미칠 수 있는 사항에 관하여 오해를 유발할 수 있음을 알면서도, 이를 재산상의 이익을 얻는 기회로 삼기 위하여 적극적으로 활용하는 행위가 구 자본시장과 금융투자업에 관한 법률 제178조 제1항 제2호에서 정한 ‘문서의 사용행위’에 포함되는지 여부(적극)Axis 8 (Open question and revisit condition): Primary “Within what scope are the gains from the sale of shares acquired prior to the commencement of the market manipulation to be regarded as profits causally connected with the violation, and what specifically are the circumstances that make the usual calculation of net trading profits unjust?” vs Independent “Where market factors independent of the violation have also affected the stock price together with the violation, by what specific method should their contribution be separated in order to calculate the profits?”
The initial reading asks about the gains from selling shares acquired before the market manipulation and about exceptions to the calculation of net trading profits, while the independent reading asks about the method of separating the contribution of independent market factors.
중요사항에 관하여 허위 또는 부실 표시된 재무제표가 구체적인 상황에서 투자자의 투자 판단에 영향을 미칠 수 있는 사항에 관하여 오해를 유발할 수 있음을 알면서도, 이를 재산상의 이익을 얻는 기회로 삼기 위하여 적극적으로 활용하는 행위가 구 자본시장과 금융투자업에 관한 법률 제178조 제1항 제2호에서 정한 ‘문서의 사용행위’에 포함되는지 여부(적극)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 (Seoul High Court Decision 2015No3069) held that the submission and disclosure by Defendant 1, the representative director, of a securities registration statement and investment prospectus containing financial statements in which false sales related to Alsa were recorded, in connection with a paid-in capital increase, constituted the use of a false document or the use of unfair means with respect to a material matter, and that intent was also established; it further found the private disposition of company funds to be embezzlement in the course of business, and also recognized the remaining defendants' conspiracy to manipulate market prices and the amount of profits arising therefrom.
Supreme Court standard: The Supreme Court held that most of the grounds for final appeal amounted to no more than disputing the selection of evidence and the assessment of its probative value at the trial stage, and that there was no misapprehension of legal principles in the judgment of the court below, and accordingly upheld the court below. With regard to Defendant 2's assertion of misapprehension of legal principles concerning additional collection, the Court held that, as it was not included in the grounds for appeal, it could not constitute a lawful ground for final appeal, and the Court also rejected Defendant 4's assertion that the sentence was unjust.
Distinguishing conditions
- Where the false entry does not concern a material matter capable of affecting an investor's investment decision
- Where the actor did not recognize the falsity of the document or its potential to cause misapprehension, or cannot be regarded as having actively used it as an opportunity to obtain a pecuniary benefit
- Where circumstances exist that make the calculation of profits by the usual net trading profit method unjust, so that profits causally connected with the violation must be calculated separately
Record verification notes
Before asserting the same conclusion, it is necessary to check whether the false entry at issue concerned a material matter directly relevant to investment decisions, such as evading designation as a management-targeted stock, and whether the prosecution filtered out and proved the exclusion of market factors unconnected with the violation in the calculation of the amount of profits.
From the official text
Points at issue
[1] 구 자본시장과 금융투자업에 관한 법률 제178조 제1항에서 정한 ‘부정한 수단, 계획 또는 기교’ 및 ‘중요사항’의 의미 [2] 중요사항에 관하여 허위 또는 부실 표시된 재무제표가 구체적인 상황에서 투자자의 투자 판단에 영향을 미칠 수 있는 사항에 관하여 오해를 유발할 수 있음을 알면서도, 이를 재산상의 이익을 얻는 기회로 삼기 위하여 적극적으로 활용하는 행위가 구 자본시장과 금융투자업에 관한 법률 제178조 제1항 제2호에서 정한 ‘문서의 사용행위’에 포함되는지 여부(적극) / 위 조항 위반죄가 성립하기 위하여 ‘거짓의 기재 또는 표시를 한 문서의 사용행위’와 ‘타인의 오해’ 사이에 인과관계가 있어야 하는지 여부(소극) [3] 구 자본시장과 금융투자업에 관한 법률 제443조 제1항 단서 및 제2항에서 정한 ‘위반행위로 얻은 이익’의 의미 및 그 산정 방법과 증명책임 소재(=검사) / 여러 사람이 공동으로 시세조종 등 불공정거래의 범행을 저지른 경우, 범행으로 얻은 이익(=범행에 가담한 공범 전체가 취득한 이익)
Unofficial English translation
[1] The meanings of 'unfair means, scheme or artifice' and 'material matters' as provided in Article 178 (1) of the former Financial Investment Services and Capital Markets Act [2] Whether an act of actively using financial statements containing false or incomplete indications of material matters, knowing that they may cause misunderstanding as to matters capable of affecting an investor's investment decision under the specific circumstances, by taking the opportunity to obtain a property benefit falls within the 'act of using a document' provided in Article 178 (1) 2 of the former Financial Investment Services and Capital Markets Act (affirmative) / Whether, in order for the offense of violation of the foregoing provision to be established, a causation must exist between the 'act of using a document bearing false entries or indications' and the 'misunderstanding of another person' (negative) [3] The meaning of 'profits gained from the violation' as provided in the proviso to Article 443 (1) and paragraph (2) of the former Financial Investment Services and Capital Markets Act, the method of calculating it, and where the burden of proof lies (= prosecutor) / Where several persons jointly commit an offense of unfair trade practices such as market price manipulation, the profits gained from the offense (= profits acquired by all accomplices who participated in the offense)
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 모두 기각한다.
Unofficial English translation
All appeals are dismissed.
Provisions referred to
[1] 구 자본시장과 금융투자업에 관한 법률(2013. 5. 28. 법률 제11845호로 개정되기 전의 것) 제178조 제1항 제1호, 제2호, 제443조 제1항 제8호, 제2항 [2] 구 자본시장과 금융투자업에 관한 법률(2013. 5. 28. 법률 제11845호로 개정되기 전의 것) 제178조 제1항 제2호, 제443조 제1항 제8호, 제2항 [3] 구 자본시장과 금융투자업에 관한 법률(2013. 5. 28. 법률 제11845호로 개정되기 전의 것) 제443조 제1항, 제2항, 형사소송법 제308조
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.
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