Open Decision Ledger · Capital markets & finance
Causation of gains obtained through the use of material nonpublic information and the evaluation of intervening causes such as the merger ratio
Translated from the Korean original. Read the Korean
Supreme Court, May 17, 2017, 2017Do1616 (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
Official text on the National Law Information Center
Question
If another cause, such as a merger rumor or the disclosure of the merger ratio, intervened after the act of using material nonpublic information, must it be held that the gains obtained from the violation cannot be calculated?
Holding
The Supreme Court held that, even where another cause has intervened, if it is no more than what could ordinarily be foreseen, causation between the violation and the gains may be recognized. The merger ratio is a circumstance ordinarily accompanying a merger, and the point in time at which the effect of the rise in stock price is exhausted is a matter only of the amount of the gain; hence, the judgment of the court below, which held that the amount of the gain could not be calculated, was found to be erroneous.
Points at issue, verbatim
위반행위 외에 다른 원인이 개재되어 이익 발생의 원인이 되었더라도 통상 예견할 수 있는 경우에는 위반행위와 이익 사이의 인과관계를 인정할 수 있는지 여부(적극)
Unofficial English translation
Whether causation between the violation and the gains may be recognized where a cause other than the violation intervened and gave rise to the gains, if the intervention of such cause could ordinarily have been foreseen (affirmative)
Disposition
Reversed and remanded Stated in the decision
원심판결 중 피고인들에 대한 부분을 파기하고, 이 부분 사건을 서울고등법원에 환송한다.
Unofficial English translation
The judgment of the court below as to the defendants is reversed, and this part of the case is remanded to the Seoul High Court.
Form of the test
Existing test applied Read from the decision
앞서 본 사실관계를 법리에 비추어 살펴본다.
Unofficial English translation
We examine the facts set out above in light of the legal principles.
Factors
- 법인의 대표자나 종업원 등이 미공개중요정보를 이용하여 법인의 업무에 관하여 주식을 매매하거나 그 밖의 거래를 하는 행위
- 자신의 이익을 추구할 목적으로 자기 계산으로 하는 것인지 또는 타인의 이익을 위하여 타인의 계산으로 하는 것인지
- 위반행위로 얻은 이익
- 통상 예견할 수 있는 경우에는 위반행위와 이익 사이의 인과관계를 인정할 수 있는지 여부
Unofficial English translation
• an act in which a representative or employee, etc. of a corporation trades stocks or engages in other transactions in connection with the work of the corporation by using undisclosed material information
• whether it is done on the actor's own account for the purpose of pursuing the actor's own interest or on another's account for the interest of another
• gains obtained from the violation
• whether causation between the violation and the gains may be recognized where the intervention of such cause could ordinarily have been foreseen
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2009. 7. 9. 선고 2009도1374 판결
Unofficial English translation
Supreme Court Decision 2009Do1374 decided July 9, 2009
Decisions referred to
[1][2] 대법원 2009. 7. 9. 선고 2009도1374 판결(공2009하, 1374) / [1] 대법원 2002. 4. 12. 선고 2000도3350 판결(공2002상, 1184)
Burden of proof
The prosecution Stated in the decision
증명책임의 소재(=검사)
Unofficial English translation
where the burden of proof lies (=the prosecutor)
Open question and revisit condition
By what standard should the point in time at which the effect on the stock price of the merger resolution and the merger ratio is exhausted be determined, so that the reference price for unrealized gains may be calculated?
If the provision on the calculation of gains in Article 443 of the Financial Investment Services and Capital Markets Act is amended, or if the Supreme Court sets out a different standard for the evaluation of intervening causes in the calculation of gains from acts of using material nonpublic information, we will re-examine this reading.
Cross-family AI independent reading & axis check
6 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-16
When compared with an independent reading conducted by another AI model (GPT-6 Astra), which read only the original text without seeing the primary reading, 6 of the 8 axes matched, and the readings diverged on axis 3 (Disposition) and axis 4 (Form of the test).
Axis 3 (Disposition): Primary “Reversed and remanded” vs Independent “Partly reversed and remanded”
Since the decretal part states that the judgment of the court below is reversed as to the defendants and the case is remanded, one may either focus on remand as the manner of disposition or also indicate the limitation of the scope of reversal.
원심판결 중 피고인들에 대한 부분을 파기하고, 이 부분 사건을 서울고등법원에 환송한다.Axis 4 (Form of the test): Primary “Existing test applied” vs Independent “Circumstances weighed”
Because the Holdings address both the method of calculating the gains and the foreseeability of the other cause together with causation, one may either focus on the application to the specific cause or read it as a comprehensive weighing of multiple factors.
‘위반행위로 얻은 이익’의 의미와 산정 방법 및 증명책임의 소재(=검사)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 held that the defendants' conduct constituted an act of using material nonpublic information under Article 448, Article 443, paragraph (1), subparagraph 1, and Article 174, paragraph (1) of the Financial Investment Services and Capital Markets Act; however, on the reasoning that the rise in the stock price before the disclosure contained a rumor of a merger with a mobile game company, the rise after the disclosure contained the merger ratio information as an independent factor, and the effect of the rise in stock price may have been exhausted on October 21, 2014 or October 24, 2014, it held that the value of the gains could not be calculated and found the defendants not guilty as to the gains on that reasoning.
Supreme Court standard: The Supreme Court held that the finding that the conduct constituted a violation was proper. However, as to Non-indicted 1 Company, a special purpose acquisition company, it is difficult to find any factor raising the stock price other than the merger information, and the rumor was itself merger information, so causation cannot be denied; the determination of the merger ratio falls within the scope of what could ordinarily be foreseen and is not to be deducted separately; and whether the effect had been exhausted is merely a matter of the amount of the gain. On these grounds, the Supreme Court reversed the portion of the judgment below finding the defendants not guilty as to the gains on that reasoning. Since this portion stood in the relation of a single crime or concurrent crimes with the portion finding the defendants guilty, the Supreme Court reversed and remanded the entire portion of the judgment below as to the defendants.
Distinguishing conditions
- A case in which the target company is not a special purpose acquisition company and there are distinct factors of its own, such as performance and industry conditions, that may affect the stock price in addition to the merger information
- A case in which the intervening cause falls outside the scope of what could ordinarily be foreseen, unlike the merger ratio, and is unusual
- A case in which there are special circumstances making it unfair to deduct the total cost from the total proceeds of the transactions related to the violation, so that the amount must be separately calculated in a comprehensive consideration of all factors
Record verification notes
Before asserting the same conclusion, one must confirm from the Records whether the prosecution has proved causation between the violation and the gains, and whether fluctuations in the market as a whole or unforeseeable separate information did not operate as the principal cause of the rise in stock price.
From the official text
Points at issue
[1] 법인의 대표자나 종업원 등이 미공개중요정보를 이용하여 법인의 업무에 관하여 주식을 매매하거나 그 밖의 거래를 하는 행위가 자본시장과 금융투자업에 관한 법률 제443조 제1항 제1호의 처벌 대상이 되는지 여부(적극) 및 위 조항이 금지하는 미공개중요정보 이용행위인지를 판단할 때 행위자가 자신의 이익을 추구할 목적으로 자기 계산으로 하는 것인지 또는 타인의 이익을 위하여 타인의 계산으로 하는 것인지에 따라 어떠한 제한이나 구별이 있는지 여부(소극) [2] 자본시장과 금융투자업에 관한 법률 제443조 제1항 및 제2항에 규정된 ‘위반행위로 얻은 이익’의 의미와 산정 방법 및 증명책임의 소재(=검사) / 위반행위 외에 다른 원인이 개재되어 이익 발생의 원인이 되었더라도 통상 예견할 수 있는 경우에는 위반행위와 이익 사이의 인과관계를 인정할 수 있는지 여부(적극)
Unofficial English translation
[1] Whether an act in which a representative or employee, etc. of a corporation trades stocks or engages in other transactions in connection with the work of the corporation by using undisclosed material information is subject to punishment under Article 443, paragraph (1), subparagraph 1 of the Financial Investment Services and Capital Markets Act (affirmative), and whether any restriction or distinction exists depending on whether the actor does so on the actor's own account for the purpose of pursuing the actor's own interest or on another's account for the interest of another when determining whether an act constitutes the use of undisclosed material information prohibited by the above provision (negative) [2] The meaning and method of calculation of "gains obtained from the violation" as provided in paragraphs (1) and (2) of Article 443 of the Financial Investment Services and Capital Markets Act, and where the burden of proof lies (=the prosecutor) / Whether causation between the violation and the gains may be recognized where a cause other than the violation intervened and gave rise to the gains, if the intervention of such cause could ordinarily have been foreseen (affirmative)
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
원심판결 중 피고인들에 대한 부분을 파기하고, 이 부분 사건을 서울고등법원에 환송한다.
Unofficial English translation
The judgment of the court below as to the defendants is reversed, and this part of the case is remanded to the Seoul High Court.
Provisions referred to
[1] 자본시장과 금융투자업에 관한 법률 제174조 제1항, 제443조 제1항 제1호, 제448조 [2] 자본시장과 금융투자업에 관한 법률 제443조 제1항, 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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